Flexibility in the energy sector is about more than just responding to energy market price fluctuations: it’s about optimizing costs, supporting grid stability, and enabling a sustainable energy system. Yet today, most discussions focus only on the visible tip of the iceberg: spot price optimization and frequency regulation services. While these mechanisms provide immediate benefits, they barely scratch the surface of what’s possible. The real opportunity lies beneath the surface.
The Tip of the Iceberg: Spot Prices and Frequency Markets
Some smart electricity retailers have shown how energy price-based flexibility, which responds directly to market prices, helps consumers shift consumption to cheaper periods and lower their energy bills.
However, energy price-driven flexibility doesn’t inherently reduce grid costs, it simply redistributes demand to meet current generation capacity. Imagine a windy winter day. Hydro power reserves are full. Electricity price drops really low and spot price optimization decides it’s a good time to charge all electric vehicles in a street, full speed. But since house heat pumps are already running to keep a cozy temperature, the simultaneous EV load causes overloading of the grid infrastructure. Energy price dips and grid capacity don’t always go hand in hand.
To unlock the full potential of energy optimization, we must look beyond spot prices and introduce incentives, such as flexibility tariffs, that encourage users to provide services directly to the local grid. This could significantly lower costs for all consumers, also those who don’t possess any flexible resources, potentially tripling their savings.
As renewable energy sources replace traditional power plants, maintaining grid frequency stability has become increasingly challenging. Transmission System Operators (TSOs) worldwide are forced to intervene frequently to manage imbalances, driving up costs. In response, many companies have capitalized on this opportunity by using battery storage for frequency trading, resulting in a period of rapid growth and high returns. Retail programs offering grid rewards are already aggregating fleets of EVs to provide frequency services, stabilizing the grid while generating revenue.
It’s clear that frequency markets are serving their purpose, and have boosted the development of flexible resources. But as the market is saturating, this era of high returns is coming to a dramatic end. Now it’s time to shift focus to exploring new value streams where flexible resources can provide their support to ensure long-term grid stability and reliability. While these markets have been the first frontier of flexibility, they are just the tip of the iceberg. The real opportunities and enablers of a successful energy transition lie beneath the surface.
The Hidden Depths: Grid Congestion and Rising Cost
Integration of renewables and electrification are putting pressure on the grid, delaying projects and threatening grid stability. A large part of the energy transition is taking place in the low and medium voltage grid domain. Distribution System Operators (DSOs) are facing a whole new reality which demands a transformation of how they plan and operate their grids. The tools used by TSOs to optimize the system have previously not been available on DSO level. Traditionally, grid expansion – adding more infrastructure – was the default solution. But this comes at a cost:
- Grid fees have already risen by 70% in some markets.
- $1 billion is invested daily in grid infrastructure, set to double by 2030.
- Without smarter solutions, grid costs could soon outweigh electricity itself.
The energy transition requires a fundamental shift in grid management. And while doing this, we unlock value pools that were previously untapped. Rather than relying on costly infrastructure expansions, local flexibility resources provide multiple opportunities for optimization. These are just a few examples:
Congestion Management
- By reducing demand during peak hours, we can minimize the need for costly grid reinforcements. Controlled load management helps smooth power peaks and alleviate temporary bottlenecks.
Voltage Quality
- A mix of high load and local generation can cause voltage instability, leading to solar panel tripping or malfunctioning devices. Feeder-by-feeder flexibility can stabilize voltage fluctuations and maintain power quality.
Curtailment Reduction
- Traditional grid capacity assessments often restrict renewable integration, leading to unnecessary curtailment of solar and wind power. By introducing flexible export limits and intelligent control mechanisms, we can maximize renewable generation without overloading the grid.
Unlocking the Iceberg: The Future of Grid Flexibility
To keep grid costs in check, we must optimize both energy usage and grid capacity simultaneously:
- Energy optimization shifts consumption, production, and storage to align with low-cost periods, ensuring efficient energy use.
- Grid capacity optimization schedules flexible loads to reduce congestion, minimizing the need for costly infrastructure expansion and enhancing system efficiency.
Advancements in artificial intelligence, digital twins, and big data analytics now make real-time, data-driven, grid optimization possible. This shift is a key enabler for scaling the technical solutions that can reduce the need for costly infrastructure investments while improving efficiency. This includes implementing continuous monitoring of every node in the grid, enabling a dynamic understanding of its operations. Additionally, real-time analysis is crucial for predicting potential bottlenecks across millions of nodes, ensuring that grid imbalances are addressed actively. To further enhance grid stability, we also need to enable instant interaction with distributed energy resources, such as electric vehicles, batteries, and solar plants, allowing for rapid adjustments that alleviate congestion and balance supply and demand. With these technological enablers, we now have a powerful toolbox of flexibility solutions:
Flexible power tariffs offer a promising solution: By allowing consumers to allocate flexible grid capacity at lower rates for controllable devices (EVs, heat pumps, batteries), they create a win-win scenario: lower costs for consumers and a more efficient grid. In return, users allow DSOs to temporarily adjust their flexible loads during peak congestion, preventing local grid overloads.
Local flexibility markets are another solution: They can efficiently provide additional value streams for the resources already deployed for TSO markets and allow aggregated small customer assets to do the same.
Finally, flexible connection agreements provide a third option: Instead of blocking new connections due to grid congestion, DSOs can offer agreements where consumers temporarily reduce load or curtail generation when necessary—allowing more connections without costly reinforcements.
These examples represent a few of many untapped opportunities. As the energy transition accelerates, the focus must shift toward comprehensive smarter, data-driven flexibility solutions that enhance grid efficiency and reduce costs i a wider perspective. By fully embracing these innovations, we can move beyond the tip of the iceberg; unlocking the vast, hidden potential beneath the surface to build a more resilient, cost-effective, and sustainable energy future.
