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Debate over Europe’s options for reducing carbon emissions while maintaining secure and reliable energy supplies, has never been greater, nor more important.
Compliance with regulations must be rapid to deliver emissions reductions and a greater level of European energy security. This means policies and regulations must be workable, equitable and enforceable.
We have sponsored analysis of the energy transition readiness of some of
Europe’s largest economies regularly since 2019. The analysis is carried out
by The Association for Renewable Energy and Clean Technology (REA) and
it shows how policies and regulations that encourage investment in energy
flexibility deliver fundamental change. Of the countries examined,
those that demonstrate agility in adapting their electricity markets to permit
broad participation are making faster progress in the energy transition.
Players that have traditionally not participated in electricity markets will increasingly want to trade both energy and service. In a highly flexible system, energy will flow ‘to and from’ assets such as solar PV installations and EVs, which are known as decentralised sources.
These players are becoming known as ‘prosumers’ – they produce and consume energy. The type of services they can sell include the battery storage capacity in EVs which the grid may need to buy at times to store variable output from assets such as commercial windfarms.
Where policy and regulation permit, prosumers will want to trade energy and services. Linking energy production and consumption via 'sector coupling' will be increasingly important. We believe flexibility and sector coupling will be the cornerstones of Europe’s renewable energy system.
Energy flexibility means optimising the economic value of every electron generated from renewable sources. It involves encouraging a modification in generation or consumption patterns - often both - to provide a service to the energy system.
Good examples of this are the choices that businesses and householders might make in response to a time-of-use tariff. A factory will opt to run a power-hungry process when the cheapest power is available. An EV driver will want to charge at off-peak prices at home.
Demand-side flexibility will become increasingly important to balance the grid as it switches to renewables. Modifying generation and consumption patterns will involve more participants and they must be able to see and understand how to monetise flexibility to reduce their overall energy costs. Read the smartEN report.
Policies and regulations that makes flexibility assets and services attractive to investors will create an effective flexibility market. Private investment will propel and sustain the energy transition over the long term and it will only be encouraged by regulatory certainty.
Investors need assurance they will be compensated for providing flexibility, and that their participation in grid ancillary services will be driven by price signals. They must be able to see and understand how to monetise flexibility, including smart charging, to reduce their overall energy costs.
