Everything you always wanted to know about flexibility

A flexible power system responds quickly to sudden changes, keeping supply and demand balanced across locations and time, despite high variability, whether through demand-side response, storage, flexible generation or other means. 

A flexible power system minimise costs, reinforces security, and reduces emissions.

Emissions are reduced because more decarbonised electricity can be consumed when available instead of being curtailed. System costs are lowered by reducing reliance on expensive fossil-based generation, thermal back-up plants and major grid expansion, which are all currently scaled to deal with rare peaks. Energy security and market resilience are enhanced by reducing reliance on fossil gas and protecting consumers from global fuel price shocks. 

When is power system flexibility needed, and for how long?

Key timescales and flexibility needs:

• Very short-term (miliseconds): Very fast responses are vital for grid stability. Fast frequency response (FFR) can act immediately after a disturbance (like a generator trip), arresting frequency decline before slower reserves can engage. Inverter-based resources such as wind, solar and batteries can deliver synthetic inertia by injecting or absorbing power within tens of milliseconds. At the same time, protection systems – relays and automatic controls – operate within milliseconds to isolate faults, preventing cascading failures.

• Short-term flexibility (seconds to hours): Essential for real-time balancing, frequency control and stability, and managing forecast errors and sudden outages. Fast-responding assets – such as gas-fired plants, hydropower, battery energy storage systems (BESS) and demand response – play a critical role.

• Mid-term flexibility (hourly to daily): Needed for managing diurnal shifts (moving from day to evening peak), steep net-load ramps, multi-hour congestion  and day-to-day weather swings. Multi-hour duration storage (batteries, pump hydro, thermal storage), dispatchable power plants, load shifting over hours or days (for example through EV charging or industrial demand-side management) are key technology options. Interconnection and regional balancing can also support managing the variability.

• Long-term flexibility (weekly to yearly): Supports system adequacy by managing seasonal patterns, bridging multiple days of low renewables generation or handling inter-annual variability (like dry-years for hydro power generation). Long-duration storage (pump hydro reservoir, hydrogen) and low-carbon generation are key technologies. Strong interconnection and spatial and resource diversity also help in the management of long-term flexibility needs.

Where does flexibility need to be deployed? 

Flexibility deployment needs to take into account the specific flexibility challenge, which typically means considering the physical location and the respective grid level (transmission or distribution). 

From a spatial perspective, flexibility services can be divided into location-specific and location-independent services. 

• Location-specific flexibility is required to address local issues such as network congestion, voltage control and power quality, and therefore must be delivered at or near the constrained point in the grid. These services can only be provided by resources connected in the right place, such as local demand response, distributed storage or grid-scale batteries strategically sited to relieve bottlenecks.
• By contrast, location-independent flexibility supports the overall energy balance of the power system and can be provided from anywhere in the grid. Services such as frequency response, system balancing and energy shifting rely less on geography and more on speed, availability and controllability, allowing a wide range of resources across the system to contribute.

Supply-side flexibility: dispatchable conventional generation renewable generation

Dispatchable thermal power plants – such as gas turbines and coal units - and hydropower (with reservoirs) provide flexibility through ramping, partial-load operation and controllable output. These assets help manage short-term variability, cover peak demand and provide reserves when renewable generation fluctuates. 

As decarbonisation progresses, the role of fossil-based flexibility will evolve. Plants are likely to operate less frequently but more flexibly, eventually shifting towards low- or zero-carbon fuels rather than continuous baseload operation.

Renewable power plants can also provide flexibility. Modern wind and solar plants equipped with advanced inverters can deliver frequency response, voltage support and active power control – including upward regulation when operating below rated capacity (i.e., with curtailment to maintain headroom). This allows them to move beyond “must-run” generation and contribute directly to grid stability and alleviate grid congestion. Policy and grid codes are key to unlocking this potential by requiring and remunerating these services.

Demand-side flexibility: consumers as system resources 

Demand-side flexibility refers to the ability of electricity consumers to adjust their consumption in response to grid conditions and price signals. Consumers may reduce consumption during periods of high electricity demand or surplus supply. These shifts are often enabled by smart technologies and automation and can be incentivised through financial rewards.

However, price dynamics alone don’t tell the full story, particularly in non-wholesale markets. On the grid side, system operators increasingly rely on demand-side flexibility as a critical tool to maintain stability, reduce peak loads and integrate VRE. 

