Flexibility in the Electricity System: What does it Actually Mean?

by Marie Volkert / 13. January 2021

Flexibility in the Energy Grid We need more flexibility in the electricity grid, in the electricity market, in the entire electricity system. One can hear these demands repeatedly in connection with the energy transition. This is because an increase in the share of wind and solar in the electricity mix, which generate electricity in a volatile manner and can only be controlled to a limited extent, poses new challenges for the electricity grid.

Fluctuating electricity consumption is now being joined by fluctuating electricity feed-in, which, to put it bluntly, depends on the weather. A new uncertainty to adjust to in order to keep supply and demand in balance. Therefore flexibility potentials are used that - and here we come full circle again - are urgently needed.

Although there is a great call for flexibility, the term itself remains vague and is used in a wide variety of ways. Not all flexibility is the same. Therefore, in the discussion about more flexibility, it is crucial to know what type of flexibility is discussed to know whether more flexibility is really needed and where there is already enough flexibility in the power system.

Together with our flexibility experts at Next Kraftwerke, we took a closer look at four topics related to flexibility: Flexibility and time, flexibility and space, flexibility and new technologies, as well as flexibility and the market. We want to find out where we currently stand and where potential challenges or solutions for flexibility in the power system still lie dormant.

What is Flexibility?

In common parlance, flexibility is an adaptability that is usually required spontaneously. A person is flexible if he or she can adapt quickly to changing external circumstances. In the electricity system, flexibility helps to maintain or restore the stability of a system, because only by reacting flexibly to constantly changing conditions - fluctuating electricity consumption, fluctuating electricity generation – the system is balanced.

The German Federal Network Agency defines flexibility in the power system as the change in feed-in or withdrawal in response to an external signal (price signal or activation) with the aim of providing a service in the power system.
To measure flexibility one can use various parameters, such as the speed of its provision, the location where the flexibility is available, or the amount of flexibility.

Flexibility and Time

The German Federal Network Agency names two temporal parameters in its definition of flexibility: response time and duration. These parameters point to two important issues in the discourse on flexibility and time: How fast and how long is the provision of flexibility? The prices on the balancing energy markets clearly reflect the remuneration of the response time. In most countries, as in Germany, the fastest form of balancing energy achieves the highest remuneration.
Duration refers to the length of time of flexibility provision but it is unclear at what point we are talking about flexibility or already about capacity. In fact, the separation between flexibility and capacity is controversial. Elias De Keyser, expert for energy and flexibility at Next Kraftwerke, sees the biggest challenge of the energy transition not in the short-term flexibility, but in flexible long-term capacities:

Elias De Keyser, Energy and Flexibility Expert

The following examples illustrate more clearly the use of both short-term flexibility and long-term flexible capacity and the challenges associated with them:

Short-term Flexibility during the Course of the Day

The feed-in from wind and PV as well as the power consumption fluctuate sometimes strongly in the course of the day. Events such as sudden cloud cover and consequently less PV feed-in require the best possible forecasts and subsequent rapid compensation. The steeper the ramp of the event, i.e., the faster and more severe the unforeseen change, the faster the technology must react to provide flexibility to smooth the fluctuation, to basically fill the gap that has suddenly appeared. Solutions include batteries or flexible power plants whose flexibility potential is bundled in Virtual Power Plants, for instance, and thus made available to the balancing energy market. In Germany, for example, the integration of renewable energies in the short-term flexibility markets is already quite advanced.

Long-term Flexible Seasonal Capacity

Long-term flexible capacity is needed not for intraday but for seasonal balancing of fluctuations in feed-in and consumption. Particularly in the winter months, weather conditions can occur in which little wind blows and the sun hardly shines, resulting in low feed-in from wind and solar. The German language, inventive as ever, has now even its own word for this situation: Dunkelflaute (dark doldrums). Electricity consumption remains high during these phases, due to the winter season. The question of how to bridge the Dunkelflaute is the subject of emotional debate. The current approach in most countries, as in Germany, is to bridge the gap with the help of conventional power plants, because renewable energies are not yet able to cope with long-lasting dark doldrums on their own, given the current state of expansion. Opponents of the energy transition and coal lobbyists like to use this fact as proof that an electricity system without conventional power plants would be impossible to implement. We disagree with this statement and are of the opinion that the Dunkelflaute period is currently still a problem that renewables cannot solve alone. However, there are already numerous concepts, clean technologies and approaches to overcome the Dunkelflaute period, and an adequate power system that knows how to use these potentials will also be able to do without conventional energy in times when solar and wind power generation is low. Which solutions do we mean, you ask? More interconnectors to link different countries to use their generation and storage to balance out the Dunkelflaute, more flexible generation from renewables, more demand response schemes, and of course more long-time storage, be it hydrogen, battery storage, or pumped hydro where possible.

Flexibility and Space

In the discussion about flexibility in the power system, the spatial component often receives less attention. Yet the question in which spatial units we consider flexibility and how we ensure that flexibility also arrives physically where it is needed are essential.

The Spatial Unit of Flexibility

In most cases, the spatial unit in which we think flexibility is defined by the market. In many European countries, the defining spatial unit is still the nation. Why still? Because the EU aims to harmonize the European flexibility markets. The Electricity Balancing Guideline (EBGL) lay out these plans. Instead of looking at countries individually, it should now be possible to use flexibility throughout Europe. After implementation, flexibility will not be a national, but increasingly a European matter.

However, smaller spatial units are also present in the discussion, in which local flexibility balances out local grid imbalances. This consideration is central, for example, in smart city approaches, in which the city balances peak loads within the city spatial unit with smart and networked infrastructure.

