Flexibility vs. Grid Investment

What is this?

Grid operators (DSOs) sometimes face a choice: build new grid infrastructure now, or pay customers and aggregators to shift their electricity use so the existing grid can cope for longer. This calculator helps you work out which is cheaper.

The three scenarios it models

1. Invest now — the DSO builds the infrastructure today. The cost C enters the regulated capital base; the DSO earns a return on it over the asset's economic lifetime.
2. Flex + defer — the DSO pays for flexibility every year for a number of years (the deferral period), then builds anyway at the end.
3. Flex + avoid — same as above, but load growth turns out not to materialise, so the investment is never needed. The avoidance probability slider controls how likely this is.

The belastningsincitament bonus

If the flexibility you procure shaves the peaks on your busiest days, Sweden's network regulator (Ei) pays you extra allowed revenue through the belastningsincitament (load incentive). It rewards DSOs whose average load is high relative to their peak load. The calculator adds this bonus to the flex path.

The depreciation chart

The "annual cost profile" chart shows how the year-by-year cost of each path evolves over time. The invest-now cost starts high (depreciation + return on the full asset value) and declines as the asset depreciates. The flex cost is flat, but potentially cheaper in the early years.

Key output to focus on

The breakeven flex budget is the most actionable number: it tells you the maximum your DSO can afford to pay per year for flexibility before investing becomes the better choice. If you can procure flexibility below this level, flexibility wins.

What WACC actually is

WACC is the cost of money — the interest rate a DSO effectively pays to have capital available. Some of that capital is debt (bank loans), some is equity (shareholders who expect a return). WACC blends them together. When Ei sets WACC at 5.5%, it means: the DSO's money costs 5.5% per year to hold.

Why "earning a return" is really just cost recovery

When Ei sets the revenue cap, it lets the DSO charge customers enough to (1) get their money back gradually — depreciation, recovering the investment over the asset's lifetime — and (2) pay the annual cost of having that money tied up — WACC × the remaining asset value.

So if you invest 20 MSEK at 5.5% WACC, Ei lets you collect roughly 1.1 MSEK/year from customers just for having put that money in the ground. That's not profit — it's paying off the people who lent or invested the 20 MSEK in the first place. At the end of the asset's life, you've broken even. The phrase "Ei allows DSOs to earn on their capital base" means recover the cost of their capital, not profit from it.

Why higher WACC raises the breakeven flex budget

Suppose you have 20 MSEK and could either bury it in a cable or keep it available and pay for flexibility instead. If WACC is 5.5%, having that money tied up costs you 1.1 MSEK/year in financing. If WACC were 8%, the same cable costs 1.6 MSEK/year. The higher the rate, the more expensive it is to have capital committed to anything.

The breakeven flex budget is literally that annual financing cost — C × r. Higher WACC doesn't make investing more profitable; it makes both options more expensive. But it raises the threshold that flexibility has to beat, so flexibility becomes relatively more competitive.

What the incentive actually measures

The belastningsincitament rewards DSOs whose annual average load is high relative to their four highest peak days. The formula is Ug = Pmedel ÷ Pmax,4, where Pmedel is the mean of all daily average loads across the year, and Pmax,4 is the average of the four highest daily peak loads. The incentive is settled at the upstream connection point (inmatningspunkt) — where the DSO's grid connects to the overlying network — not at individual consumer meters.

Why not all flexibility improves Ug

The four highest-load days in Sweden are almost always cold, dark, still winter evenings — when heating load is high and wind/solar output is low. Flexibility that addresses summer congestion or a local feeder that is not the system bottleneck on those winter days may not move Ug at all. The question to ask is: does this flexibility application reduce load at our inmatningspunkt on the top-4 days of the year?

Estimating the improvement in practice

To set the Ug improvement parameter, a DSO needs three things:

1. Their current Ug vs norm: Ei publishes the norm level (normvärde) for each DSO; the incentive pays on the difference between actual and norm.
2. The expected load reduction on peak days: how much MW does this flex application cut at the inmatningspunkt on those 4 days? This requires a grid model — or at minimum, historical data showing what share of peak load flows through that point.
3. The upstream subscription cost: the incentive is priced against the DSO's abonnemangskostnad to the overlying network. The 75 SEK/customer/year in this calculator is Ei's median across 18 local DSOs for a 1% intäktsram movement (range: 40–174 SEK). A DSO with high upstream subscription costs and many customers will see a higher number.

A rough starting point

If you don't have a grid model yet, use 0.3–0.5% as a conservative estimate for flexibility that genuinely shaves the top peak days. Use 0% if the congestion point is summer-limited or downstream of the inmatningspunkt bottleneck. The range from Ei's sample (±1% is typical, up to ~2% for regional networks) gives a sense of the realistic upside.