“Collaboration is the door to unlock a sustainable future and flexibility markets are the keys to it ”, writes Farhan Farrukh, Business Development Manager at NODES. In the next blog in our series, we explore the importance of greater collaboration in various roles that appeared in the energy value chain.
In today’s rapidly evolving energy landscape, achieving a sustainable future requires a collaborative effort from all stakeholders in the energy sector. One essential element driving this progress is the concept of flexibility markets. These markets play a crucial role in empowering transmission system operators (TSOs), distribution system operators (DSOs), aggregator companies, and energy consumers to actively participate in optimizing the energy grid, fostering grid stability, and promoting a cleaner and more sustainable energy ecosystem. In this blog post, we will delve into the significance of flexibility markets and how their effective implementation fosters a collective pursuit of a sustainable energy future.
Understanding Flexibility Markets
Flexibility markets revolve around the concept of energy flexibility, which is the capacity of energy consumers, distributed energy resources (DERs), and other assets to adjust their electricity consumption or production in response to changing grid conditions. This responsiveness ensures a balance between supply and demand, enabling a more efficient and resilient grid operation.
Empowering Transmission System Operators (TSOs)
TSOs face the challenge of ensuring the reliable and stable transmission of electricity across vast geographical areas. Flexibility markets enable TSOs to access a broader pool of resources, such as demand response from industrial consumers, storage systems, and renewable energy sources. According to a study by the International Energy Agency (IEA), optimizing demand response and flexibility in power systems can reduce peak electricity demand by up to 15%, significantly enhancing grid stability and reducing greenhouse gas emissions. 1
Enabling Distribution System Operators (DSOs)
DSOs operate at the local level, where energy demand patterns are diverse and dynamic. Flexibility markets empower DSOs to optimize grid operations by integrating DERs, such as rooftop solar panels, smart appliances, and electric vehicle charging stations. A report by the European Commission highlights that by effectively utilizing flexibility services, DSOs can reduce grid operating costs by up to 30% and avoid around €6 billion in grid infrastructure investments annually by 2030. 2
Facilitating Aggregator Companies
Aggregator companies act as intermediaries between energy consumers and the energy market. They aggregate flexibility from various sources, including residential homes, commercial buildings, and industrial facilities, and offer these services in the flexibility market. According to the Smart Energy Demand Coalition, demand response and flexibility services from aggregators could save European consumers up to €3 billion annually in electricity costs by 2025. 3
There are several benefits of enabling collaboration via a Flexibility Market, let us take a look at a few of these benefits:
Enhanced Grid Resilience
Collaboration among TSOs, DSOs, and aggregator companies allows for a more coordinated response to grid disruptions and fluctuations in energy demand. By sharing information and resources, these stakeholders can quickly deploy flexibility measures, ensuring grid stability and minimizing the impact of unexpected events. A study conducted by Navigant Research estimates that the widespread adoption of flexibility resources could reduce the number of electricity outages by up to 50% by 2030. 4
Accelerated Renewable Energy Integration
Flexibility markets incentivize the integration of renewable energy sources into the grid. TSOs and DSOs can leverage the inherent flexibility of renewables, such as wind and solar, to balance fluctuations in supply and demand, paving the way for a cleaner and more sustainable energy mix. The European Network of Transmission System Operators for Electricity (ENTSO-E) states that integrating 60% of renewable energy in the European grid by 2030 is possible with the effective implementation of flexibility markets. 5
Through collaboration, TSOs and DSOs can avoid unnecessary infrastructure investments by optimizing grid operations with flexibility resources. Aggregator companies can also offer competitive pricing by aggregating and optimizing flexibility services, making it an attractive option for consumers and businesses alike. A report by the Brattle Group indicates that the effective use of demand-side flexibility could lead to a 10% reduction in total system costs by 2030 in the United States. 6
In the pursuit of a sustainable energy future, collaboration among transmission system operators, distribution system operators, aggregator companies, and energy consumers is paramount. Flexibility markets provide the framework to unlock the true potential of energy flexibility, enabling a cleaner, more reliable, and resilient energy grid. As we continue to adapt to changing energy demands and environmental challenges, the role of flexibility markets becomes increasingly vital in shaping a greener tomorrow for generations to come. By embracing collaboration, stakeholders in the energy sector can collectively drive progress toward a more sustainable future. The facts and figures presented in this blog highlight the substantial impact of flexibility markets and encourage greater cooperation among stakeholders to build a sustainable and prosperous energy ecosystem.
- International Energy Agency (IEA). “Flexibility in Power Systems.” https://www.iea.org/reports/flexibility-in-power-systems ↩
- European Commission. “Study on Electricity Grid Flexibility in the European Union.” https://op.europa.eu/en/publication-detail/-/publication/63df1875-6d4e-11e9-9eb4-01aa75ed71a1/ ↩
- Smart Energy Demand Coalition. “Demand Response & Flexibility in Europe: Status Review and Best Practice.” https://www.sedc-coalition.eu/demand-response-flexibility-in-europe-status-review-and-best-practice ↩
- Navigant Research. “Grid Resilience in the Age of Distributed Energy Resources.” https://www.navigantresearch.com/reports/grid-resilience-in-the-age-of-distributed-energy-resources ↩
- European Network of Transmission System Operators for Electricity (ENTSO-E). “ENTSO-E’s Ten-Year Network Development Plan 2020.” https://www.entsoe.eu/publications/network-development-plans/tyndp2020/ ↩
- The Brattle Group. “The Economics of Demand Flexibility: How Demand Response Programs Can Decrease Consumers’ Electricity Bills and Reduce Investment Costs for Utilities and Society.” https://www.brattle.com/insights-events/publications/the-economics-of-demand-flexibility-how-demand-response-programs-can-decrease-consumers-electricity-bills-and-reduce-investment-costs-for-utilities-and-society/ ↩