Flexible Connection Agreements

Flexible connection agreements (FCAs) are connection contracts between a DSO and a network user in which the user accepts, in exchange for connection or capacity benefits, that the DSO may curtail their injection or withdrawal under defined conditions. FCAs are one of three main mechanisms by which DSOs acquire flexibility from third-party resources — alongside network tariffs and local flexibility markets. The Swedish national implementation is Villkorade Avtal (conditional connection agreements).

What a flexible connection agreement does

A standard grid connection gives the customer a firm, unconditional right to inject or withdraw up to their contracted capacity at any time. Under an FCA, the customer accepts conditional access: the DSO may temporarily limit their capacity when the grid reaches defined operational thresholds. In exchange, the customer typically receives:

• A faster or cheaper connection (reduced deep connection cost, or connection at a point that would otherwise require reinforcement)
• A higher contracted capacity than an unconditional connection would permit at that location
• A compensation payment when curtailment is activated

FCAs are a rules-based flexibility mechanism: the customer pre-commits to being curtailable under defined trigger conditions, rather than bidding into a competitive market at the time of the grid event. This makes them more predictable for DSO planning but less price-efficient than market-based mechanisms.

EU regulatory framework

The Electricity Market Design Reform Directive (2024/1711, Art. 6a) requires member states to establish a framework for flexible connection agreements. Key provisions:

• DSOs must offer FCAs to new connections and, where technically and economically feasible, to existing connections
• FCAs must not unduly restrict market participation: NC DR Art. 31(3) explicitly preserves the right of FCA holders to participate in local flexibility markets
• The FCA framework must be non-discriminatory; similar customers in similar grid situations must receive similar offers
• Sweden transposed Art. 6a in Prop. 2025/26:16 (in force January 2026), mandating Ei to develop the national flexible connection framework

See Villkorade Avtal for the Swedish implementation, Electricity Market Design Reform 2024 for the broader legislative context, and Ei for the Swedish regulatory development process.

Design dimensions

The Comillas/BeFlexible research (Source - DSO Service Acquisition Interaction Comillas (2024)) defines ten key design dimensions for FCAs, organized across meta-dimensions:

Temporal

• Duration: temporary (time-limited) vs permanent (indefinite)
• Curtailment notification: day-ahead / intra-day / real-time / ex-post; critically affects ability to combine with local market participation

Locational / product

• Connection costs: deep (customer pays full reinforcement cost) / shallow (customer pays only local connection cost, system reinforcement socialized) / avoid reinforcement / defer reinforcement
• Benefit of the DSO: what grid need the FCA addresses — connecting new capacity that would otherwise require investment

Network connection criteria

• Capacity limitation — connection capacity capped below contracted maximum
• Voltage level limitation — access restricted at specific voltage thresholds
• Other security criteria (N, N-1) — activation when N-1 security margin is breached
• Short-circuit power rate — limiting fault current contribution

Activation

• Activation trigger: emergency (no advance notice) / maintenance (planned window) / congestion (real-time grid state) / peak/off-peak (time-defined windows) / seasonality
• Pre-definition of curtailment: known in advance (seasonal calendar) vs reactive (only when grid needs)
• Principle of access: how the DSO selects which customers to curtail when multiple FCAs are available
  • Pro-rata: all FCA holders curtailed proportionally
  • LIFO (last-in, first-out): most recently connected customers curtailed first
  • Auction: DSO calls for bids; lowest-cost curtailment wins
  • Congestion-created level: amount of curtailment proportional to congestion caused

Commercial

• Compensation payments: fixed (predetermined amount) / set by LFM (LFM market price determines compensation) / LFM-indexed (compensation indexed to LFM clearing price) / none
• Sell curtailed energy: whether the DSO or customer can sell the curtailed energy volume into an energy market
• Maximum curtailment: absolute limit on how much can be curtailed, defined as: capacity limitation (MW) / energy limitation (MWh per period) / monetary limitation (maximum compensation paid)
• Eligible customers: generation / demand / storage

Interaction with other DSO mechanisms

FCAs do not operate in isolation. Most DSOs deploy FCAs alongside network tariffs and local markets simultaneously. This multi-mechanism deployment creates interaction effects that require co-design to avoid. (Source - DSO Service Acquisition Interaction Comillas (2024))

