Exploring the market dynamics and value chain for smart energy systems

The West Midlands Combined Authority (WMCA) has a vision to develop the West Midlands as a strategic centre for the future of smart and flexible energy systems. As part of the region’s economic strategy (West Midlands Plan for Growth) and Local Growth Plan, the WMCA is working to support the sustainable growth of a smart energy systems cluster.

Background

This is to be done principally through the formalisation and coordination of cluster activities, working with industry to reduce barriers and grasp opportunities, such as by leveraging inward investment and driving business growth. Importantly, this will drive the delivery of outcomes outlined in the West Midlands Regional Energy Strategy, led by Energy Capital as part of the WMCA and released in February 2025. This piece of work aimed to inform the future direction of the cluster delivery.

Client needs and key question(s)

The WMCA needed to deepen its understanding of the new energy market and specifically the unique opportunities and potential afforded to their region – including, where relevant, through interventions of WMCA and its partners.

What we did

Define the opportunities: The initial research defined the segments of the smart energy systems sector, namely energy management, clean tech, strategic services and supporting infrastructure. To ascertain the opportunities that these may provide for the WMCA, the developers and the users of each segment were then defined, which resulted in a number of subcategories and the identification of companies operating within these.

Assess the opportunities: Seven distinct opportunities within smart energy systems were assessed using a scoring framework, which included sizing the opportunity using LCP Delta forecasts for the UK, considering resource advantages of the WMCA region, a competitive analysis to assess the defendable nature of WMCA’s advantages and a relative comparison of the potential for easing pressure on the grid and the reduction of local emissions.

We achieved all of the above by undertaking the following:

• Assessment of key policies and regulations affecting the market.
• Research using both internal and external sources.
• Workshop with key stakeholders from across the region.

The results

The report concluded that there are three segments of smart energy systems that the WMCA has significant potential to develop and achieve strong growth:

• EV charging for trucks: a nascent sector where WMCA has significant advantages and can help to shape the market as it develops, with a leading developer and significant numbers of potential users.
• District heating: the companies present in the region provide a high number of developers, with its urban density providing many users, making it well suited to succeed in this sector.
• Residential solar: given the number of developers in this sector within the WMCA and the scope to reach a significant proportion of the UK market users from the WMCA, there is reason to expect the WMCA can become a market leader in this sector.

We then made recommendations for next steps that the WMCA might take to progress with the above. For example, we recommended the types of partnerships that they should look to build. 

Overall, this research helped WMCA to prioritise further development work within the smart energy systems cluster. It also helped them to ensure joined-up working across economy and energy teams internally.