In November 2021 ENTSO-E and Frontier Economics published a report in which they conduct an in depth examination of so-called "flexibility platforms" in the energy sector.
The report defines flexibility platforms as "digital platforms that facilitate or coordinate the trade, dispatch and/or settlement of energy or system services between TSOs, DSOs and Distributed Energy Resources (DERs)". DERs is a term used to refer to small, geographically dispersed generation or demand resources, installed and operated on the distribution system at voltage levels below the typical bulk power system. In layman terms, these are the smaller scale devices used by businesses and domestic endusers to generate or take-off energy as prosumers (e.g. solar panels, combined heat and power plants, electricity storage, small natural gas-fuelled generators, electric vehicles,...)
As a result of the significant transformation the energy sector is undergoing - driven by the transition to renewable energy sources - , electricity supply is becoming more and more variable as well as decentralised, and electricity consumption levels and patterns are fundamentally changing.
This evolution requires the implementation of a more flexible and responsive electricity grid use and management. In this context digital tools have been developed to allow T/DSOs to manage the grid in a more flexible manner. At the same time the increasing digitalisation of the electricity grid facilitates DERs' access and participation to existing markets and to participate in the provision of electricity system services (re-dispatching services, frequency and non-frequency ancillary services, congestion management).
Flexibility platforms are considered to effectively facilitate flexibility markets through providing signals for investment, the incentives for asset owners to make them available on the network and a venue for buyers of flexibility to signal their needs and to contract for services (see Ofgem's Future Insights Series, Flexibility platforms in electricity markets).
According to the ENTSO-E and Frontier Economics report flexibility platforms include platforms that are self-contained marketplaces, as well as platforms that act as intermediaries to established wholesale and balancing markets. The report makes a further distinction between platforms that pertain to ‘local’ flexibility, where the primary focus is to resolve constraints on the distribution networks, and those that pertain to flexibility that can help with national (or cross-border) balancing of the electricity system, including the update of existing platforms to integrate DER as new resources in the provision of system services.
The report identifies the follow functions performed by flexibility platforms:
- asset registration and prequalification;
- notification of flexibility requirements;
- submission of offers;
- coordinated grid impact assessment and priority of access;
- price formation;
- issuing dispatching instructions and activation; and
- validation and settlement
Depending on the needs of system operators and on the applicable regulatory and institutional context, flexibility platforms have varying forms of involvement in each of these functions.
The report examines and compares eight flexibility platforms which cover a broad range of governance, functional and design characteristics. The report explains the specificities of these platforms and also identifies common trends and challenges that impede their development.
From a regulatory perspective it is interesting to note that flexibility platforms operate under a variety of ownership structures, some platforms being fully independent of regulated entities, others being operated independently but implemented in a partnership with T/DSOs and some being completely owned by T/DSOs. As identified by the report this leads to differences in the devision of functions between commercial and regulated domains and brings about the question to what extent regulated entities like T/DSOs are allowed to take on tasks that would otherwise fall within the commercial domain.
Other regulatory concerns may relate to anti-competitive behaviour and conflict of interests, access to these facilities, transparency, vulnerabilities to market manipulation, secure operation of the grid and prosumer protection.
For sure these are elements regulators will keep an eye on. It is to be seen if these concerns require to be addressed in specific regulations.