The electricity grid cannot always carry out the spatial determination of flexibility by the market. Thus, with the harmonization of the European markets, a progressive grid expansion is essential. Only then, electricity traded on the balance sheet can also be physically delivered. Bottlenecks are currently occurring above all at the cross-border interconnection points, i.e. the transfer points of the electricity grids between the countries. If more electricity is traded on the exchange than can be supplied, this leads to negative effects such as the breach of supply contracts and the associated penalty costs or, from a technical point of view, to loop flows. Market and grid must therefore be coordinated, which leads us directly to the next question.

How can the Power Grid and the Market be Better Coordinated?

Grid bottlenecks do not only occur at border interconnection points. Within a country, an uneven spatial distribution of electricity generation also puts a strain on the grids. One example is wind power generation in Germany, which is primarily located in the north, while the largest centers of consumption are in the south. This results in grid bottleneck situations that are balanced with the help of grid-serving flexibility. Until now, the transmission system operators in Germany regulate this from above with system services called redispatch and feed-in-management of renewables. The problem is that these measures are expensive, but the market does not reflect these costs. Therefore, the question is: How can the market and the grid be better coordinated and the management of grid bottlenecks be carried out more effectively and more cheaply? Globally, there are already other approaches:

Nodal Pricing

Nodal pricing uses dynamic grid usage fees to reflect the costs of using the grid on the market and is a possibility for preventive grid balancing management. Instead of separating the grid into zones, it is separated into so-called nodes (feed-in nodes). At each node, a different price prevails, based on the electricity price and the cost of electricity supply. Different prices between nodes in the same market system thus reflect different costs of (local, regional) network use. Advantages are that the market sends price signals to relieve the grid in making it more expensive to use the grid when it is already heavily used and vice versa. Another advantage is that it sends additional investment signals, which create incentives to add capacity in areas where networks have not been under much strain so far and therefore the grid usage is cheaper. New Zealand and some states of the USA use nodal pricing for instance. Whether nodal pricing really is a practicable solution is, however, controversial.
Criticisms include the fact that the market loses liquidity and that there is too little competition at the individual nodes. In addition, implementation is very complex and, as previous examples show, error-prone and unstable.

How much flexibility must regulation provide? What can the market contribute? Where is the perfect balance between a perfect “copperplate” and grid flexibility? Which market actors should participate? Our expert on grid-serving flexibility, Tobias Nitze, identifies the biggest challenges as follows:

Redispatch 2.0

Die Energiewende findet vor allem in den Verteilnetzen statt, doch die Verteilnetzbetreiber nehmen bisher nur eine untergeordnete Rolle in einer lokalen Netzengpassbewirtschaftung ein. Dies soll sich mit dem Redispatch 2.0 schrittweise ändern, der im Oktober 2021 eingeführt werden soll und dann das bisherige Einspeisemanagement in Deutschland ablöst. Vereinfacht bedeutet dies: EE-Anlagen werden in den Redispatch einbezogen und die ad-hoc Maßnahmen des Einspeisemanagements werden durch ein planbares Redispatch-Regime ersetzt.

Inwiefern eine stärkere Einbindung des Marktes auch bei dieser Ausgestaltung des Netzengpassmanagements sinnvoll sein kann, ist im Hinblick auf den neuen Redispatch umstritten. Wie viel Flexibilität muss regulatorisch bereitgestellt werden? Was kann der Markt beitragen? Wo ist das perfekte Gleichgewicht zwischen Kupferplatte und Netzflexibilität und welche Akteure sollen integriert werden? Unser Experte für netzdienliche Flexibilität, Tobias Nitze, benennt die größten Diskussionspunkte wie folgt:

Tobias Nitze, Project Manager Business Development

Flexibility and New Technologies

The expansion of new and smart technologies will make it possible to achieve the energy transition. In addition to flexible consumers such as PtX technologies, Big Data and artificial intelligence are particularly popular when it comes to harnessing flexibility potentials in the power system.

Nevertheless, it helps to take a differentiated and uncluttered look at the technology in question and what it can do, as Sebastian Hölemann, our expert for VPP Solutions, emphasizes:

Sebastian Hölemann, Head of VPP Solutions and Services/Member of the Management Board

The Virtual Power Plant follows a similar approach, by bundling the potential of numerous, already existing generators, consumers and storage units in a swarm and controlling them in a targeted manner by analyzing and evaluating internal and external data.

In addition to better harnessing existing potential, there are also new technological flexibility options, such as batteries from electric vehicles and PtX. The technologies already exist, but their market penetration is not sufficient yet to make a decisive contribution. The reasons for this are the prices of the respective technologies, which are often still too high, and a lack of regulatory support.

Flexibility and the Market

Throughout this article, the market came up repeatedly as an important player. This is because the often most favorable way to obtain flexibility is to create financial incentives to provide new flexibility or incentives to expand existing flexibility potentials. We have already discussed this with regard to grid-serving flexibility and new technologies. Tobias Romberg, Project Manager in the Business Development team, comes to an interesting observation with regard to the German market:

Tobias Romberg, Project Manager Business Development

Flexibility in the Power System: The Status Quo

Our flexibility experts highlighted challenges for four interesting topics: flexible capacity, more market involvement in grid-serving flexibility and consumer engagement, a more realistic assessment of technologies, and still existing market and regulatory barriers to flexibility incentives. What is your opinion? What are your views on the topics discussed around flexibility in the power system and where do you see the biggest challenges ahead? Write us a comment and join the discussion!

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Marie Volkert is a student assistant at Next Kraftwerke, studies geography and is interested in energy systems and their market design around the globe. Her passion is to put complex issues into clear words.

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