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Designing a local flexibility market for buying back capacity from electricity consumers connected to the distribution network

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  • Ziras, Charalampos
  • Zepter, Jan Martin
  • Pechrak, Shahatphong
  • Tsaousoglou, Georgios

Abstract

The proliferation of flexible resources in the electric distribution network and their active management have already started to cause congestion problems, mainly in areas with significant electric vehicle penetration. In this work, we study the reduction of usable capacity as a congestion management measure in a local flexibility market context. Using an extensive two-year residential charging dataset from Denmark, we highlight the problems caused by the almost 50% non-utilized capacity on an aggregated level of household chargers. We discuss and address various market design challenges and the implications of free excess capacity by treating aggregated capacity as a divisible good that can be traded between a distribution system operator (DSO) and flexibility service providers. The use of capacity blocks streamlines service delivery and overcomes many of the challenges of using explicit services. Finally, we show empirically that a simple, uniform pricing, two-stage auction significantly reduces DSO payments and mitigates the issue of excessive profit margins compared to a single-stage auction.

Suggested Citation

  • Ziras, Charalampos & Zepter, Jan Martin & Pechrak, Shahatphong & Tsaousoglou, Georgios, 2025. "Designing a local flexibility market for buying back capacity from electricity consumers connected to the distribution network," Utilities Policy, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:juipol:v:93:y:2025:i:c:s0957178725000049
    DOI: 10.1016/j.jup.2025.101889
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    References listed on IDEAS

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    1. Ziras, Charalampos & Heinrich, Carsten & Bindner, Henrik W., 2021. "Why baselines are not suited for local flexibility markets," Renewable and Sustainable Energy Reviews, Elsevier, vol. 135(C).
    2. Rebenaque, Olivier & Schmitt, Carlo & Schumann, Klemens & Dronne, Théo & Roques, Fabien, 2023. "Success of local flexibility market implementation: A review of current projects," Utilities Policy, Elsevier, vol. 80(C).
    3. Hennig, Roman J. & de Vries, Laurens J. & Tindemans, Simon H., 2023. "Congestion management in electricity distribution networks: Smart tariffs, local markets and direct control," Utilities Policy, Elsevier, vol. 85(C).
    4. Karim L. Anaya & Michael G. Pollitt, 2021. "How to Procure Flexibility Services within the Electricity Distribution System: Lessons from an International Review of Innovation Projects," Energies, MDPI, vol. 14(15), pages 1-26, July.
    5. Heinrich, Carsten & Ziras, Charalampos & Jensen, Tue V. & Bindner, Henrik W. & Kazempour, Jalal, 2021. "A local flexibility market mechanism with capacity limitation services," Energy Policy, Elsevier, vol. 156(C).
    6. Morell-Dameto, Nicolás & Chaves-Ávila, José Pablo & Gómez San Román, Tomás & Dueñas-Martínez, Pablo & Schittekatte, Tim, 2024. "Network tariff design with flexible customers: Ex-post pricing and a local network capacity market for customer response coordination," Energy Policy, Elsevier, vol. 184(C).
    7. Hennig, Roman J. & de Vries, Laurens J. & Tindemans, Simon H., 2024. "Risk vs. restriction—An investigation of capacity-limitation based congestion management in electric distribution grids," Energy Policy, Elsevier, vol. 186(C).
    8. Rai, Ussama & Oluleye, Gbemi & Hawkes, Adam, 2022. "An optimisation model to determine the capacity of a distributed energy resource to contract with a balancing services aggregator," Applied Energy, Elsevier, vol. 306(PA).
    9. Heinrich, Carsten & Ziras, Charalampos & Syrri, Angeliki L.A. & Bindner, Henrik W., 2020. "EcoGrid 2.0: A large-scale field trial of a local flexibility market," Applied Energy, Elsevier, vol. 261(C).
    10. Schittekatte, Tim & Meeus, Leonardo, 2020. "Flexibility markets: Q&A with project pioneers," Utilities Policy, Elsevier, vol. 63(C).
    11. Bjarghov, Sigurd & Farahmand, Hossein & Doorman, Gerard, 2022. "Capacity subscription grid tariff efficiency and the impact of uncertainty on the subscribed level," Energy Policy, Elsevier, vol. 165(C).
    12. Palm, J. & Kojonsaari, A.-R. & Öhrlund, I. & Fowler, N. & Bartusch, C., 2023. "Drivers and barriers to participation in Sweden's local flexibility markets for electricity," Utilities Policy, Elsevier, vol. 82(C).
    13. Jin, Xiaolong & Wu, Qiuwei & Jia, Hongjie, 2020. "Local flexibility markets: Literature review on concepts, models and clearing methods," Applied Energy, Elsevier, vol. 261(C).
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