Editing IPCC:AR6/WGIII/Chapter-15 (section)

==== 15.6.8.1 Service-based Business Models in the Energy and Transport Sectors ====

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'''Energy as a service (EaaS)''' is a business model whereby customers pay for an energy service without having to make any upfront capital investment ( [[#PwC--2014|PwC 2014]] ; [[#Hamwi--2017|Hamwi and Lizarralde 2017]] ; [[#Cleary--2019|Cleary and Palmer 2019]] ). EaaS performance-based contracts can also be a form of ‘creative financing; for capital improvement that makes it possible to fund energy upgrades from cost reductions and deployment of decentralised renewable energy ( [[#KPMG--2015|KPMG 2015]] ; [[#Moles-Grueso--2021|Moles-Grueso et al. 2021]] ). Innovation in EaaS has started at the household level, where smart meters using real-time data are used to predict peak demand levels and optimise electricity dispatch ( [[#Chasin--2020|Chasin et al. 2020]] ; [[#Government%20of%20UK--2016|Government of UK 2016]] ; [[#Smart%20Energy%20International--2018|Smart Energy International 2018]] ).

'''Aggregators.''' An aggregator is a grouping of agents in a power system to act as a single entity when engaging in power system markets ( [[#MIT--2016|MIT 2016]] ). Aggregators can use operation optimisation platforms to provide real-time operating reserve capacity and a range of balancing services to integrate higher shares of variable renewable energy ( [[#Zancanella--2016|Zancanella et al. 2016]] ; [[#Ma--2017|Ma et al. 2017]] ; [[#Enbala--2018|Enbala 2018]] ; [[#Research%20and%20Markets--2017|Research and Markets 2017]] ; [[#IRENA--2019b|IRENA 2019b]] ). This makes a business case for deferred investments in grid infrastructure ( ''medium confidence'' ). Aggregating and managing demand-response of heat systems (micro CHP and heat pumps) has shown reduction in peak demand ( [[#TNO--2016|TNO 2016]] ).

'''Peer-to-peer (P2P) electricity trading''' . Producers and consumers can directly trade electricity with other consumers in an online marketplace to avoid the relatively high tariffs and the relatively low buy-back rates of traditional utilities ( [[#Liu--2019|Liu et al. 2019]] ; [[#IRENA--2020f|IRENA 2020f]] ). P2P models trading with distributed energy resources reduce transmission losses and congestion ( [[#Mengelkamp--2018|Mengelkamp et al. 2018]] ; [[#SEDA--2020|SEDA 2020]] ; [[#Lumenaza--2020|Lumenaza 2020]] ; [[#Sonnen--2020|Sonnen 2020]] ; [[#UNFCCC--2020|UNFCCC 2020]] ).

'''Community ownership models''' . Community ownership models refer to the collective ownership and management of energy-related assets with lower levels of investment, usually distributed renewable energy resources but also recently in heating systems and energy services (e.g., storage and charging) ( [[#Gall--2018|Gall 2018]] ; [[#IRENA--2018|IRENA 2018]] ; [[#Kelly--2019|Kelly and Hanna 2019]] ; [[#Singh--2019|Singh et al. 2019]] ; [[#Bisello--2021|Bisello et al. 2021]] ; Maclurcan and Hinton 2021). Community ownership projects may need significant upfront investments, and the ability of communities to raise the required financing might prove insufficient, which can be supported by microcredits in the initial stages of the projects ( [[#Aitken--2013|Aitken 2013]] ; [[#Federici--2014|Federici 2014]] ; [[#REN21--2016|REN21 2016]] ; Rescoop 2020).

'''Payment method: Pay-as-you-go (PayGo).''' PayGo business models emerged to address the energy access challenge and provide chiefly solar energy at affordable prices, using mobile telecommunication to facilitate payment through instalments; [[#Yadav--2019|Yadav et al. 2019]] ). However, PayGo has the technology and product risk, requires a financially viable and large customer base, and the system supplier must provide a significant portion of the finance and requires substantial equity and working capital ( [[#C40%20Cities%20Climate%20Leadership%20Group--2018|C40 Cities Climate Leadership Group 2018]] ).

'''Transport sector business models''' . Analog to EaaS, mobility as a service (MaaS) offers a business model whereby customers pay for a mobility service without making any upfront capital investment (e.g., buying a car). MaaS tends to deliver significant urban benefits (e.g., cleaner air) and brings in efficiency gains in the use of resources ( ''high confidence'' ). However, the switch to MaaS hardly improves the carbon footprint and further tempted on-demand mobility is likely to nurture carbon emissions ( [[#Suatmadi--2019|Suatmadi et al. 2019]] ). Therefore, to support climate change mitigation, MaaS must be integrated with the deployment of smart charging of electric (autonomous) vehicles coupled to renewable energy sources ( [[#IRENA--2019d|IRENA 2019d]] ; [[#Jones--2019|Jones and Leibowicz 2019]] ).

'''Financial technology applications to climate change.''' Financial technology, abbreviated as ‘fintech’, applies to data-driven technological solutions that aim to improve financial services ( [[#Dorfleitner--2017|Dorfleitner et al. 2017]] ; [[#Lee--2018|Lee and Shin 2018]] ; [[#Schueffel--2018|Schueffel 2018]] ). Fintech can enhance climate investment in innovative financial products and build trust through data, but also presents some challenges including potentially significant emissions from increased energy use with distributed transactions ( [[#Lei--2021|Lei et al. 2021]] ). Blockchain is a key fintech that secures individual transactions in a distributed system, which can have many applications with high impact potential but is also associated with uncertainty ( [[#OECD--2019c|OECD 2019c]] ; [[#World%20Energy%20Council--2019|World Energy Council 2019]] ). Fintech applications with climate change mitigation potential have been growing recently, including tracking payment or asset history for credit scoring in AFOLU activities ( [[#Nassiry--2018|Nassiry 2018]] ; [[#Davidovic--2019|Davidovic et al. 2019]] ), blockchain supported grid transactions ( [[#Livingston--2018|Livingston et al. 2018]] ), carbon accounting throughout value chains ( [[#World%20Bank--2018b|World Bank 2018b]] ), or transparency and verification mechanisms for green financial instrument investors ( [[#Kyriakou--2017|Kyriakou et al. 2017]] ; [[#Stockholm%20Green%20Digital%20Finance--2017|Stockholm Green Digital Finance 2017]] ). Generally, blockchain and digital currency applications are not well covered by governance systems ( [[#Tapscott--2016|Tapscott and Kirkland 2016]] ; [[#Nassiry--2018|Nassiry 2018]] ), which could lead to problems with security ( [[#Davidovic--2019|Davidovic et al. 2019]] ), and some licensing and prudential supervision frameworks are in flux.

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