Source - Nordic Energy Research 2025-03: Current Utilisation of Flexibility in the Nordics

Full title: Current Utilisation of Flexibility in the Nordics — Demand Side Flexibility in the Nordics: Lessons Learned from 10 Case Studies Published by: Nordic Energy Research (nordicenergyresearch2025-03) Consortium: THEMA (Norway), COWI (Denmark), CIT Renergy (Sweden), Motiva Services (Finland) URL: https://pub.norden.org/nordicenergyresearch2025-03/current-utilisation-of-flexibility-in-the-nordics.html Focus: Maps 45 demand-side flexibility (DSF) initiatives across the four Nordic countries; presents 10 case studies in depth; identifies barriers and provides policy recommendations. Commissioned to inform Nordic regulatory development.

Summary

The report is structured in three parts: (1) country overviews, (2) 10 case studies with barriers and enablers, (3) policy recommendations. Data collection through interviews with DSOs, aggregators, FSPs, and technology providers.

Nordic comparison

Sweden is the only Nordic country with commercialized (permanent) DSF solutions. As of the report’s fieldwork:

Sweden also has the most permanent solutions with the most developed commercial markets. Norway leads in number of initiatives but none have reached commercial maturity.

Most tested flexibility sources (across all 45 initiatives): EV chargers (17 initiatives), heat pumps (8), PV (6), batteries (6), ESWHs (5).

Sweden-specific context (from country sheet):

• ~170 DSOs; smart meter rollout completed January 1, 2025
• HAN ports available as of 2025; no data hub implemented yet
• Power-based grid tariffs required by 2027; many DSOs implementing earlier
• Conditional connections in use; queue management governed by ellagen
• The platforms SWITCH (E.ON-developed) and NODES (Norwegian) dominate Swedish markets

Key infrastructure comparison across the Nordics

10 case studies — overview

Three of the ten cases are Swedish:

Sthlmflex (Sweden, 2020–2023) — discontinued

Established by Svenska kraftnät, Ellevio, Vattenfall, and E.ON to solve lack of grid capacity in Stockholm. Used NODES platform. Discontinued due to low market liquidity. Two structural root causes:

1. TSO temporary subscriptions outcompeted flex bids: Swedish DSOs can apply for a temporary (additional) subscription to the TSO’s grid at low cost. In Sthlmflex, these subscriptions were often cheaper than the flexibility bids — eliminating the DSO’s need to clear the market. This is a structural design flaw: temporary subscriptions are not guaranteed and therefore not a full substitute, but their low price suppressed flex market demand.
2. Intäktsregleringen: The revenue cap framework makes grid investment more economically attractive to DSOs than market-based flexibility procurement. Interviewees stated that grid investments still feel “more economically appealing” under the current framework — despite lösningsneutralitet provisions. See Ei › TOTEX reform and lösningsneutralitet.

Additional barriers: high entry costs when market liquidity is low; DSOs preferring bilateral contracts; heat pumps show promise as loads (predictable, numerous) but delivered flexibility was not always verified.

Effekthandel Väst (Sweden, permanent from 2022)

Focus: fridges and freezers at supermarkets and warehouses (alongside batteries and EVs). The supermarket resource type was chosen because: (1) loads are geographically distributed in proportion to population density — well-matched to where grid congestion occurs; (2) existing Modbus/Danfoss control systems enable integration without new hardware; (3) aggregated by portfolio size, the national potential is ~0.6 GW.

Food hygiene constraint: temperature thresholds for refrigerated food set strict bounds on activation depth. Handled by adjusting baselines for individual loads rather than applying standard formulas — but requires negotiation with the market platform operator. Non-standard baselines are both a barrier (complexity) and an enabler (unlocking profitability that rigid baselines would preclude).

Key barriers: (1) same intäktsregleringen problem as Sthlmflex; (2) market liquidity still fragile — DSOs were observed to prefer bilateral contracts over the open market; (3) missing communication standards across platforms; (4) lack of awareness among resource owners.

