It is fair to say that platform business models are among the most disruptive economic trends of our century. Seven of the ten most valuable companies pursue platform-based business models. Platforms have fundamentally transformed entire industries by creating new marketplaces, providing new ways of interacting with customers, digitizing and simplifying processes, unlocking (consumer-owned) resources, and leveraging network effects. Take Airbnb, for instance. The company is more valuable than hotel industry giants Marriott, Hilton, or Hyatt without owning real estate or even a single bed. The electricity sector could be the next in line for this platform revolution.

If platformization were indeed such a powerful trend, one may ask why it has not affected the electricity sector before. Indeed, the sector used to be characterized by lack of agility and innovation for decades due to tight regulation, monopolistic structures and a high share of public ownership. Electricity has been generated in large, centralized coal, gas and nuclear power plants and sold to consumers by utilities within monopolistic structures. However, these preconditions are changing as we speak — in part due to the sector’s ongoing sustainabilization

As a cornerstone in humanity’s ambitions to mitigate climate change, the sector is required to become carbon-free within an ambitious timeline. This transformation fundamentally changes the rules of the game in the power sector and paves the way for platformization. Looking back at Airbnb, its core value engine is making use of consumers’ idle capacity and managing the complexity of millions of users. With the rise of rooftop photovoltaic, or PV, electric vehicles, and home storage assets, more and more consumers now own their own generation assets — a resource potential that platform business models can tap into.

Early adopters have already launched platform-based businesses in the industry. The Brooklyn Microgrid operates a platform on which consumers can sell their excess energy produced in their rooftop PV to their neighbors. Tesla partners with Octopus Energy to bundle multiple home batteries into a virtual power plant. Silicon Valley based start-up Fermata Energy is developing a digital marketplace linking EVs with grid operators to stabilize the grid or with electricity providers to balance their generation. EVmatch provides a plug-sharing platform that connects EV users with the wall-box in your garage. Others will follow.

The opportunity is immense but major challenges need to be addressed to succeed with platform business models in the power sector, among these are:

• Accountability. What is the platform ultimately accountable for? A matching platform like Tinder basically assumes no accountability at all. On Airbnb, consumers can, in many cases, be refunded some of the cost if the experience is not meeting their expectations. But in the electricity context, glitches in the platform can lead to blackouts at home or an electric vehicle stuck in the middle of nowhere — will platform operators bear that risk or leave it to their customers?
• Immediacy. Electricity is like no other good or commodity. It is subject to the physical constraint that the power grid needs to be in balance at all times. If demand does not equal supply or vice versa, the grid may collapse. This requires power providers to meticulously forecast their consumers’ demand, procure energy accordingly, and balance both dimensions in close to real time. A system operator supervises the process, balances inaccuracies, and penalizes providers if need be. Will platform businesses take on that burden while they just wanted to create a marketplace for trading access to solar energy in the neighborhood?
• Regulation. The power sector is highly regulated and hence a profound understanding is required to be successful in the field. One angle may be to operate outside of the conventional (highly regulated) power market — for example, the core transaction on the EVmatch platform is trading electricity (to charge EVs). But users are not bound to the requirements of regular power providers outlined above because the traded product is a service (i.e., charging the EV) and not the good electricity itself.
• Inflection Point. When does it all start to make sense? For platform-based business models to become viable, a certain market penetration of rooftop PV, EVs, home batteries, etc. is required. What is the right time to enter the market?
• Trust. How can platform operators build trust in their service? If a Tinder date doesn’t show up, that’s one thing. But if my plug sharing partner is not at home as scheduled or their wall box charger is unexpectedly out of service, the consequences may be more severe (i.e., getting stuck with an empty EV). Users trusting in their peers is essential for platform markets. Airbnb and others have developed sophisticated trust mechanisms to tackle this. How can they work for electricity platforms?

These are still considerable hurdles to jump but those who overcome them have a great chance to become the next unicorn in the electricity sector, in other words, the Airbnb of Power.