As electrification expands, demand-side flexibility is becoming increasingly important. Technologies such as EVs, heat pumps/cooling systems, data centres and electric boilers are adding large new electricity loads to the system. Managing consumption patterns will be essential for maintaining grid stability and efficiency. Although demand-side flexibility growing rapidly, it is still at an early stage of deployment in many markets. Aggregators increasingly play a role in pooling small loads and enabling them to participate in electricity markets and system services. Most current demand-side applications operate on sub-hourly to daily timescales, offering rapid and localised responses to grid needs.

Industrial sector 

Traditionally, large industrial processes – such as for producing steel, cement, chemicals or pulp and paper – offered low flexibility: Loads often operate continuously or in long production cycles, with peak demand driven by process schedules rather than time of day. In a traditional power system (with low VRE), some of these processes were scheduled (such as at night) to benefit from cheaper electricity prices. With the increase in cheap electricity during periods of high renewables generation, some of those processes can be incentivised to operate more flexibly, offering significant potential for short-term flexibility services, ranging from 15 minutes to several hours (for a detailed example, see our German study) because of the scale and energy intensity of those processes. Production lines can sometimes be slowed, paused or shifted to off-peak hours in response to price signals or grid needs. Industrial demand response can thus contribute to balancing, reserve provision and congestion management. Key policy levers include clear market access for industrial demand response, fair remuneration for flexibility and contractual arrangements that limit production risks.

Data centres, a rapidly emerging industry segment, are expanding at an unprecedented pace globally, driven by AI growth and digital sovereignty objectives. In the last couple of years, this rapid growth has placed a growing strain on electricity grids due to connection backlogs, local congestion and adequacy concerns, prompting regulators and network operators to rethink grid access frameworks. This study explores how data centres in Europe can actively support reducing grid stress through temporal and geographical load shifting. Policy lever like Flexible Connection Agreement (FCA) can enable data centres to secure accelerated grid access in exchange for pre-defined flexibility commitments during periods of system stress.

Commercial sector

Commercial buildings such as retail spaces, offices and warehouses also provide flexibility. Electricity demand in this sector follows daily and weekly patterns driven by lighting, IT equipment and heating or cooling. Smart building technologies and centralised energy management platforms can automatically adjust non-essential loads like lighting, HVAC and refrigeration with limited impact on operations. Challenges include split incentives between building owners and tenants, limited automation in older buildings and concerns over comfort and service quality. Key policy levers include building energy codes, incentives for smart building technologies, aggregation frameworks and enabling participation in flexibility and balancing markets.

Residential sector

Household flexibility is highly distributed but becomes significant when aggregated. Smart appliances, EVs, heat pumps, water heaters and home batteries can shift electricity consumption (driven by cooking, heating or cooling, lighting and (increasingly) car charging) away from peak periods (typically morning and evening). Aggregators often combine these resources into virtual power plants. Key challenges include consumer engagement, data access and automation. Smart meters, dynamic or time-of-use tariffs, consumer protection rules, support for aggregators and digital platforms can help unlock this potential.

Sector coupling: flexibility across energy sectors

Sector coupling links the power system with heating, transport, industry and fuels, enabling flexibility by shifting energy across sectors. Electrified technologies, such as EVs, heat pumps, electrolysers and electric boilers, can adjust their operation in response to renewable generation. For example, they may increase consumption when renewable output is high or reduce demand during periods of scarcity. This expands the pool of available flexibility and enables balancing across multiple timescales, from hours to seasons. As renewable shares increases, coordinated planning across power, heating, transport and hydrogen systems is essential to ensure they respond to system needs rather than creating new peaks.

Storage technologies: shifting energy across time

Energy storage decouples electricity generation from consumption. Surplus energy can be stored and released later when demand is higher or renewable generation lower. Different technologies serve different timescales. Batteries excel at fast response and intraday balancing, while pumped hydro and other long-duration storage options address multi-day or seasonal storage needs. Storage can simultaneously deliver multiple services, including frequency control, ramping, congestion relief and adequacy. Policy frameworks that allow storage to earn revenues from several services are critical to unlocking its full value.

Read more about how battery storage shapes the energy transition at Everything you always wanted to know about battery storage.

