As part of the IEA TCP for a Co-operative Programme on Smart Grids (ISGAN) Working Group 9,
we access insights from existing European and non-European power systems, markets, and
pilots to understand the issues and implications of flexibility market design.

The main barriers for using distributed flexibility can be grouped into three sub-categories:
• technical barriers • consumer engagement • regulatory barriers

Employing a multi-faceted methodology, the work was initiated with a thorough review of electricity systems in the participating countries. Based on this review, a targeted stakeholder questionnaire, complemented by in-depth interviews with system operators, aggregators, and consumer associations, facilitated not only insights extraction but also a comparative synthesis of stakeholder views.

It can be acknowledged that barriers to distributed flexibility use range from technical constraints to regulatory hurdles, highlighting the absence of a comprehensive regulatory framework. Smart meters, while ubiquitous, still face technical challenges and regulatory barriers impede Distribution System Operators (DSOs) from accessing flexibility resources, necessitating further clarification.

Globally, a consensus emerges on the imperative for refined regulatory frameworks and clarified roles. Challenges persist in technology and infrastructure for measurement and verification, hindering seamless flexibility integration. It could be demonstrated that flexibility potential as a network reinforcement tool faces unpredictability, mitigated by advancements in predictability and regulatory evolution. European perspectives underscore grid topology’s significance in leveraging local flexibilities.

Distinct business models surface across regions, with Austrian Flexibility Service Providers focusing on ancillary services, short-term markets, and Virtual Power Plant (VPP) solutions. Persistent customer engagement challenges highlight the need for education and financial incentives.

In conclusion, the diverse designs of global electricity markets necessitate tailored approaches for the successful implementation of flexibility markets in operational planning. Regulatory clarity and continuous stakeholder engagement emerge as pivotal factors in navigating this evolving energy landscape.

The Technology Platform Smart Grids Austria is an association of relevant stakeholders in the field of electrical power supply. The Platform was founded in 2008 with the support of the Climate and Energy Fund, the Ministry of Transport, Innovation and Technology and the Ministry of Economy and since then the FEEI – association of electrical and electronic industries and Oesterreichs Energie support as host organizations.

The aim of the Platform is to pool joint forces for future intelligent electricity grids in order to support an energy- and cost- efficient system operation.

Synergies through coordination of stakeholders from industry, energy sector, research and public bodies should be used efficiently.

Austrian expertise in smart grids ise strengthened by flagship projects and made visible internationally.

You can find here more information on the platform.

In 2021 and 2022 extraordinarily high prices have been observed in electricity markets across Europe. The main reason behind the high electricity prices is the high price of natural gas, which is used to generate electricity. Natural gas-fired power plants are often needed to satisfy the demand for electricity when the demand is at its highest or when the volumes of electricity generated from other technologies such as nuclear, hydro, or variable renewable energy sources do not suffice to cover demand. Hence, natural gas is often said to be the price-setting technology in the European electricity system. Demand for natural gas and electricity increased as economies opened up after the pandemic lockdowns but also due to the 2022 high summer temperatures and the resulting increased cooling demand in parts of Europe. At the same time electricity generation from certain technologies, e.g., nuclear, has been below historical levels due to technical and weather-dependent circumstances. The Russian invasion of Ukraine added a supply shock that further exacerbated the constraints and pushed prices up.

All actors are needed in the transition of the energy system, not least the end-users, also referred to as the customers. This group may for example provide their demand-side flexibility. However, the incentives today can be seen as being too weak and the barriers to participate with flexibility too high.

A survey has been conducted that aims at laying the basis for a common understanding of international market designs and different flexibility services that are currently in use. To capture the whole picture, the topic of market design was split into three subtopics, covering general market design, flexibility market design, and flexibility services for system operators. Each of these topics is made accessible by several questions that have been answered by the respective countries, enabling the Working Group to understand presently used market designs and flexibility services. We find that the design of electricity markets differs significantly between European and non-European countries, thus presenting a wide range of challenges to the countries in question. Consequently, there are no general-purpose solutions for the successful implementation of flexibility markets related to operational planning. However, several common issues were identified and will be investigated in the further course of the work of Working Group 9 through stakeholder interviews from participating countries.

Overview

This paper draws on the work carried out in the UK by the Energy Data Taskforce and how its recommendations pertain to and align with flexibility service provisions and market developments in the UK. Insights from relevant energy
stakeholders (networks, industry/innovation and academia) have also been incorporated.

Overview

There are many developments around flexibility within the energy system, particularly around electricity network reinforcement avoidance and trading platforms. However, there are also significant gaps in this area that could hinder the participation of innovators in the flexibility markets and, at the same time, limit the procurement process for network companies. This insight paper attempts to capture the views and insights from experts within the UK and draw out the key takeaways.

Summary

Many developments are taking place around flexibility within energy system(s), particularly around electricity network reinforcement avoidance and trading platforms. However, the scoping study hypothesis was that there are also significant gaps in research. As such, the study conducted a literature review to confirm areas that are being considered and concurrently surveyed ISGAN member countries to gather additional thoughts and concerns.

Conclusions were that there are areas that still need to be addressed, namely:

1. Integration of trading with dispatch
2. Understanding of multiple actors’, requirements (including where those requirements are conflicting) for flexibility and the commercial implications
3. A need to identify the characteristics that different flexibility options provides and how to access them
4. Interoperable markets to support the development and usage of flexible products and services at scale
5. Consumer focused flexibility
6. Avoiding stability/security of supply issues through loss of diversity

This report summarises the findings of the literature study and the survey, and explains the thought leadership, to date, in the areas described as gaps above.

Overview

The first factsheet presents some insights into metering as an enabler for consumer-focused flexibility, and gives a brief overview of the two generations of smart meter roll-outs in Sweden, as well as the national regulation of minimum functional requirements for electricity meters.

In spring 2021, the Swedish Energy Markets Inspectorate submitted a report to the Government with recommendations on how to facilitate the concept of independent aggregators in Swedish legislation. The second factsheet aims to summarise the main analysis and recommendations of the report.

The third factsheet presents some insights into price signals and consumer flexibility, and gives a brief overview of the characteristics of dynamic electricity pricing, as well as some food for thought going forward.