17 Jan 2022

TEMPO Project - D.6.2 Report Business Models For Each Solution Package

Within the TEMPO project, six innovations related to networks, digitization thereof and building optimization undergo final development.

To ensure that the six innovations developed in the TEMPO project are successfully deployed in the marketplace, this report analyzes business models by setting up a framework consisting of different business model components that can be combined in different ways depending on the needs of the specific DHC network. 
To properly understand the needs of a DHC network, the framework considers 5 internal project characteristics (network age, network generation, type of buildings, energy sources and DHC goal) and 3 external (urban versus rural environment, market maturity and regulation) project characteristics that typify most projects. As such, the framework can analyze how such project characteristics influence business model decisions.

The business model components taken up and analyzed within the framework are the type of partners (stakeholders) involved, potential ownership models and contractual relationships, financing options and the revenue model.

When it comes to stakeholders, DHC systems typically involve a significant number of stakeholders that are needed before the project can take place and succeed.  The framework therefore describes over 20 roles that take place in the context of a DHC project. It then categorizes these roles under 3 dimensions, indicating 1) the timing when a stakeholder is active (pre-feasibility, feasibility, commercialization, design & build, operation & maintenance, customer service), 2) indicating in which part of the DHC system it is active (cross-sectional, generation, distribution, end-usage), 3) and indicating which type of activities the role is related to (physical flows, information or functional tasks).

When it comes to ownership models and contractual relationships, for the future success of TEMPO innovations it is key to understand, who is deciding, implementing and finally operating the system. The correct ownership is therefore important to be able to communicate with the real decision maker. The framework distinguishes four major types of ownership, ranging from public to private control: (1) not-for-profit community-owned cooperatives, (2) full public control models, (3) public-private partnerships, and (4) full private control models. 

The financing structure of the DHC project. This is often a challenge for DHC projects as DHC networks require high upfront investments, even before revenues are delivered. There is a clear investment/revenue time lag. To this end, the framework categorizes financing forms depending on the timing of costs. 

The revenue model of the DHC grid. This is the final part of the business model framework. The framework distinguishes between 4 key categories of income. That is, income directly related to the delivery of heat (with an extensive description of different heat tariff types), indirect sources of income related to the delivery of heat (for instance subsidies for saved CO2 emissions), income not linked to the delivery of heat (that is, income from selling components), and finally, more innovative revenues related to more efficient working of DHC grids.

For each of these business model components, it is examined how the different types of DHC projects fill in these business model components. This isconcretized for each of the three original TEMPO demo sites, leading to 3 new extended service business models for each of the TEMPO solution packages.

If you want to know more about this and other deliverables, click here to access the TEMPO Project website.