Report: Local Flexibility Markets - Future Proofed

This paper looks at the evolving mix of technologies connecting to distribution networks, and assesses what new challenges and opportunities they introduce that should inform local market design. We review the current tools being used to manage local congestion (Contracted flexibility services, static distribution charging and flexible connections), their pros and cons, and recommend a new vision for future local flexibility markets (dynamic distribution charging) that we think will be more resilient to many of these emerging challenges.

Key Takeaways:

  • Current tools being used to manage local congestion (as above) will not be sufficient to deal with the needs of the evolving local electricity system.
  • Good market design should find an efficient solution which balances the need to optimise based on the single wholesale price with optimising to maximise local grid efficiency.
  • Dynamic distribution charging - improving the signal to be more reflective of real system congestion - should unlock greater system benefits and should be able to replace almost all existing local flexibility signals.
  • Most importantly, we must test a number of different and innovative ways to manage local constraints to find the optimum market design as soon as possible.

Local Flexibility Markets - Future Proofed


Published on 20th October 2023 by:

image of Sebastian Blake

Sebastian Blake

Flexible Markets Lead

Hey I'm Constantine, welcome to Octopus Energy!