From insight to action: accurate assessments to help close flexibility gaps in Europe’s power system

As Europe makes strides in decarbonising its power sector, wind and solar now provide nearly half of all electricity generation across the continent. However, with this success come new structural challenges. A growing volume of decarbonised electricity is going unused due to mismatches between when and where it’s produced – and when and where it’s needed. For example, in 2024, Germany had to cut back one-fifth of its offshore wind power. Finland experienced over 700 hours of negative electricity prices, where producers had to pay to offload it. These trends point to a pressing need to boost system flexibility and present opportunities to expand storage and demand response. 

Against this backdrop, Agora Energiewende, together with Consentec GmbH, has developed a set of principles for the design of Flexibility Needs Assessments (FNAs) – a reporting obligation introduced under the 2024 European Electricity Market Design reform for members states. On 16 April, the European Network of Transmission System Operators for Electricity (ENTSO-E) submitted a proposal on the FNA methodology to the European Union’s Agency for the Cooperation of Energy Regulators (ACER). ACER now has until 16 July to approve or amend the proposal. Once approved, it will become binding for the national assessments, which will form the foundation upon which member states must set their non-fossil flexibility targets.

Agora’s new research provides a new analytical base for the design of FNAs, so that they can help unlock greater flexibility and thereby maximise the cost-efficient integration of renewable electricity, maintain system stability and reduce fossil energy use. These key design principles include that FNAs should be transparent, optimise cost efficiency and consider network needs. While the assessment approach should be consistent across member states, the derived policy responses can be tailored to national contexts.

Why flexibility matters

Flexibility enables supply and demand to be balanced across location and time, whether through demand-side response, storage or other means. This allows more decarbonised electricity to be used when it is available, lowering emissions and overall system costs by reducing the need for fossil-based generation, thermal back-up plants and grid expansion.

A more flexible power system also helps balance the growing demand from electrification, such as electric vehicles, heat pumps and electrolysers, without requiring major and costly grid expansions. As fossil-based, dispatchable generators are phased out, new sources of flexibility are needed to keep the system stable: from covering peak demand and providing balancing reserves to managing inertia and ramping constraints.

Flexibility also enhances energy security and market resilience by reducing reliance on fossil gas and protecting consumers from global fuel price shocks. Flexible systems also help ease price volatility, avoiding spikes during renewable droughts (known as Dunkelflaute), and negative prices when renewable output surges in periods of high sun and wind (“bright breeze”).

Flexibility needs assessments to accurately inform targets 

FNAs aim to identify how much and what kind of non-fossil flexibility is needed to make better use of decarbonised electricity. To do so, they balance the cost of curtailing (cutting back) renewable energy with the cost of adding flexibility infrastructure. This allows for a comparison between the system-optimal level of flexibility with what is actually being deployed in the market. While in theory, price signals should drive investment in flexibility, in practice, short-term market dynamics and non-market barriers (like grid connection hurdles or complex permitting) often hinder cost-optimal deployment, especially for decentralised solutions like residential batteries, heat pumps or electric vehicles. FNAs identify these gaps and help assess whether current market frameworks and regulations are enabling or obstructing progress. 

Agora Energiewende’s analysis outlines a comprehensive approach to setting up FNAs that goes beyond diagnostics. It shows how FNAs can be designed to more accurately assess flexibility needs, a precondition for accelerating the deployment of targeted flexibility solutions. By incorporating both system-wide and grid-level constraints, FNAs can feed directly into national Resource Adequacy Assessments, supporting smarter capacity planning.

A standardised, transparent, and open-source methodology built on harmonised data collection would allow for transparent comparison across member states and greater usability for researchers, regulators and market actors. Over time, this approach could improve planning security for grid operators, lower the cost of capital for flexibility investments and open the door for smaller players to participate in the energy transition.

Designing FNAs well is critical so that they can reveal how well current market frameworks support flexibility and where targeted policy measures are needed to close the gap. In this way, they can help unlock investment in technologies like energy storage and demand-side response, accelerating the decoupling of power prices from fossil fuels and lowering overall system costs. 

The report “Making the most of green electricity: key principles for identifying flexibility gaps in the power system” and the accompanying slide deck were produced by Consentec GmbH on behalf of Agora Energiewende. They are both available for free download below.