Flex4RES project partners are pleased about the recent release of the European Commission’s Winter Package. It constitutes a great step forward for renewable energies’ integration and the build-up of flexibility. Still, it neglects to address key regulatory barriers to flexibility resources activation. The Flex4RES project complements the European Commission’s initiative and fills this gap.

The evolution of market designs as key instrument for renewable energies’ integration.

With the EU Winter Package “Clean Energy for All Europeans”, released on November 30, the European Commission emphasizes the needed transition towards a more flexible electricity sector that can integrate large shares of renewable energy and sets up clear measures.

The success to ambitious European objectives in terms of renewable energies will depend on the ability of electricity markets to reconcile VRE features, mainly: higher forecast uncertainty and low generation costs, with sufficient balancing resources to ensure a high degree of reliability. This objective is addressed through an adaptation of European electricity market designs that are expected to become more responsive to system’s needs, open to new participants and integrated across borders.

In the future setting, intraday and balancing markets will play a key role to increase flexibility based on three main measures: the energy shall be traded as close as possible to real time, the participation of demand-side and storage resources should be further incentivized and the assessment of resource adequacy shall be enhanced on a regional base. In terms of flexibility the following impacts would be expected if the proposals of the Winter Package are fully implemented:

  • More reactive markets and increased liquidity due to traded products as close as possible to real time, a wider scope of market products and a broader base of potential market participants;
  • Improved business opportunities for flexibility providers;
  • The procurement of balancing reserve shall be performed on a regional level
  • Provisions on the adequacy assessment and potential capacity mechanisms put great emphasis on fixing the energy markets first, which will have a positive impact on flexibility providers;
  • If capacity mechanisms are implemented the criteria should be non-discriminating; the detailed design, however, is not defined and thus it is still open in how far flexibility characteristics will play a role;
  • Increased exposure of all consumers to real-time market signals, the flexibility impact of small consumers and decentralised resources will nevertheless be very much subject to practical implementation in national regulations;
  • The role of flexibility aggregators is strengthened; their options to market flexibility will still be very much dependent on a more precise definition of the market model and the relations to existing actors, like suppliers and balancing responsible parties;
  • A large potential lies in the obligation related to distribution grid operators to consider flexibility services in their network planning.

The contribution of the Flex4RES project is fully in line with current considerations…

The Flex4RES initiative and key messages are fully in line with the European Commission’s current questioning.

The release of the electricity report highlights the framework conditions to unlock flexibility potentials in the Nordic-Baltic countries in order to contribute to a reliable and efficient penetration of variable energy resources (VRE).

Based on a joint contribution of energy experts in the region, it points out that large existing flexibility potentials are not utilised, suggesting that market or regulatory barriers impede the use of such resources. This study contributes to EU’s current discussions and sheds light on key policy-based instruments that can be implemented to increase system flexibility in the electricity sector.

The electricity report follows up on a previous study in the Flex4RES project focusing on the framework conditions to flexibility activation in the district heating sector. District heating accounts for a considerable share of energy use in the Nordic and Baltic countries and thus also for considerable flexibility potentials in the interface between electricity and heating.

… But goes a step further to increase flexibility.

The Nordic and Baltic electricity market is well functioning at present and generally in line with the EU vision. However, several regulatory barriers are identified that still require a clear political commitment to be removed. Such barriers identified among the Nordic-Baltic countries could as well be relevant for other European countries.

Additionally, the Winter Package does not specifically address the decisive role to be played by cross-sectoral coupling in the future integration of VRE. This is particularly relevant between the district heating and electricity sectors. However, it acknowledges district heating flexibility potentials and recommends that a thorough assessment is performed in the future.