**4.1. From centralized models to distributed system platforms**

production costs. *Uniqueness* demonstrates the level of convergence among business models in terms of conception and execution in ways that add valued to customers; the greater the convergence among business models, the lower the potential for above-average profits. *Fit* means that all the elements of the business model are consistent and mutually reinforcing, and that all the parts work together for the same end goal. Finally, *profit booster(s*) include increasing returns, competitor lock out, strategic economies, and strategic flexibility. Positioning the Hamel business model as the unit for analysis of market reorientation in electric industry thus provides a robust and multi-dimensional framework for evaluating the suitability of new

Initiated in 2014, New York's REV program is a comprehensive effort to reform the state's energy system in order to align ownership, management, and operation of its utility industry [43, 44]. REV is led by NYPSC and seeks to fundamentally transform the electric power sector of New York State from a primarily centralized generation system to distributed utilities model [45]. The REV docket has two tracks. Track 1 focuses on the development of DER markets and the utility-as-platform model known as distributed-system platform (DSP) providers, while Track 2 focuses on reforming utility-ratemaking practices and revenue streams to accommodate the proposed DSP model. Implementation of REV will take several years and will involve the mutual efforts of industry, customers, non-profit organization, and regulatory partners. The initiative encourages regulatory changes that promote energy efficiency, demand response, increase storage capacity, and increase renewable energy resources. These reforms empower end-users by providing more choices through diversification of energy resources, and by fostering improvement in the performance of the power sector across policy objectives such as system-wide efficiency, system reliability and resiliency, enhanced customer billing system, market animation and leverage of customer contributions, fuel and

proposals for electric utilities and energy governance in in New York.

**Figure 3.** Components of Hamel business model framework.

12 Energy Systems and Environment

resource diversity, and reduction of carbon emissions [44].

**4. Evaluating the REV docket: the détente for utilities and DER**

Retail peak electricity demand in NYS is approximately 75% greater than the average system load, and nearly 9% of power generated in the state is lost in transmission [47]. Essential investment needed through 2025 to replace the state's aging infrastructure to meet projected energy demand is estimated at \$30 billion [43]. REV is thus a 'polycentric' strategy intended to make distribution planning more transparent and better integrated. For instance, it seeks to transform electric distribution companies into DSP providers with responsibility for active coordination of DERs. It fosters "transactive energy" ecosystem in which "consumers and other parties can take full advantage of every type of energy resource—on both sides of the meter" [45]. Key to this ambitious goal is reorienting the traditional regulatory model by aligning utility and consumer interests so that both groups benefit from (scalable) improved market efficiency and scalable organizational learning.

Two pricing mechanisms offer a critical role in this regard. First, REV establishes benefit–cost analyses as a foundational procurement tool to determine renewable electricity deployment [48]. Chosen due to its regulatory familiarity and apparent simplicity [49], the multi-year distribution system integration plans (DSIPs) to be developed by utilities seeks to foster a fair, open and value-based decision-making environment for utilities to build out their own competitive advantage in the DER market [45]. The benefit–cost approach will be applied in DSP investments, procurement of DERs through competitive selection and tariffs, and energy efficiency programs. Second, REV proposes using locational marginal pricing (LMP) principles to optimize the value of distributed utilities. Application of LMP principles can help distinguish which configuration of distributed resources enhances system flexibility and yield overall best value to consumers [44]. In terms of a repurposed DER policy, market development, innovation in designing value strategy and benefit–cost of DSIPs, and investment in community-choice aggregation programs, the REV model shares some of these characteristics with other ambitious and successful initiatives, particularly the German Energiewende initiative [50]. New York is not alone in its efforts to improve its utility regulation market and optimal system efficiencies. Parallel regulatory actions have been proposed in California, Hawaii, Massachusetts, Minnesota, and Illinois through its proposed utility of the future study known as "NextGrid" [51]. However, REV represents the most promising utility-as-platform business model as it challenges two fundamental components of the conventional utility model: the assumption that electricity demand is inelastic, and the notion that economies of scale make a centralized generating model the most economical way for electricity services provision [52] and market development. **Table 2** summarizes the main policy, regulatory, and technological solutions that utilities and planners have proposed to improve DMS and UCM strategies based on polycentric approach to business-model innovations.
