The Nordic countries have tested demand-side flexibility from smart appliances for several years through technology pilots and market initiatives. However, few measures have been scaled up to become permanent solutions within the power system. In total, 45 ongoing or completed initiatives have been identified across the Nordic region. Most are technical demonstrations or pilot projects that include financial compensation, delivery verification, and testing of market mechanisms.
Technological and Market Barriers Prevent Profitable Flexibility
Analysis of ten selected initiatives in the Nordic region shows that several barriers hinder profitable demand-side flexibility. DSOs therefore often choose more costly alternatives, such as increased grid expansion or flexibility from more expensive sources, which results in higher costs for end-users.
Aggregators must make significant investments to build a consolidated portfolio of loads, and compensation is often low. At the same time, stakeholders face challenges related to market design, participation requirements, and access to platforms.
The lack of standardised requirements for appliances’ technical flexibility and communication protocols also limits the exploitation of demand-side flexibility. Improved standardisation and interoperability are needed to ensure that different appliances and platforms can interact effectively.
These barriers must be viewed in context. Many can be resolved through improved technical standardisation or by changing the requirements for market participation.
Several regulations and industry standards are under development to address barriers to demand-side flexibility. At the EU level, a harmonised regulatory framework is still being drafted. The voluntary EU Code of Conduct (CoC) for smart appliances promotes interoperability between products but lacks a timeline for inclusion in binding EU legislation.
Six Key Messages for Nordic Authorities and Decision-Makers
The Nordic countries, with their experience from pilot projects and demonstrations, are well positioned to take the lead in demand-side flexibility ahead of the EU. To accelerate development, a clear roadmap with milestones for standardisation, interoperability, flexibility criteria, and minimum requirements is recommended. We recommend six actions for Nordic authorities:
- Technology-neutral regulation for DSOs: Provide incentives to choose cost-effective solutions, irrespective of whether these are grid investments or operational measures.
- Stronger DSO commitment to flexibility solutions: DSOs must ensure market liquidity through minimum compensation and long-term agreements.
- Enhanced coordination between stakeholders: Better collaboration between TSOs, DSOs, and other actors is necessary to harmonise markets and resolve technical barriers.
- Simplified verification for small loads: Rewarding small loads for being ready to respond to signals should be prioritised ahead of costly individual verification.
- Reassessment of risk management in the grid: Taking calculated risks when activating demand-side flexibility should be tolerated to improve grid utilisation and reduce costs.
- Alternatives to market trading: Using conditional connections, bilateral agreements, and smart grid tariffs can be more effective than setting up complex markets.
With the right incentives and regulations, smart appliances can support the development of a more flexible, green, and cost-effective power system.
THEMA, COWI, and CIT Energy have, on behalf of Nordic Energy Research, produced a report that summarises the latest evidence on how best to develop regulatory measures that promote the efficient use of flexibility solutions. The report examines 10 specific cases and maps barriers and opportunities for the effective use of local demand-side flexibility from smart appliances.
The full report can be read here:
