Smarter and More Flexible European Energy Systems

The Smarter and More Flexible European Energy Systems (EU Flex) project is assessing the market for demand-side flexibility in 31 European countries – including 7 deep-dives into key markets.

SME’s from the UK often lack vital market intelligence to inform their business and export strategies, so Energy Systems Catapult is delivering high-quality research on European electricity markets, with an emphasis on matching gaps in those markets to current UK areas of strength.

The Challenge and Opportunity

European electricity grids were mostly constructed in the first few decades of the 20th century. Up until the 1990’s fluctuations in supply and demand in these centrally operated systems, were often resolved by placing a phone call to neighbouring countries.

By contrast, the UK began opening up its electricity markets in the 1980s, with regulation formed through the independent energy regulator Ofgem. Progressive reform of electricity markets, with soundings taken from industry and organisations such as the Catapults, coupled with strong UK government support for innovation, means the landscape is fertile for innovative SME’s.

Across Europe, driven by EU directives such as the ‘Clean Energy for all Europeans’, member states are moving towards reforming their markets. So there are opportunities for UK businesses to capitalise on the need for flexibility as barriers to market entry are removed. Opportunities include:

  • Innovation to solve electricity network pinch-points, with growing in decentralised generation and electric vehicles creating more volatility in supply.
  • Digitalised solutions to monitoring and balancing supply and demand over-smaller time periods.
  • Demand Side Response – with business models are emerging that seek to tap into electricity markets by providing services that help to balance the grid.

Our research identified that UK SME’s often lack vital market intelligence early on to inform their business strategies and struggle to bridge the gap between R&D and successful export.

This project was funded by the Foreign Commonwealth Office in Europe and involved key stakeholders from Innovate UK.

Our Approach

The EU Flex project is being delivered through two key work streams: a high-level assessment on 31 European countries (27+4 EU and EFTA) providing breadth across all countries and a deep dive on seven countries identified as key markets under the context of demand-side flexibility. This involves:

  • A high-level overview which considers market indicators such as regulatory barriers, policy landscape, market liquidity and the flexibility profile. Through this overview we selected seven priority markets to investigate further.
  • The ‘deep dive’ into each priority country looks at revenue streams in each country as well as Time of Use (ToU) metering and pricing, network tariffs, consumer bill components, subsidies and Feed in Tariffs (FiTs).
  • A Business model feasibility review was also performed against each of the seven countries. This involved interviews with several UK SME’s on their detailed business models, which we mapped onto the markets in priority countries. The analysis looked at feasibility, scalability and profitability.
  • In addition, the project team identified opportunities for collaboration where the UK has knowledge gaps.
  • The team conducted primary research with UK SME’s that has created an evidence base for the barriers they face with exporting which will support ongoing work by the Catapult’s international team in supporting UK SMEs overseas.

The Outputs

All deliverables from the EU Flex project will be made available to UK SMEs and other stakeholders:

  • A final report which will establish the UK baseline in terms of where we have an advantage.
  • Country market fact files for each of the 27+EFTA countries,  including in-depth information on seven priority countries.
  • Business model evaluations looking at emerging business models and case studies from the UK mapped to the seven priority countries.
  • The Catapult will signpost SME’s to overseas incubators, accelerators and centres of excellence as part of our ongoing engagement.

To deliver longer term impact following the outputs of this study, the Catapult’s International team will support SMEs interested in Europe, particularly in the seven priority countries identified and build on the initial engagements with in-country government posts and research and innovation centres.