Flexibility market in EU to grow, but gas plants may not be the only way to balance the power system

As Europe phases out its remaining coal plants, it is also losing key flexible energy sources whose output can be adjusted to ensure secure electricity supplies even during peak demand. One frequently discussed solution is the use of gas-fired power plants. But demand-side flexibility can also help balance the grid.

As European Union countries aim to increase the share of renewables in their energy mix, maintaining balance in the electricity grid is becoming more challenging. Electricity generation from wind and solar is weather-dependent and intermittent. Renewables therefore need backup from other flexible energy sources.

When there is not enough power in the grid, peaking plants such as natural gas power stations can be used. But it can just as easily happen that there is a surplus of electricity in the grid, as was the case on Easter Monday in the Czech Republic. In that situation, demand-side flexibility is needed.

Transmission system operators are already managing both situations today. But as renewables grow and nuclear and coal are phased out, demand for flexibility will increase. European Commissioner for Energy Kadri Simson expects daily demand for flexibility in the EU to rise by 133% between 2021 and 2030.

“And comparing 2050 with 2030, the EU will need a further average increase of 250%,” the European Commissioner added at the Smart Energy Summit 2023.

Demand-side flexibility

With electrification increasing across Europe, “the next crisis may be local,” as distribution grids come under further strain at the local level, said Michael Villa, executive director of smartEn. Yet electrification itself can offer demand-side flexibility, Euractiv reports.

Demand-side flexibility covers a wide range of technologies, including electric vehicles that can store energy by charging their batteries at night, when energy is cheapest; digitally connected appliances in buildings that can be controlled remotely; and solar panels paired with home batteries that can feed electricity back into the grid when demand is highest.

According to an industry study published last year, consumers in the EU could save more than 71 billion euros a year on their electricity bills if the full potential of these technologies were harnessed.

The study also found that by the end of the decade, the need to curtail renewable electricity generation would fall by 61%, giving consumers access to more clean energy without the need to install additional wind and solar farms.

The market is still in its infancy

However, according to Lucinda Murley, lead analyst at consultancy LCP Delta, the demand-side flexibility market in the EU is still in its infancy and is driven primarily by solar self-consumption in southern European countries such as Italy, Spain and Portugal.

“It is not yet widespread,” she explained, adding that the challenge is integrating national markets, which currently operate separately.

“There are literally billions of euros available in these markets for demand-side flexibility,” she told the event’s attendees, adding that they are not being tapped yet.

The European Commission is aware of this challenge and has urged EU countries to swiftly implement the 2019 Electricity Market Directive, which opens Europe’s wholesale electricity market to companies offering demand response services.

“In many member states, demand response still lacks this access to wholesale markets, which is contrary to the requirements of the Clean Energy Package,” Simson told the event’s attendees. The package entered into force in 2019.

Last month, Brussels proposed a further reform of EU electricity market rules to speed up this process, requiring EU countries to define national targets for demand response and storage. The draft law also allows network operators to launch auctions to reduce electricity demand during peak periods, open to flexibility services.