If you were in Munich last week then you know: Europe’s biggest energy show did not disappoint. Combining Intersolar, EMPower, ees - electrical energy storage and Power2Drive into one megaevent, The smarter E again focused on key technologies needed to drive the energy transition.
And what were people talking about? Nearly everyone had an opinion on the Iberian blackout. The most surprising trending word must have been “inertia”: the once-so-dull topic that yesterday no one cared a whit about. Yet today, our social media feeds are flooded with inertia “experts” confidently advocating sure-fix solutions to prevent the next big outage, and inertia seems to have become the new favorite theme.
While flexibility and grid stability have been hot topics for the last couple of years, the unprecedented events in Spain and Portugal just two weeks ago have pushed these subjects into the forefront. It’s a fact that renewables alone cannot fully support our power needs; complementary technologies are needed to ensure that supply and demand stay balanced 24/7.
Here are some of the hottest topics we discussed at The smarter E:
Flexibility is the new oil
Storage is a key element—and so is demand-side response. The vast number of smaller and low-voltage connected assets offers a significant opportunity. If we can harness them, they could provide the flexibility to deliver greatly needed grid stability. However, a substantial and rapid build-out of aggregation and virtual power plants is required to orchestrate these resources and realize their full potential.
Some eye-opening facts were brought up in the conference and forum talks:
- Intraday price spreads are 10%+ on average over the past two years
- The hours of negative prices doubled from 2023 to 2024, and the trend isn’t stopping
- Curtailment and congestion costs are surging
The facts indicate that flexibility is essential to ensuring a reliable, affordable, sustainable supply of energy. If it is managed intelligently, there is also a strong business case for flexibility.
On Thursday, smartEn (Smart Energy Europe) hosted a session at the EMPower forum on Optimising Grids Through Demand-Side Flexibility. In a series of brief talks, experts in flexible demand management explored challenges, barriers and solutions to better use the value of demand-side flexibility (DSF). It started with a bang, as Sebastian Sahlender from Siemens provided a business case for all of the technical solutions that followed: he estimates the revenue potential of DSF to be as much as 400,000 EUR annually per MW of flexibility. Meanwhile, Kora Töpfer from EPEX Spot highlighted how EPEX is on the front line of flexibility services through GOPACS in the Netherlands.
Our own Christoph Malzer described the “DSF Cavern” as the difficulty of market access and the cost of connecting assets that vary significantly across Europe. In some countries, markets are more challenging to enter and may require you to dig deeper to get to the "oil", but at the same time, they may also be more financially rewarding.
The DSF Cavern. Check the photo gallery below to see which countries require a deeper drill; Data from Market Monitor for DSF 2024 by LCP Delta and smartEn.
VPPs are gearing up
The VPP operators we talked to are certainly maturing and preparing for further growth and complexity. We see them digging down in three ways:
Scalability: VPPs are growing from a handful of assets to hundreds or thousands. While pilot projects and early-stage commercialization could still be handled with homegrown software, expensive edge computing devices, and manual processes, optimizing a VPP at scale to profitability is exponentially more challenging. Meanwhile, side processes like onboarding and settlement become too complex to do manually; automation is no longer a nice-to-have but absolutely necessary.
Multi-market optimization: A VPP may be developed around a single profitable revenue stream. But such revenue streams tend to saturate, shrinking margins. New markets with promising new revenue models will develop, and may then also change or flatten. Even changing intraday supply and demand balances and generation mix means that the best market to monetize is a constantly moving target. Long-term success requires the ability to adjust strategies or pivot to new markets quickly, optimize across multiple markets and revenue streams over extended time horizons, and intraday from one market time unit (MTU) to the next.
Geographic expansion: VPPs are usually built to meet the specific requirements of their home TSOs. However, if they try to expand to another country, they may find themselves forced to rebuild many processes from scratch. Every country has its quirks, from regulatory differences to TSO market software platforms and data models.
Taking flexibility to market
All of these factors point to a need for agility. VPP operators should look for modular software that can handle the full range of business processes, adapt quickly to change, and allow easy integration with internal or third-party systems. This gives them a significant competitive edge, avoiding growing pains while enabling faster time to market and the ability to adapt when market conditions change.
In Munich, we saw a trend towards flexibility delivered by energy suppliers and/or flexibility asset manufacturers (i.e., EVs). While these may each be individually agile, they may risk siloing sources of flexibility by supplier/TSO/manufacturer and make agility across suppliers and different asset classes harder. This unintended consequence reminds us of the German solar subsidies and how they denied home batteries the opportunity to export to the grid at times of very high prices last year. The ban on residential BESS exports has now been lifted, but the lost gains last year will never be recovered.
The industry needs successful VPPs online and growing as soon as possible - flexibility doesn’t help us much if it can’t be brought to market. Strain on the grid will continue to multiply as demand increases, renewables grow, and conventional plants retire. So we need well-managed flexibility to make the best possible use of every kWh generated.
A big thanks to everyone who shared their thoughts and experiences with us in Munich this year. We look forward to continuing the conversation and working together to ensure a strong and flexible energy system!
