A market-based approach to local flexibility – design principles


Brussels, 12 February 2020 | Increasing the share of renewable energy generation in the energy mix is vital for decarbonisation, yet intermittent renewables such as wind and solar power can put pressure on the capacity of local and regional grids, requiring costly grid management measures from the network operators, both TSOs and DSOs.

At the same time, decentralised resources are being deployed at an increasing rate, including, among others, storage assets and electric vehicles interacting with the grid. Active customers will increasingly be able to offer demand-side flexibility, either directly or through aggregation services. Ways must be found of effectively managing and harnessing the flexibility potential offered by these resources.

While grid expansion is necessary to meet the challenges of increased electrification, it is not enough on its own to solve grid management issues, such as congestion management, and would be too costly as a unique solution. TSOs and DSOs have a range of tools to manage congestion, but harnessing local resources via mechanisms that value their location as well as the service itself will be an important part of the solution.

Overall, these challenges, the integration of renewable energy and the harnessing of decentralised resources, must be addressed in a cost-efficient manner that increases both the security of supply of the power system, and also integrates effectively with existing power markets i.e. building on the liquidity and transparency of the organised wholesale energy market.

The question is how to ensure that these flexibility resources are used when and where they are most needed, that their value to the system is reflected accurately, in a way that also meets the grid management needs of network operators.

Please download the full position paper below.