As the power sector becomes dominated by increasingly decentralized renewable energy sources, the potential for the use of flexibility services keeps growing. This can result in more efficient management of supply and demand, at reduced costs. A new breed of solutions - flexibility platforms - can play an important role in interconnected electricity systems and create opportunities for new business models to enter the market. But will these platforms manage to gain a foothold in the industry? In the final part of our series on flexibility platforms, we’ll try to answer this question.
Tasks for the future
The electricity sector is going through a period of innovation, and we can expect to see many changes in the foreseeable future. But what is already clear is that flexibility platforms can secure huge benefits for companies and consumers alike. However, standards for data, processes and interoperability still need to be defined in order for them to operate more efficiently, to achieve more coordination and to ensure lower barriers to entry, which can further drive innovation.
As we have seen in our previous articles on the piloted operational models - administrative flexibility scheme coordinators, market intermediaries and marketplaces - there is a wide range of possible designs and solutions, with different roles for the participants involved. Besides the policy implications this diversity carries, the directions in implementing those platforms and others yet to be developed are worth considering. Below are some areas that could be explored in future research.
Flexibility market structure - The structure of flexibility markets requires a series of functions that are divided into phases (e.g. preparation phase or activation phase). A thorough examination of each phase can provide valuable insight into these functions and how they might be performed by a particular flexibility platform as efficiently as possible.
Services and products characteristics - Some platforms offer standardized products. While this may sound like the right approach - harmonization makes it easier to compare bids, thus lowering entry barriers - it has its disadvantages. For instance, DSOs often need specific product parameters. An alternative approach is to allow buyers to filter the available assets based on specific characteristics, which must be clearly defined.
Better coordination and real competition - Further ways of implementing flexibility platforms should be determined that can best facilitate the coordination between market participants while enabling fair and open competition, avoiding undue market power and market distortions.
Right now, stakeholders within the electricity sector still face some challenges regarding the integration of distributed energy resources (DERs), TSO-DSO coordination, and EU-wide market design. Flexibility platforms can help overcome these challenges if they adapt to stakeholders’ respective business needs. Moving forward, it will be interesting to see how platforms evolve.
A possible classification
In our previous articles, we introduced eight flexibility platforms developed and launched in the past few years, so it stands to reason that there will be more to follow. But how will the flexibility platform landscape of the future look? Will there be several independent platforms or some coordinated local ones, or maybe one big platform for an entire country?
Ofgem, Britain’s independent energy regulator, considers these possibilities in a paper on flexibility platforms in electricity markets. It distinguishes between four scenarios and compares them across four functional areas:
As you can see, the key differences arise from the number of platforms and the extent of coordination between them. If there is only a single platform, it’s possible to make a distinction based on the number of markets where the platform is used, hence the difference between the super-platform and the single market scenarios, which are identical in other respects. It must also be noted that none of these platforms is “perfect” or necessarily better than the others: they all have their benefits and their disadvantages (e.g. more/less innovation or regulation). Potential participants would need to consider their individual objectives and requirements.
The Ofgem study also makes some important recommendations that could be implemented in the future, irrespective of the type of platforms. These relate to cross-industry development, data-sharing frameworks, a shared vocabulary and, most importantly, the communication of the benefits to market participants.
Flexibility platforms are still in their infancy and it’s difficult to predict what the future holds in store for them. But what is already evident is that they are exciting technological solutions that can help ensure the optimal operation of a more decentralized electricity system.
