Europe smart energy and flexibility market study

Published: 6 July 2020

UK businesses often lack vital market intelligence to inform their business and export strategies, so Energy Systems Catapult has conducted a market study of the commercial opportunity for demand-side flexibility and wider smart energy system solutions in Europe.

Supported by the Foreign and Commonwealth Office in Europe, we assessed 31 European countries as part of the project – Towards a Smarter and More Flexible European Energy System– to produce a report focused on six key countries with market gaps that match current UK areas of strength: Belgium, Denmark, Germany, the Netherlands, Portugal and Spain.

The Challenge and Opportunity

Smart systems and flexibility are a vital tool in the suite needed to reach Net Zero carbon emissions. As the proportion of intermittent renewable generation increases, storage and grid balancing will need to become more widespread and effective in order to avoid constraints and blackouts.

Interconnection between regions alone will not be sufficient for most countries to achieve grid stability and security of supply. Traditionally the electricity systems of Europe have been strongly centralised. Power flowed down from large generators to passive consumers. This is all changing, as energy systems
decarbonise in response to the threat of climate change and pressures on resources.

Vast improvements in communications means that complex multi-directional flows of power
in a decentralised system can be monitored and balanced. The increased involvement of active consumers and prosumers (those who both consume and produce electricity) in demand and supply can be seen as democratisation of the energy system.

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

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

Key points

The EU Flex study identified six priority markets for smart systems and flexibility business opportunities after analysis of 31 European countries. The analysis of those 31 countries form a series of market fact files that will be released on the Energy Systems Catapult’s Innovator Portal when it relaunches in Autumn 2020, including:

  • Market size
  • Policy landscape
  • Regulation landscape
  • Ease of business
  • Market competitiveness
  • Flexibility profile

The six priority markets detailed in this report Towards a smarter and more flexible European energy system are: Belgium, Denmark, Germany, the Netherlands, Portugal and Spain.

Firstly, we carried out a baseline assessment of the UK  smart systems and flexibility markets to establish where the UK held an international advantage. This identified five business models:

  • Grid-connected battery storage
  • Aggregators
  • Smart EV charging
  • Home Energy Management Systems (HEMS)
  • Smart Local Energy Systems (SLES)

Secondly, we analysed the size and typical pricing patterns of wholesale, ancillary and balancing markets; and explored the policies, regulations, subsidies and tariff structures in each of the six priority countries.

Thirdly, we carried our interviews with in-country trade specialist, industry landscape research and case studies from UK SME’s in each of the six priority countries. The analysis included:

  • An evaluation and score for each of the five business models across the six priority countries
  • Opportunities to access revenue through electricity markets
  • Opportunities for cost avoidance for consumers.