As a pioneer in the operation of electricity markets, the EPEX SPOT SE electric power exchange acts as a neutral intermediary between grid operators and flexibility providers. At present, the use of local flexibility markets is inconsistent throughout the EU, which is mainly due to the legal framework.
In Germany, regulations still stipulate a cost-based redispatch, which offers no incentives for flexible systems to take part in the redispatch process in a way that is efficient, Aurore Lantrain explains in the interview. However, pilot projects have shown that there are better options.
Lantrain works as business development and strategy officer at the European electric power exchange. The power exchange operates the markets for physical short-term electricity trading in Central Western Europe and Scandinavia, as well as in Switzerland, the United Kingdom and Poland. Lantrain is currently working on EPEX Localflex and other new services for grid operators.
As a result of the energy transition, certain regions are seeing an increase in feed-in from renewable sources of energy, but these are often not the main areas of consumption. This can lead to grid congestion at all voltage levels. These congestions have become more frequent in recent years, and they require expensive grid stabilization measures, such as feed-in management or redispatch. In Germany alone, these measures cost 4.2 billion euros in 2022 and three billion euros in 2023.
At the same time, consumers are increasingly able to control their power consumption, and the electrification of various sectors, including mobility, is progressing at a rapid pace. Battery storage, electric cars and other integrated IoT devices are capable of increasing and reducing their power consumption for more flexibility in the system. Localizing these flexible systems is key to avoiding grid congestion.
By controlling their consumption in a way that aids grid stability or, if required, by feeding electricity back into the grid, consumers can help avoid grid congestion before it occurs. The most efficient way to determine when and where flexibility is required is to use a market mechanism that brings together supply and demand. This happens on local flexibility markets, such as those operated by EPEX SPOT. Flexibility services are registered in local order books based on grid topology information. Grid operators can order these services to avoid grid congestion.
As a pioneer in the operation of electricity markets, EPEX SPOT SE functions as a neutral intermediary between grid operators, i.e. flexibility buyers, and flexibility providers. These markets efficiently centralize local physical flexibility services and provide them to whoever needs them, whenever they need them – for both long-term reservation and short-term activation. This will promote the development of more flexibility sources.
On the buyer side, the grid operators are active on the flexibility market. On the sales side, the concept of local flexibility markets is completely open to all types of technology. From industrial users such as computer centers, aggregators and electricity storage systems, to energy communities and other producers – they are all plausible market players on the local flexibility market.
EPEX SPOT Localflex’s offering spans the entire flexibility spectrum, from its very existence to its usage. We create opportunities for flexibility service providers to market their systems and we provide grid operators with access to new tools to overcome congestion and optimize grid planning. From onboarding to registration, activation and billing, we are part of the whole process from start to finish.
We collect orders from registered market participants looking to buy or sell electricity in an order book and use an anonymous auction to aggregate bids and offers for transactions. An algorithm ensures that flexibility supply and demand are optimally matched while taking several conditions into account, including grid constraints and the coordination between transmission and distribution grid operators.
EPEX SPOT has been working on various initiatives to develop local flexibility markets since 2017. With Enera and Enflate, our first pilot projects for flexibility markets, we have developed our expertise to efficiently manage local grid congestions and peak demand in the European power grid. The Localflex Continuous NL market has centralized flexibility offerings in the Netherlands since 2023. Localflex also promotes the integration of renewable energies in the UK and increases the involvement of consumers and producers in overloaded grid areas. To this end, we formed a partnership with UK Power Networks, a utility company.
The use of local flexibility markets is inconsistent within the EU, which is primarily due to the legal framework. In Germany, for example, the regulations stipulate a cost-based redispatch and, in turn, offer no incentives for flexible systems to take part in the redispatch process in an efficient way. We hope that the new Network Code on Demand Response will cement the role demand response plays in solving grid congestion in Europe, putting it on a whole new footing. The European Union Agency for the Cooperation of Energy Regulators (ACER) monitors this process.
Events such as this are extremely important in harmonizing development with and in spite of the regulatory environment. As a private organization in the energy sector, it is our mission and responsibility to use innovation to drive the energy transition. Efficient innovation requires close cooperation with those who will use these services. The exhibition provides a space where attendees can openly discuss their challenges, needs and success stories so that everyone can learn from each other and work together to find the best solution.
We were able to meet both potential DSO customers as well as potential partners. It was a great opportunity to test some ideas and have stimulating discussions with many participants. Numerous technology companies have developed dynamic tariff offerings that are paving the way for increasingly flexible demand. We even had a few end users come to ask about our market pricing. That gave us the impression that consumers are prepared to be flexible and the industry is already in the process of developing the relevant products. So there’s just one piece of the puzzle left to solve: regulation.
This interview was conducted by Niels H. Petersen.
Further information at The smarter E Digital
Want to learn more about how you can benefit from flexibility for new markets, additional monetization opportunities and grid system overload management? At The smarter E Digital, you can watch Aurore Lantrain’s presentation at The smarter E Forum 2024! The platform also offers many more presentations about flexibility.
