The value of decentral flexibility in nodal market design – A case study for Europe 2030

Abstract

To better integrate fluctuant renewable energy sources, we investigate the local value of decentral flexibility options e.g., battery storage systems, electric vehicles and heat pumps, under nodal market design. A novel framework to depict the economic value of decentral flexibility units at different locations is presented: First, based on an energy system model, nodal as well as zonal price time series are generated. Second, flexibility values are computed based on these price time series using operation models. Our case study for 2030 for Europe demonstrates the high value of decentral flexibility provided especially by bidirectional flexibility options. The mean daily price spread is found to be a main driver for all flexibility values. We observe similar flexibility values across most nodes in both market designs. However, for a distinct subset of nodes that represent close to 10% of total demand, substantially higher values of local flexibilities are observed which indicates a markedly higher demand for flexibility. Yet, the zonal market design only provides imperfect incentives for the system-oriented operation of flexibilities at these nodes. Besides the introduction of nodal pricing as first-best option, we propose to consider tailored instruments focusing on these flexibility hot spots as second-best policies.