Flex›Source - Swedish Aggregators LFM KTH Thesis (2021)

Source - Swedish Aggregators LFM KTH Thesis (2021)

“A Swedish Perspective on Aggregators and Local Flexibility Markets”. KTH master thesis (60 credits) investigating aggregator barriers in Sweden and SthlmFlex’s market design, with a quantitative estimate of demand-side flexibility potential from heat pumps and EVs in Stockholm single-family houses (2021–2030). The most detailed early academic analysis of the Swedish aggregator ecosystem before independent aggregation rules were in force.

Bibliographic information

  • Title: A Swedish Perspective on Aggregators and Local Flexibility Markets — Considerations and barriers for aggregators and SthlmFlex together with their potential to manage grid congestions in Stockholm
  • Authors: Simon Färegård, Marko Miletic
  • Degree: Master of Science in Energy and Environment (second cycle, 60 ECTS)
  • Programme: Sustainable Energy Engineering, KTH Royal Institute of Technology
  • School: School of Industrial Engineering and Management, Department of Energy Technology
  • Approved: 2021-06-15
  • Examiner/Supervisor: Per Lundqvist
  • Industrial supervisor: Claës af Burén (WSP Systems–Energy)
  • TRITA: TRITA-ITM-EX 2021:393
  • Location: Stockholm, Sweden

Research questions

  1. How does SthlmFlex compare to other European local flexibility markets?
  2. What are the institutional, technical, financial, and social considerations/barriers for aggregators in Sweden?
  3. What are the barriers for SthlmFlex as a market?
  4. What is the demand-side flexibility potential from heat pumps and EVs in Stockholm single-family houses (2021–2030)?

Method

Exploratory research design combining:

  • Literature review of EU regulation, market design, and aggregation frameworks
  • Qualitative interviews with market participants (aggregators, DSOs, regulators)
  • Quantitative estimation of demand-side flexibility potential (heat pump + EV installed base modelling)

Key findings

SthlmFlex market design — missing rebalancing mechanism

The most notable finding from the market comparison: SthlmFlex lacked an integrated rebalancing mechanism. This is identified as the single most significant structural difference between SthlmFlex and the two European markets compared. When a local DSO flexibility market activates demand reduction, the resulting imbalance must be settled — but SthlmFlex had no automated or standardized process for this. Aggregators operating in SthlmFlex were therefore exposed to BRP imbalance costs that were not compensated within the market platform itself. This reproduced the general Swedish cross-BRP problem at the local market level. (Aggregation › Nordic comparison: Sweden’s cross-BRP problem)

Independent aggregation rules — forthcoming at time of writing

The study was written before the implementation of EU Art. 13 aggregation rights in Sweden. The report notes that “new Swedish regulations that will enable independent aggregation will be enforced in the beginning of 2022.” This prediction was partially correct — Ei published its proposal (Ei R2021:03) and legislation was eventually enacted — but the actual cross-BRP barrier was not resolved by 2022 and remains only partially resolved as of 2026.

Aggregator business model

The aggregator business model at the time was centred on technical system sales rather than market revenue:

  • Revenue structure: implicit flexibility services (primarily FCR-D, via BRP partnership) + explicit flexibility services (local markets) + hardware/software sales
  • Explicit DSO market services constituted a small part of total revenue due to low prices offered on flexibility markets
  • The technical system sale (hardware gateway + software license) was the primary value proposition and revenue anchor

This contrasts with the situation after 2022, when FCR-D market growth made balancing market revenue a larger share of the aggregator business case. The thesis captures the pre-FCR-D-boom aggregator economics.

Four barrier categories

The study applies a four-quadrant barrier framework:

Institutional barriers:

  • Balance responsibility requirement: aggregators had to operate through a BRP, creating dependency and cost
  • No independent aggregator status: no legal right to hold separate balance responsibility for activated resources
  • Upcoming regulation (Art. 13) expected to partially resolve this

Technical barriers:

  • Heterogeneous hardware (different EV charger, heat pump, battery manufacturers with different APIs)
  • Smart meter limitations: 15-min data resolution but limited real-time access
  • Measurement: baseline estimation required for settlement; no standardized method
  • Communication latency: ability to respond within activation timeframes

Financial barriers:

  • Low flexibility market prices (explicit services not revenue-sufficient on their own)
  • Revenue uncertainty: activation frequency unpredictable
  • High setup cost relative to expected activation revenue from thin local markets

Social barriers:

  • Customer knowledge deficit: many potential customers unaware of flexibility aggregation
  • Comfort concerns: particularly for heating — customers concerned about temperature impacts
  • Trust deficit: aggregators new and unfamiliar compared to established electricity suppliers

SthlmFlex-specific barriers

Beyond the missing rebalancing mechanism, the thesis identifies:

  • Market approach: SthlmFlex positioned as a congestion management tool for Ellevio and Vattenfall Eldistribution, not as a commercial opportunity for FSPs — this framing limited FSP recruitment motivation
  • Limited price transparency
  • Limited standardization: product design not yet aligned with emerging Energiföretagen standardization work

Heat pump and EV flexibility potential — Stockholm

The quantitative estimate found sufficient demand-side flexibility potential in Stockholm single-family houses to address grid congestion in the studied timeframe. Key points:

  • Heat pumps can provide flexibility via thermal storage in buildings (pre-heating/pre-cooling)
  • EVs can shift charging within daily patterns without compromising mobility
  • The potential is technically available but realization depends on aggregator ecosystem development and barrier removal

Precise figures are not reproduced here as the methodology is 2021-vintage and superseded by more recent analyses (e.g., Source - FlexAbility Delrapport 1 (2025)).

Limitations and dating

The thesis was completed in spring 2021, before:

  • FCR-D residential battery market maturation (2022 onwards)
  • SthlmFlex wind-down (effective close 2023)
  • Ei R2021:03 formal proposal and subsequent legislative process
  • EIFS 2024:1 DNDP regulation
  • The FlexAbility and BeFlexible demonstrations

The regulatory and market context has changed substantially. The thesis’s value lies primarily in its snapshot of 2021 aggregator economics and barrier identification, which remains historically relevant for understanding the trajectory of the market.