E.ON Energidistribution’s flexibility markets (Sweden, permanent from 2023/24)

E.ON owns and operates 70 local grids in 139 municipalities. The report covers the period when E.ON had reached 9 market areas (report’s fieldwork dates to 2024/25 season). Key practices:

• Markets opened only after analysis of whether LFM is the most cost-effective solution (vs bilateral contracts, villkorade avtal, DLR)
• Markets transition from project form to line organization in 2022; uniform processes applied across all markets
• Automated API for FSP integration and automated publication of flexibility needs — scaling from single project to 9 markets requires automation since manual processes do not scale
• E.ON guarantees a minimum number of years the market will operate plus minimum availability payments when starting a new market; this reduces FSP investment risk and is described as essential for achieving initial liquidity

Cross-cutting barriers (all Swedish cases)

Consistently identified across all three Swedish case studies, from interviews:

1. Intäktsregleringen (revenue cap): Swedish grid operators face a regulated revenue cap (Intäktsregleringen) that implicitly favors grid investment over operational flexibility measures. Despite lösningsneutralitet provisions in the ellagen, practitioners report that physical grid investment “feels more economically appealing.” The new TOTEX-based RP5 framework (from 2028) is designed to address this; practitioner experience to date is that it has not yet changed incentives sufficiently.

2. Power tariff perverse incentive (first documented finding in this report for Swedish conditions): Power-based grid tariffs are designed to incentivize flatter consumption profiles (implicit flexibility). However, when heat pumps or batteries deliver explicit flexibility, they must compensate by running at elevated power before and/or after activation — making their power profile more volatile. This creates higher power peaks, which incur higher costs under the power tariff. The instrument designed to enable implicit flexibility thus partially undermines explicit flexibility market participation.

3. Missing communication standards for market platforms: Aggregators participating in multiple local markets face high integration costs because each platform (NODES, SWITCH) and DSO has slightly different rules. NC DR is expected to standardize this. E.ON advocates for consistent rules across national and European levels.

4. Market liquidity: The classic chicken-and-egg problem. DSOs need participants to justify market investment; FSPs need volume certainty to justify qualification investment. E.ON’s solution: pre-commit to market duration and minimum availability payments. Sthlmflex failed to escape this trap.

5. DSOs favoring bilateral contracts over market solutions: DSOs described as preferring one-on-one arrangements with individual FSPs rather than open market procurement, which excludes potential participants and undermines price discovery and liquidity.

6. Lack of expertise among resource owners: Supermarket operators, building managers, and small industrials are often unaware of their flexibility potential. Aggregators and targeted information campaigns are the primary remedy.

7. TSO temporary subscriptions competing with local flex bids (Sweden-specific): As described for Sthlmflex.

Aggregators — the report’s strongest enabler finding

Across all Swedish cases, aggregators are described as essential to market functioning — not just participants but infrastructure:

• Own the know-how for integrating with diverse appliances and multiple platforms
• Define viable baselines (a technically complex task requiring appliance-specific knowledge)
• Own the hardware for measurement and communication at the resource level
• Enable automated bid management and portfolio optimization
• Cannot be replaced by direct DSO-to-consumer contracts for household-scale resources

This is consistent with wiki content in Aggregation and Flexibility Market, but the practitioner evidence here is unusually direct.

Policy recommendations (summary)

The report recommends accelerating:

1. NC DR implementation — standardized protocols, prequalification rules, validation methods, and harmonized baseline approaches across all LFMs
2. TSO-DSO coordination on gate closure times to enable value stacking (FSPs simultaneously participating in LFM and ancillary markets)
3. Long-term market commitments from DSOs (modeled on E.ON’s approach) to provide FSP investment certainty
4. EcoDesign integration — ensure smart appliances (heat pumps, ESWHs, EV chargers) are sold with accessible, standardized control interfaces as standard
5. Information campaigns targeting resource owners who are unaware of their participation potential

Relevance to wiki

Updates and confirms content in: Flexibility Market, Aggregation, Effekthandel Väst, E.ON Energidistribution, Demand Response, Flexibility, CoordiNet

Fills gaps:

• Nordic comparative perspective on Sweden’s DSF leadership
• Sthlmflex discontinuation mechanism (TSO subscriptions, intäktsregleringen)
• Power tariff perverse incentive (new finding for Swedish context)
• E.ON market development practices (guarantee of market duration as liquidity solution)
• Aggregator role as essential market infrastructure
• Fridges/freezers as Effekthandel Väst’s primary resource type with food hygiene constraint