FCAs ↔ Network tariffs

Green (compatible):

• Flat-rate tariffs generally coexist with FCAs without conflict — no price signals overlap
• When FCAs have no compensation payments, they add no double-rewarding risk to any tariff design
• FCAs address reactive power and voltage constraints that network tariffs cannot signal

Orange (contextual):

• Shallow connection cost recovery + socialized tariffs risks double-charging customers — they contribute to network cost recovery through both the tariff and connection cost
• Congestion-triggered curtailment + congestion-reflecting tariff (e.g., locational pricing) risks double-rewarding; customers reduce consumption via both mechanisms for the same congestion event
• Technology-differentiated tariffs + compensation payments → risk of favouring certain technologies twice (tariff incentive + curtailment compensation)

Design principle: FCAs with no compensation payments interact cleanly with almost all tariff designs. When compensation payments are added, every tariff design should be reviewed for double-rewarding risk.

FCAs ↔ Local markets

This pair has the most interaction conflicts — particularly critical for Sweden where villkorade avtal and local flexibility markets coexist at the same DSOs.

Red (incompatible):

• Ex-post curtailment notification + day-ahead LFM: if customers receive curtailment instructions after the fact, they cannot factor this into their day-ahead market bids. Any bids they submitted assume no curtailment; ex-post curtailment then creates a double activation of the same resource.
• Emergency activation + day-ahead LFM bids: if activation can occur with no advance notice for emergencies, customers with outstanding LFM bids cannot adjust. Combined use is infeasible.
• LIFO access principle: creates uncertainty about which customers will be curtailed, preventing reliable LFM bidding (a customer may bid into the LFM assuming they will not be curtailed, then find themselves called first under LIFO)

Green (compatible):

• Permanent FCAs with known timelines + LFMs: customers can plan their LFM availability around known curtailment windows; if curtailment notification is day-ahead, LFM participation is unaffected for hours without curtailment
• No compensation payments in FCA + LFMs: no double-rewarding risk because no financial transaction occurs on the FCA side
• Same-type eligible customers and LFM asset direction: if the FCA requires upward generation and the LFM also requires upward generation, the two mechanisms are asking for the same thing — compatible as long as activation timing and compensation don’t overlap

The design principle for NC DR compliance in Sweden: FCAs (villkorade avtal) and LFMs must be co-designed. NC DR Art. 31(3) preserves FCA holders’ right to participate in LFMs — but this is only practically achievable if the FCA notification timing, access principles, and compensation structure are compatible with LFM participation. Emergency-trigger FCAs with ex-post notification undermine this right in practice.

Swedish context — villkorade avtal

Sweden’s Villkorade Avtal are the national implementation of FCAs. Current characteristics:

• Activation trigger: primarily congestion-driven and emergency; no uniform notification timing across DSOs
• Compensation: some DSOs offer compensation (guaranteed capacity reduced vs guaranteed off), others do not
• Principle of access: not standardised; varies by DSO
• Interaction with LFMs: E.ON Energidistribution uses villkorade avtal as a backstop when SWITCH market procurement is insufficient; villkorade avtal activate only if market-based flexibility fails. This sequential design (market first, then FCA) is the recommended NC DR approach and avoids the red-condition double-activation problem.

Under Ei’s proposed framework following Prop. 2025/26:16, a certified effektregleringssystem (power management system) will be required for new flexible connections — this is a standardisation step that brings Swedish FCAs closer to the EU design dimension framework. See Villkorade Avtal for the full Swedish development.

The Source - DSO Service Acquisition Interaction Comillas (2024) interaction analysis is directly prescriptive for the Swedish NC DR T&C development: DSOs must review their villkorade avtal designs against each active mechanism to identify orange and red cross-options, then amend designs or add coordination rules to resolve conflicts.

FCAs in the three-mechanism DSO toolkit

FCAs and LFMs are complementary: FCAs provide operational certainty (the DSO has a committed right to curtail when needed), LFMs provide economic efficiency (competitive pricing and resource diversity). The NC DR establishes LFMs as the default procurement mechanism with FCAs as the backstop — but their interaction requires careful design.

