Local flexibility markets in the energy transition: A comparative review and framework for future development

Local Flexibility Markets (LFMs) are no longer experimental mechanisms but evolving governance systems that determine how distributed flexibility becomes an enduring component of national power systems. This paper reframes LFMs not as fixed market designs but as multidimensional transition processes shaped by the co-evolution of institutional, market, regulatory, digital, and social dynamics. Using a five-dimensional Transformational Framework, we conduct a cross-country comparative analysis of six regimes—the United Kingdom, the Netherlands, Germany, France, Australia, and South Korea—to identify how differing governance logics and policy sequences influence the maturity and direction of LFM evolution. The results show that technological readiness alone is insufficient: sustainable scaling depends on institutional openness, regulatory adaptability, digital interoperability, and social legitimacy. The study distinguishes two dominant pathways of transition—institutionally anchored and regulator-driven—and highlights hybrid experimental approaches emerging in distributed energy contexts. It finds that misalignment among dimensions often explains stagnation more effectively than technological or economic constraints. Ultimately, LFMs represent adaptive governance infrastructures that integrate decarbonization objectives with localized operational needs. Their long-term success will depend on continuous coordination across governance layers, transforming flexibility from a policy experiment into a stable and legitimate market function for resilient, decentralized energy systems.