Grid infrastructure: flexibility through networks

Electricity networks are also a major source of flexibility. Transmission grids allow electricity to flow from regions with surplus wind and solar generation to demand centres. This helps smooth local variability and reduce the need for costly backup generation. Strong interconnections and cross-border links allow system operators to pool flexibility over larger geographic areas, lowering balancing costs and improving security of supply. One major challenge lies in anticipating the length and location of future power lines – and predicting which technological innovations will provide alternatives to classical grid expansion.

Grid flexibility does not always require building new power lines. Many systems follow the GORE principle to minimise cost and increase public acceptance: Grid Optimisation first, then Reinforcement, and Expansion only when necessary. Measures, such as dynamic line rating, phase-shifting transformers, advanced power-flow control and voltage regulation, allow existing infrastructure to carry more power and respond dynamically to changing conditions.

• At transmission level, advanced transmission technologies give system operators greater control over power flows and system stability. Tools such as Flexible AC Transmission Systems (FACTS) and phase-shifting transformers allow operators to manage voltage and redirect electricity flows in real time, relieving congestion and improving network utilisation without immediately building new lines. In India, for example, Static Synchronous Compensators (STATCOMs) – a form of FACTS – are deployed in regions with high solar penetration to maintain voltage stability and support reliable operation. High Voltage Direct Current (HVDC) systems further expand flexibility by enabling efficient long-distance transmission and interconnection between regions, effectively balancing supply and demand across wide areas. Where new infrastructure is required, speedy permitting, coordinated cross-border planning and alignment between transmission and distribution investments are critical.
• At the distribution level, grid expansion and modernisation are emerging as the primary enablers (and potential bottlenecks) of power system flexibility and electrification. Solar PV, EVs, heat pumps and batteries are increasingly connected at low- and medium-voltage levels. These resources create bidirectional power flows and can lead to local congestion and voltage fluctuations that existing infrastructure was not designed to manage. As a result, distribution grid investment is expected to more than double in coming decades, reflecting the concentration of electrification and decentralised generation close to consumers. Modernisation – via smart transformers, automated switching, advanced monitoring and real-time voltage control – allows distribution system operators (DSOs) to integrate distributed flexibility more cost-effectively. Combined with local flexibility procurement – such as batteries and EVs to defer reinforcement, as in the United Kingdom – distribution grids are evolving from passive assets into active platforms that enable flexibility, support electrification and underpin a resilient, consumer-centric power system.

Read more key insights about grid in A Word on Grids and Policy priorities for modernising distribution grids.

What are the main flexibility strategies based on your VRE share?

The International Energy Agency (IEA) identifies six phases of renewable integration. As solar and wind shares increase, flexibility requirements grow and become more diverse. 

• Phase 1–2: Low wind and solar penetration (<20% of total power generation) – Operational fine-tuning:

  At low levels of VRE, the grid can manage variability with relatively small adjustments. Conventional power plants absorb fluctuations by adjusting their output. Minor retrofits or operational changes of conventional power plants may be needed but overall system design is largely unchanged. Flexibility plays a supporting role. Improved forecasting and dispatch adjustments help manage variability, while demand-side measures, such as time-of-use tariffs, can encourage consumers to shift consumption slightly.

• Phase 3–4: Moderate wind and solar penetration (20–50% of total power generation) – System coordination:

  As VRE begins to shape daily and weekly generation patterns, variability and uncertainty increase.  Grid operators must actively manage congestion, balance reserves and mitigate renewable curtailment. In addition to supply-side solutions (phase 1–2), storage and interconnectors expand, while demand-side response becomes more prominent. Dynamic pricing, automated load shifting and aggregator programmes allow households and businesses to adjust consumption in real time, reducing grid stress and lowering costs. 

• Phase 5–6: High wind and solar penetration (>50% of total power generation) – System redesign:

  At high penetration levels, VRE dominates generation patterns. Flexibility becomes central to grid operations. Without it, systems face risks of frequency deviations, reserve shortfalls and curtailment. System redesign is essential. Markets must incentivise flexibility across all layers, and infrastructure must support bi-directional flows. Smart electrification of end-use sectors (in buildings, industry and transport sectors) provides additional demand-side flexibility: EVs, smart appliances and distributed storage provide balancing and ancillary services, often through virtual power plants. Consumers shift from passive users of electricity to active participants in system balancing. 

Is it better to build more transmission lines or other flexibility options? 

