Value of Flexibility in Future Electricity Markets

Context

Flexibility is defined as the ability of power systems to cope with expected and unexpected changes in demand and generation, as well as grid disturbances. New technology trends such as variable, renewable generation and distributed energy resources challenge the demand as well the supply of flexibility, historically provided by conventional power plants. The development and deployment of additional resources for flexibility is therefore assessed as a key issue in facilitating the transition towards a sustainable power system. Besides conventional power plants, well-known sources of flexibility are storage and demand response. In addition, transmission network and market integration facilitate the access to these flexibility resources in other regions.

A market place, which correctly prices flexibility, is expected to be crucial in order to provide correct incentives for investments in flexibility. This market needs to match the needs of the system, determined by means of different energy, network and reliability services in the current market design, with the potential of new and existing flexibility providers. As the distribution system level is increasing in importance due to the increase of distributed energy resources, it is advised to research the potential of providing these resources with access to the market for flexibility.  This can be done by means of aggregation in clusters or virtual power plants. It remains however unclear how this market for flexibility will evolve. Will this gradually evolve towards an extension of the current energy and ancillary service markets, or will this give birth to a separate “flexibility market”, trading capacity characterised with a certain response time and activation limits? Will this give rise towards standardized products, improving market liquidity, possibly supported by a dedicated market platform?

Research objective

The objective of this research proposal is to develop the framework for a future market for flexibility. A model-based approach is pursued to match the demand and supply of flexibility, assessing the need for a product standardization, and the interaction with energy and ancillary markets in the electricity sector.

Methodology

First of all, this requires a study of the techno-economic potential of different flexibility providers. The core of the first research step is to determine techno-economic potential of different flexibility providers. In addition to existing flexibility providers, specific attention is directed towards the aggregation of distributed energy resources.  In a second step, the needs of the system are studied and the current market products facilitating flexibility are analysed. On the other hand, it is necessary to study the needs of the system. In a third step, it is to be researched how the needs of the system, and the potential of various flexibility providers, can be matched in a market place. It needs to be researched if a certain level of standardization can be achieved, in order to increase market liquidity.

A model is built to bring together the demand and supply of flexibility. This model-based approach allows to assess flexibility market design. The model is to be particularly designed to simulate the operation of flexible technologies while participating in multiple flexibility services. This model can be used to assess the techno-economic feasibility of standardized flexibility products, as well as put forward optimal product characteristics.