Some observations on the European flexibility market
The role of flexibility in a modern energy system with a large share of renewable energy is undisputed. Flexibility comes from energy storage systems co-located with renewable production sites, standalone battery systems, and the demand side, where industrial and commercial firms, as well as communities of households, can adjust their load in response to price signals. Flexibility is often needed by TSOs and DSOs to stabilize the grid but can also be used for purely commercial purposes.
It is interesting to examine how this flexibility reaches the market in different countries. The first and most straightforward way to realize flexibility, especially demand-side flexibility, is to make an agreement with a utility or directly with a network operator for delivering that flexibility at a price. This does not involve any market mechanism, and the deal is purely regulated by a PPA or similar. This has the disadvantage of not being able to benefit from market price fluctuations. It also does not represent the true value of flexibility, which might be much higher than the offered price.
In response to this need, a few flexibility trading platforms were created across Europe. Usually, such a platform is a digital platform that facilitates or coordinates the procurement, trade, dispatch, and/or settlement of energy or system services. These platforms cover various use cases, from resolving constraints on distribution networks to real marketplaces that trade ancillary services or serve as intermediaries for access to the wholesale market. The platform can be local, serving one or very few procurers who are usually local network operators, or more global, working even cross-country. It can be operated by a TSO or by a 3rd party company.
Some platforms, such as Piclo Flex in the UK, cover multiple countries and are available for participation by any Flexibility Service Providers (FSPs), functioning as real marketplaces running auctions, clearing transactions, and settling payments between T/DSOs and FSPs. Others serve as intermediaries to procure flexibility services through established markets. Market intermediary flexibility platforms do not perform the essential functions of marketplaces within the platform ecosystem but instead provide enabling services (e.g., asset registration and prequalification) to T/DSOs and FSPs, facilitating procurement. Example of such a platform is THE CROWD BALANCING PLATFORM in Netherlands which also operates with some specific services in Austria, Germany, Italy and Switzerland.
Well-established marketplaces for flexibility trading, besides those in the UK, can be found in Spain, where many renewable energy producers and prosumers offer flexibility services on the eSIOS platform operated by the Spanish TSO. The platform offers the possibility of trading for a huge number of aggregators, C&I firm and IPPs in Spain.
In Germany, which strongly pushes renewable production, there is no such marketplace as yet. The DA/RE platform operated by ENBW is more of an administrative flexibility scheme coordinator than a marketplace. It does not support market-based allocation of flexibility but instead provides support for centralized cost-based allocation by facilitating data exchange between relevant stakeholders. This is a surprisingly weak position for a country with one of the largest numbers of energy market players in Europe. And this is not the only hurdle for German FSPs in their market activities. A C&I company cannot decide to participate in the flexibility market without an agreement with its utility. It seems that German legislation is far behind its ambitious net-zero plans.
On the other side of the range, the UK is preparing for market participation of flexibility providers in the wholesale market and in 2024 Piclo is adding Piclo Max to its currently operating Piclo Flex platform. The company asserts that it will be the world’s first platform to streamline access to all electricity markets from a single place for flex sellers, including EVs, batteries, renewables, and other asset types.
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