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Circular economy and sharing platforms in energy

Circular economy and sharing platforms in energy

Vihra Andonova, Euro Perspectives Foundation

Rethinking Sustainable Development in European Regions by Using Circular Economy Business Models (REDUCE) is a project to improve the implementation of regional policies in order to enable regions to adopt more environmentally sustainable ways of production and to reduce the negative environmental impacts of economic development. The focus in this short article is the Circular business models.

Circular business models can be used to help companies achieve resource efficiency and subsequent net revenue gains, and by doing so help regions achieve a more innovative, resilient, and productive economy. Although circular business models are often viewed as sustainable by nature, it is recognized that there are uncertainties about their potential impacts, such as externalities and rebound effects. Surely, one of the best examples of new models in the circular economy is shared platforms and all those models that lay on the base of what we usually define as a sharing economy.

Uber and Airbnb are two companies that have disrupted the mobility and hospitality sector, respectively, by using digital technologies, employing new market coordination mechanisms, and capitalizing on products and services facilitated by individuals in a decentralized manner instead of by the firm itself. Together with companies that offer car sharing, tool sharing, skill-sharing, or crowdfunding platforms, these organizations are considered as part of the sharing economy.

At the same time, the capacities of distributed renewable energy generation and storage facilities are increasing and result in the need for new business models and coordination mechanisms in the energy sector. In the context of these two distinct but possibly synergetic developments, various researchers and practitioners have started to transfer principles and ideas of the sharing economy to the energy sector.

In this context, researchers have drawn on ideas of the sharing economy for more profitable and efficient use of demand-side energy technologies such as energy storage. Others have focused on developing market designs where prosumers (i.e., a producer and consumer of electricity) may share their energy and resources peer-to-peer (P2P) in energy communities or micro-grids.

Furthermore, sharing energy has been regarded as a possible business model where prosumer needs and behavioral aspects should be considered, regulatory barriers need to be overcome, and the energy transition can be driven forward. While these important research advancements focus on specific technologies, particular business models, or possible market systems for prosumers, a more general understanding of what the sharing economy means in the context of the energy sector is still missing.

Specifically, this means understanding electricity as a very complex good where P2P sharing might not be easily implemented or poses different challenges compared to shared cars, rooms, or digital content. On the other hand, sharing huge power plants has always been part of the electricity system and is hardly anything new. To shed more light on how the sharing economy and the transitioning energy system might interact, the purpose of this article is to carve out what the general interfaces and overlaps between these two topics are.

Accordingly, we use a profound understanding of the sharing economy as a foundation to discuss how business models and characteristics of the sharing economy can be applied in the context of energy. Without claiming to be comprehensive, it draws on scientific as well as grey literature, including articles, blog posts, and websites, to assess the current state of research and practice in this area. Furthermore, workshops with companies from the energy sector that have already adapted aspects of the sharing economy in their business model are conducted to gain qualitative empirical insights on this issue.


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