RESEARCH REPORT

In brief

In brief

  • Flexibility is a new lever that can empower distribution system operators (DSOs) to cope with the new demands brought on by the energy transition.
  • As per EU Directive 2019/944, DSOs have started to procure flexibility through market approaches.
  • To identify best practices, we have assessed the procurement approach of the 173 DSOs across Europe and the UK that have over 100 000 clients.
  • The journey towards industrialization, based on specific needs and DSOs’ maturity, has started: advanced countries are drafting legal frameworks.


Finding flexibility

Flexibility, the actions taken by grid users to modulate power intake based on an external signal, is an essential part of the energy transition.

As more and more sources of distributed generation are added to the network, and the demand for electricity extended to new uses such as powering electric vehicles or heating commercial and residential properties, many DSOs have added flexibility to their operational strategy.

Enedis embeds flexibilities in its industrial model. Enedis analyses the network constraints and publishes flexibility opportunities (where, when, how much?) wherever they can be useful, cost-effective, and integrated in its operational processes.

— Hubert Dupin, Head of Flexibility Department — Enedis

Regional approaches inspire different markets

Although there is a clear need for flexibility across Europe and the United Kingdom, DSOs have not taken a uniform approach to procurement.

Five countries have set up industrial market approaches to local flexibility procurement, while the rest of Europe is still experimenting.

In France and the UK, DSOs use flexibility proactively to address DSO-specific needs based on anticipated network constraints. Elsewhere, in the Netherlands, Germany and Sweden, it is a means to solve congestion on the DSO network, which is often caused by a lack of high-voltage (HV) transmission capacity.

Five countries have set up industrial market approaches to local flexibility procurement, while the rest of Europe is still experimenting.

5 use cases for flexibility

Due to different grid constraints and investment capabilities, there are many different use cases for flexibility, which are applied according to the needs of each market.

Investment deferral

is used to postpone investment during the planning phase until the ideal investment date. In this case, the choice to use flexibility is made on purely economic grounds.

Permanent embedded solutions

are deployed as an integrated solution as part of the planning process, and are currently specific to Enedis.

Demand congestion management

is a key driver for the deployment of local flexibility in areas where a significant growth in consumption puts the network at risk.

High Voltage injection congestion

occurs when the increase in the amount of connected renewable capacity means that excess power cannot be dispatched, which creates a risk of grid overload.

Outage management

is another use of flexibility focused on network operations, such as limiting the impact of planned works, or re-supplying the network quickly during unplanned outages.

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In France and the UK, DSOs cover most of the use cases, while the rest of the analyzed DSOs cover only one or two, typically to deal with short-term congestion issues.

Network visibility and market design

Another key factor in a DSO’s approach to procurement is network visibility.

When there is good visibility over network needs, a long-term approach is used. This means that capacity is tendered in advance, and activation notices are sent afterwards as needed by the DSO.

In this case, flexibility often replaces or postpones the need for investment: the same level of supply reliability is also required. As a result, these different types of flexibility are purchased with capacity reservation, meaning that flexibility providers are paid to make capacity available during specific times when the grid is constrained.

Short-term markets, where flexibility is bought shortly before it is needed on the network (day-ahead, or even intraday), are used to address short-term needs.

The type of market used is directly linked to the type and level of visibility that DSOs have over their network and congestion risks—again, the approach differs by regional cluster.

Naturally, cost also plays a role.

As stated in the EU Directive 2019/944, flexibility must be tendered if it is considered as an economically viable alternative to regular options; so the different use cases for flexibility define the alternative investment and valuation methods, as well as the types of contract used.

The different use cases for flexibility define the alternative investment and valuation methods, as well as the types of contract used.

Rewriting the rule book

The regulatory framework for DSOs to procure local flexibility plays a definitive role in the development of local flexibilities, but none of the countries analyzed have finished deploying a full regulatory package: they are still in active conversations with the different stakeholders.

Interestingly, many of these conversations are co-creation sessions initiated by system operators (DSOs or TSOs). By including aggregators, regulators, and TSOs, it is possible to ensure that flexibility markets are not only well managed, but also competitive.

Projects and discussions built on DSO-TSO collaboration, such as the S3REnR collaborative approach and the IntraFlex approach for WPD respectively in France and in the UK are good examples of this emerging willingness to collaborate.  

Key actions and next steps

DSOs will play a central role as the local flexibility framework is industrialized.

Based on our findings, it is crucial to:

  • Ensure that there are no obstacles to prevent the value stacking of flexibilities, which requires strong coordination between DSO-led mechanisms and other existing markets
  • Continue the definition of future market designs while aiming at simple mechanisms with few restrictions to support the development of flexibility for local use, ensuring customer acceptance and lower operation costs
  • Develop a consistent overall framework for flexibility assessment and procurement that considers the different ways DSOs access flexibility (mandatory provision, time of use tariffs, variable connection agreements and local markets)
  • Support the various needs of the transition phase regarding the development of platforms, processes and flexibility portfolios for long-term consumer benefit.

Grégory Jarry

Industry Principal Director – Accenture France


Luc Servant

Consultant – Consulting, Utilities

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