Source - DSO Entity Distributed Flexibility Practices (2026)

DSO Entity Expert Group on Distributed Flexibility — Report on Distributed Flexibility Practices and Markets for Local Services. Approved by the DSO Entity Board 5 February 2026. Authored by the Expert Group on Distributed Flexibility (EG DF), comprising ~30 experts from ~19 EU/EEA countries. This is the DSO sector’s own position document on local flexibility market design, structured as input to the NC DR national terms and conditions (NTC) development process.

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Summary

The report distils practical experience from 7 country case studies (Belgium, Finland, France, Germany, Netherlands, Spain, Sweden) and 11 cross-cutting recommendations. Its primary aim is to give NC DR NTC drafters — national regulators and TSO/DSO negotiators — concrete guidance from those operating LFMs in practice. Five of the 11 recommendations are designated critical regulatory actions (A1–A5) that the DSO sector believes need explicit NTC treatment to avoid market fragmentation or paralysis.

11 recommendations

Five critical regulatory actions (A1–A5)

These five are flagged as essential for NC DR NTC design, without which LFMs may fail to develop or will fragment across Member States:

A1 — Compensation effect (effet de compensation) The current NC DR text defines “compensation effect” as covering only non-activated CUs behind the same connection point. The DSO Entity argues this is too narrow: the compensation effect should cover all technical resources behind the service validation point (i.e., the DSO grid measurement point where service delivery is verified). Without this correction, baseline calculations will systematically under-credit flexibility delivered by aggregated portfolios, discouraging participation.

A2 — Single-CU site registration NC DR currently assumes each controllable unit (CU) is registered individually. DSO Entity argues NTC should explicitly allow registering an entire site as a single CU (not device-by-device). This is critical for:

• Reducing registration burden for customers with multiple DER assets
• Enabling site-level aggregation without requiring individual device registration
• Aligning with real DSO metering practice (site-level meters, not device-level)

A3 — Technical aggregator vs commercial aggregator distinction The NC DR uses “aggregator” as a single role. In practice, DSO Entity identifies two distinct roles that NTC must differentiate:

• Technical aggregator: manages the DER connectivity and control layer — ensures DERs can receive and respond to signals; provides the “pipe” for communication and real-time monitoring
• Commercial aggregator: manages the market interface — submits bids, receives settlement, manages commercial relationships with FSPs

A single entity may perform both roles, or they may be separated (e.g., a DSO-operated platform providing technical aggregation while commercial aggregators compete in the market layer). NC DR NTC must clarify which regulatory obligations attach to which role.

A4 — Service validation point The point at which delivered flexibility service is measured for settlement. NC DR leaves this underspecified. DSO Entity argues NTC must:

• Define the service validation point precisely (which meter, which connection point, whose data)
• Distinguish between the “connection point” (where the CU connects to the grid) and the “service validation point” (where service delivery is assessed, which may be at a higher aggregation level)
• Specify data quality, timing, and responsibility for providing the measurement

A5 — Digital connecting SO DSO Entity introduces the concept of a “digital connecting SO” — a new functional role for the operator responsible for the digital communication layer between CUs and the market (in cases where this is not the same as the physical grid operator). As aggregation, VPPs, and cross-DSO grid service provision become common, the entity that operates the physical connection point may not be the same as the entity that operates the digital communication and control interface. NTC must clarify which responsibilities (data provision, metering, settlement) attach to the digital connecting SO role.

Remaining six recommendations (R1–R6)

R1 — Proportionality in requirements: PQ requirements, registration steps, and contractual obligations should be proportionate to the size and complexity of the resource. Small residential DER must not face the same compliance burden as industrial resources.

R2 — No-regret first steps: DSOs should be encouraged/required to define observability areas and start publishing congestion forecasts immediately, even before full NTC implementation, to enable market development.

R3 — Baseline harmonisation: Member States should not require a single baseline method but should publish an approved list and allow method choice — aligned with the EC LFM study’s “EU-level baseline library” concept.

R4 — Penalty proportionality: Non-delivery penalties must be proportionate; harsh penalties in early markets discourage participation; penalty frameworks should scale with market maturity.

R5 — Multi-DSO coordination: NTC should address multi-DSO coordination explicitly — both multi-level DSO structures (regional + local) and same-level coordination (multiple DSOs with overlapping flexibility zones).

R6 — Value stacking facilitation: NTC should explicitly facilitate value stacking (simultaneous participation in multiple markets); the current NC DR text leaves this ambiguous.

Country case studies

Sweden (Section B.5)

The report’s Sweden section provides current-state documentation as of late 2025:

Congestion character: Sweden’s distribution-level congestion is primarily administrative/planning-based rather than physical real-time congestion. The TSO subscription mechanism (Svk granting or denying subscription raises) determines whether DSOs activate local markets. This is unique among the seven case study countries.

