Europe’s shift to flexible electrification lagging finds LCP Delta and smarten
Image courtesy LCP Delta
Although there has been progress in demand side flexibility, market accessibility to enable a shift to smart, flexible electrification is not happening fast enough, warn LCP Delta and smartEN in their latest Market Monitor for Demand Side Flexibility.
The report, which provides an overview of the accessibility and participation of demand side flexibility (DSF) across 30 European markets, lists the UK and France as leaders in the space but warns of a growing need to maximise the participation and value of DSF assets across different value streams.
According to the report, in 2024 residential assets saw a significant increase in participation in ancillary services, particularly in Sweden and France, despite existing barriers.
There was also widespread adoption of wholesale reflective dynamic tariffs, encouraging greater flexibility among residential consumers. Norway and Finland led the way, with over 90% of households using day-ahead dynamic tariffs, while Sweden had a higher share of monthly variable tariffs.
While this progress is promising, more action and collaboration, states the report, are needed to support consumers and the sector as a whole.
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The report highlights the rise of asset-specific tariffs, mainly for heat pumps and electric vehicles, which offer lower costs for customers while helping energy retailers and asset providers better manage electricity demand.
At the same time, large renewable targets—led by France, Germany, and Italy—along with a rapid increase in residential assets, particularly in Germany, are driving future DSF development. In the coming years, LCP Delta and smartEn expect more service providers to combine both implicit and explicit flexibility to create most value for customers.
Wholesale energy markets are mostly inaccessible to independent flexibility service providers, which limits their ability to profit from DSF. France and Great Britain are the only countries where residential assets can take part in these markets without needing approval from their Balance Responsible Parties (BRP).
Commenting in a release was Jon Ferris, head of Flexibility at LCP Delta: “Today, the need for electricity system flexibility is more urgent than ever. While demand for flexibility grows with the electrification of our economy, progress has been too slow. To keep up, we need independent access for trading flexibility in wholesale markets, with better coordination between retailers and aggregators.”
Added Michael Villa, executive director at smartEn: “After decades of stagnation, electricity demand rose 1.2% (31TWh) between 2023 and 2024. Electrification must continue, but in a smart, flexible way—otherwise, decarbonisation will come at the cost of affordability and competitiveness. The 2024 Market Monitor for Demand-Side Flexibility warns that a smart, flexible electrification of demand is not happening, at the speed needed to tackle the challenges ahead.’’
In response to their findings, LCP Delta and smartEn are calling for:
• Opening all markets to distributed energy resources
While the Electricity Market Directive already provides the regulatory framework, says the report, inadequate implementation prevents fair and unobstructed renewable energy, energy storage and DSF from accessing all wholesale markets, ancillary services and capacity mechanisms.
• Transparent price signals to help consumers manage costs
With increased electricity price volatility and network congestion, retail tariffs reflecting both wholesale electricity prices and cost-reflective network tariffs are crucial, the report emphasises. This will enable consumers to leverage their flexibility and manage costs while having a positive impact on the electricity system
• Encouraging System Operators to buy clean, affordable, flexibility sources
Finally, the report finds that a lack of widespread market-based procurement of flexibility by system operators is leading to sub-optimal system management, leading to costly alternatives such as redispatch, excessive curtailment, or avoidable grid investments.
Said Villa: “We are confident this smartEn and LCP-Delta report, combined with the new EU institution’s focus on competitiveness, affordability, security, and innovation, will provide the ideal market and regulatory conditions for the demand-side flexibility potential to flourish —now.”