It is not always straightforward to decide whether building more transmission lines or relying on other flexibility options is the better path. Some flexibility options offer powerful tools to manage variability and congestion, but it is not always the most cost-effective or technically suitable option. Choosing between flexibility options and traditional alternatives such as network reinforcement or renewables curtailment requires a careful assessment of system conditions, investment costs and operational benefits. 

Transmission expansion primarily provides spatial flexibility, allowing electricity to flow from regions of surplus generation to areas of high demand. In contrast, options such as energy storage, demand response, or thermal ramping provide temporal flexibility, enabling the system to shift energy use or generation across time. Both dimensions are deeply interconnected: a grid with strong spatial flexibility reduces the need for storage in some cases, while robust temporal flexibility can ease congestion and defer costly transmission investments. Moreover, grid reinforcement not only enhances spatial balancing but also allows systems to benefit from smoothing effects across wider geographic areas. These smoothing effects have a temporal dimension, since aggregating diverse demand or generation profiles (such as wind or solar) across regions reduces variability. 

Historically, grid planning relied on conservative rules, reinforcing networks whenever equipment loading approached 100% of rated capacity. In today’s systems, dominated by short-lived peaks from solar generation or EV charging, this approach often leads to oversized infrastructure with low average utilisation. Flexibility can defer or even avoid these costly upgrades by shaving peaks, shifting loads and providing ancillary services.

The optimal solution depends on factors such as VRE share, grid topology and market design. For example, in Turkey, an analysis undertaken by SHURA compared costs and benefits of options like battery storage, demand-side response and network reinforcement under different scenarios of renewable penetration. The study found that demand-side flexibility and battery storage could reduce system costs by up to 15% compared to reinforcing transmission lines for short-duration peaks, especially when renewables curtailment was minimised. Conversely, in regions with weak distribution networks and limited digital infrastructure, targeted reinforcement may still be more economical than deploying advanced flexibility solutions (SHURA, 2019).

In California, automated demand response programmes avoided the need for emergency procurement during heatwaves, saving an estimated USD 150–200 million and reducing reliance on fossil peaker plants. Similarly, Chile’s strategic combination of curtailment and battery storage lowered system costs compared to building oversized storage capacity. 

In Vietnam, rapid solar and wind expansion in 2019–2021 (especially in the Central and South regions) outpaced transmission expansion, resulting in congestion, curtailment and even suspensions on new VRE connections due to insufficient grid capacity. Vietnam’s ability to balance the system increasingly hinges on the 500 kV North–South transmission backbone, which is needed to move power from generation-rich regions to major load centres and to maintain reliability as demand grows. While accelerating targeted grid reinforcements is a near-term priority, the latest policy document (12/2025/TT-BCT) requires 10% of storage capacity for new solar PV installation. This illustrates the dynamic between lengthy but much-needed grid reinforcement and expansion versus local flexibility solutions. 

Flexibility is not a one-size-fits-all solution. System operators and regulators must evaluate technical feasibility and economic efficiency under local conditions. Cost-benefit analysis helps identify which flexibility options deliver the greatest value at each stage of the energy transition.

Do power markets have to liberalise to procure flexibility effectively? 

Power market liberalisation alone does not guarantee efficient flexibility provision. Markets, if not designed properly, can feature an inefficient patchwork of flexibility enabling and disabling design elements. For example, some key design elements of short-term energy and balancing market rules can quickly distort wholesale power price signals, increasing the cost of providing flexibility. Conversely, better design of short-term markets (day-ahead, intraday and balancing markets and imbalance settlement rules) – which is where the demand for flexibility is met – facilitates efficient price formation to provide flexibility effectively and at mínimum cost.

Importantly, flexibility can be delivered in both liberalised (i.e. market-based) and non-liberalised (i.e. highly regulated) systems, provided mechanisms are cost-reflective and aligned with real system needs. In liberalised markets (e.g. in the EU), flexibility is procured through energy, ancillary services, capacity and balancing markets that reward fast response. In vertically integrated systems, similar outcomes can be achieved through planning-led procurement, targeted auctions and regulated contracts. When well designed, tool like electricity tariff-design can provide a direct and scalable signal to consumers regardless of the underlying market structure. Tariff design (time-based, capacity-based, or hybrid) can incentivise load shifting and peak shaving.