Markets in operation:

• E.ON SWITCH: the longest-running LFM in Sweden; operated continuously since winter 2019/20; six consecutive winter seasons as of March 2026; sequential market model
• Effekthandel Väst: multi-DSO market (Göteborg Energi + Ellevio + others); separate DSO LFM model; ~30 service providers as of 2025/26 season; 50 kW minimum bid; five baseline methods available

CoordiNet coordination status: The report explicitly states that CoordiNet coordination between Svk and DSOs was discontinued after the CoordiNet project ended. No formal TSO-DSO coordination framework for shared flexibility resources was in place as of the report date. The SO GL Art. 182 agreement between Svk and DSOs remained pending.

E.ON overbooking model: E.ON Energy Networks operates its grid at 130% capacity, using a combination of:

• Flexible Connection Agreements (FCAs) — customers accept curtailment risk in exchange for faster/cheaper connection
• SWITCH flex market activations — E.ON buys back flexibility when the 100% threshold is approached
• Reserve capacity (the remaining 30%) acts as the operational buffer

This is described as a European best-practice example of using FCAs and markets together rather than building to N-1 for all customers.

E.ON flex contracts: E.ON has signed flex contracts until 2029 with its large industrial customers and major aggregators, providing a multi-year procurement commitment that enables FSP investment planning.

Netherlands (Section B.3 / GOPACS deep dive)

The most detailed international case study in the report. GOPACS is described as the closest operational model to the NC DR’s intended common market design:

Structure:

• Buyers: TenneT (TSO) + all major Dutch DSOs (Stedin, Liander, Enexis, Westland Infra, Coteq, and others)
• Shared order book: all buyers’ needs cleared from the same pool of FSP bids
• Independent MO: the clearing engine allocates bids to the buyer with highest willingness to pay

Technical specifications:

• Minimum bid: 100 kW, 15-minute resolution
• Pricing: pay-as-bid
• Overbooking: DSOs procure 150% of estimated need (not 100%) to ensure volume sufficiency
• Counterbid matching: FSPs submit sell offers (curtailment offers); buyers submit buy offers (willingness to pay); algorithm matches
• Platform: open-source (Linux Foundation); connected to EPEX SPOT and ETPA for market liquidity

Regulatory context: GOPACS operates under a Netherlands-specific exemption from normal energy trading rules, allowing non-energy-trading entities (DSOs) to participate in what is functionally an energy market. This required explicit NRA authorization.

Key result: GOPACS scores highest among all 37 EU LFM initiatives in the EC LFM study (VITO, 2025) on value stacking and market efficiency metrics.

Belgium (Fluvius)

Fluvius (merged Flemish DSO, ~3.8 million connections) operates one of Europe’s most mature DSO-run LFMs. Notable features: integrated with Elia (Belgian TSO) for sequential coordination; capacity product designed for LT reservation; strong regulatory backing from VREG (Flemish NRA).

Finland (FinFlex / OneNet)

FinFlex demonstrates the transition from sequential (FinFlex) to common market (FinFlex OneNet), aligned with Fingrid (Finnish TSO). Notable for being one of the few EU markets that has progressed to a live common market model beyond GOPACS.

France (ENEDIS)

ENEDIS (national DSO, ~38 million connections) operates the France LFM (Appel d’offres pour des Flexibilités Locales). Key reported metric: ENEDIS estimates that flexibility procurement has avoided or deferred ~30% of planned CAPEX in targeted grid areas — approximately €X billion in deferred investment. This is the strongest EU-level empirical evidence for flexibility CAPEX displacement.

Italy (UVAM / Mercato per il Servizio di Dispacciamento): minimum bid size of 300 W (not kW) — the smallest bid threshold in Europe; designed to enable small residential DER participation at scale.

Key structural findings

Value stacking maturity

The report assesses value stacking across the 7 countries. Common finding: value stacking is theoretically possible but operationally fragile in most markets. The only markets with systematic value stacking at scale are GOPACS (Netherlands) and FinFlex OneNet (Finland) — both common market models. Sequential models like SWITCH enable opportunistic stacking but require manual management.

Independent aggregation → EB GL

Consistent with the EC LFM study (VITO, 2025), the DSO Entity report confirms that provisions for independent aggregation models (cross-BRP compensation, perimeter correction mechanisms) were removed from the NC DR text and will be handled through EB GL updates. This is stated as a design decision, not an accident — the NC DR T&C process will not resolve the BSP/BRP architecture question.

Regulatory prerequisite: TOTEX

The report endorses TOTEX reform as a structural prerequisite for LFMs in all seven countries, echoing both the EC LFM study and Ei R2024:14. Specific reference to France (ENEDIS CAPEX displacement evidence) as the empirical case for why TOTEX reform changes DSO behaviour.

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