Swedish framework trajectory

What NC DR and Directive 2024/1711 have already locked

Three things are structurally fixed for Sweden before any national Ei regulation is written:

• Art. 31.1 (FNA counting rule): villkorade avtal must be treated as firm connections when DSOs assess flexibility needs. The underlying grid constraint must be reported in full — VA coverage does not reduce the stated need in the FNA/DNDP. Exception: permanent FCAs under Art. 6a.1.c. (Source - NC DR Amended Text (ACER Recommendation 01-2025 Annex 1))
• Art. 31.2 (market coordination): activation must coordinate with any existing local flexibility market through a mechanism specified in the market procurement rules; day-ahead gate closure triggers a TSO imbalance adjustment for any subsequent activation. This locks in the market-first principle as EU-level statute — it was already Swedish practice per Ei2025:01, but is now non-negotiable. (Source - NC DR Amended Text (ACER Recommendation 01-2025 Annex 1))
• Art. 31.3 (market participation rights): FCA holders cannot be prevented from participating in balancing or local services markets. This is the right already recognized in E.ON’s SWITCH queue-jumping model but must now apply across all Swedish DSOs. (Source - NC DR Amended Text (ACER Recommendation 01-2025 Annex 1))

Additionally, Directive 2024/1711 Art. 6a requires a formal national framework by 17 July 2026 and explicitly permits permanent FCAs where reinforcement is not economically efficient — including for storage. The ellag amendment (4 kap. 4a §, in force 2026-01-01) creates the enabling authority; EIFS regulations are pending. (Source - Electricity Market Design Reform Directive (EU 2024-1711))

The Ei method-approval model and its limits

Sweden’s current approach — Ei approves each DSO’s methods before contracts are signed (ellag 4 kap. 46 §, operationalized in Ei2025:01) — works for large DSOs that have the resources to develop and submit a method. E.ON received its first approval in March 2024. But Sweden has ~170 DSOs: most have not developed a villkorade avtal method and are effectively blocked from using the tool at all, or are operating informally without Ei approval.

The Art. 6a transposition obligation forces Ei to produce formal EIFS regulations — not just ställningstaganden — specifying what a compliant national framework looks like. The most likely outcome is EIFS that sets binding framework rules (notification timing requirements for LFM coordination; activation-as-last-resort obligations; Art. 31 coordination mechanism) while leaving individual trigger thresholds and compensation structures to per-DSO method approvals. This is consistent with how Ei has regulated LFM products (Förordning §§10–12: prescribe the product category; DSOs design within it). (Source - Ei Ställningstagande Ei2025-01 Villkorade avtal (2025), Source - Ei Godkänner Marknadsprodukter Flexibilitetstjänster (2026))

Responsibility layers — settled vs. open

Permanent FCAs — the key structural question

SOU 2025:47 mandated Ei to investigate whether permanent FCAs should be allowed in Sweden. The EC comparative study (Fraunhofer ISI, 2025) found no EU country has systematically deployed permanent FCAs despite the legal authority having existed since 2024. The structural barrier is regulatory confidence: confidence requires operational data, but data requires deployment at scale. The recommended approach is an analytical model-based study rather than waiting for operational experience that never accumulates without the policy push.

In practice, permanent FCAs are most compatible with storage business models: a battery co-located with solar that agrees to restricted grid access in exchange for a faster/cheaper connection and lower ongoing capacity fee can build a viable revenue model around the restriction — using on-site charging and accepting curtailment risk. This is exactly the pattern Sonnedix describes in Portugal (Source - Powernaut Flex Trends Report (2026)) and what ERSE recommended E-Redes offer proactively to storage operators. This use case is where Swedish permanent FCAs are most likely to appear first.

Data gaps

• Ei’s national framework EIFS for Art. 6a flexible connections — content, timeline, and whether notification timing will be prescribed as a binding floor or left to method approval
• Ei’s outcome on permanent FCAs (SOU 2025:47 investigation mandate) — likely 2027 at earliest
• Whether Ei will prescribe a standard notification timing requirement (day-ahead gate closure as minimum) to enable Art. 31.2 compliance for all DSOs
• Whether existing customers can opt into villkorade avtal — investigation mandated but no outcome