Unlocking Flexibility in Power Systems
Without flexibility, the power grid faces the risk of collapse as renewable energy integration grows. Wind and solar capacity are expected to more than double, from 3 TW in 2022 to 7.1 TW by 2030. While reliance on these sources is critical for achieving Net Zero, their variability – and surprisingly, their vulnerability to cyberattacks – exposes critical flaws in a grid designed to accommodate the consistent output of fossil fuels.
Flexibility solutions are no longer optional. They are critical in order to balance supply and demand, maintain grid stability, and enable a successful energy transition. The increasing demand for flexibility is evident in the projected growth of the energy services market, expected to rise from $65 billion in 2022 to $106 billion by 2027 globally. Additionally, the European Commission’s research indicates that flexibility requirements in the EU will more than double by 2030, reaching 25% of total demand for power today, and 80% by 2050.
What is Flexibility in Energy Systems?
Flexibility is the power grid’s ability to adapt and balance supply and demand despite fluctuating renewable energy inputs and dynamic consumption patterns.
The Risks of an Inflexible Grid
Supply Volatility
The stakes of insufficient flexibility are becoming impossible to ignore.
In the first 8 months of 2024, across EU countries, electricity prices fell below zero for a record combined total of 7,841 hours, driven by the rapid expansion of solar and wind energy.
Germany alone – the largest electricity market in the EU – recorded 468 hours of negative pricing over 2024 (+60% Y-o-Y). France saw 356 hours, doubling from the previous year. Spain experienced negative prices for the first time, totalling 247 hours in 2024.
This oversupply of renewable energy exposed cracks in the energy system, highlighting the need for adaptable solutions to stabilize grids and prevent financial losses.
Cybersecurity Threats
With just a laptop and smartphone, cybersecurity consultant Vangelis Stykas bypassed solar panel firewalls worldwide, exposing their vulnerability. He managed to gain access to more power than flows through Germany’s entire grid. His findings showed that a single hacker could disrupt supply-demand balance and trigger cascading failures across Europe.
Cyberattacks on utilities have surged, doubling to 1,100 per week globally in two years, with Europe reporting over 200 attacks last year, according to the IEA. Stykas warns, “If these can be hacked, that leaves Europe’s grid, which underpins our entire lifestyle, vulnerable.” Addressing these vulnerabilities requires both advanced flexibility solutions and robust cybersecurity measures to safeguard critical infrastructure.
Solutions for Grid Stability
The chart below shows European-focused flexibility startups in key segments, highlighting innovative solutions that drive grid stability and advance energy flexibility.
The chart categorizes European-focused startups based on two criteria: their asset class focus and their orientation towards asset owners or the broader market. In the following sections, we delve into the segments of this landscape that we find particularly exciting.
Innovative Tools Driving Flexibility
Susten’s research highlights key subdomains with significant potential, including:
These innovations, coupled with strong financial performance and expanding capacities, are reshaping the energy landscape.
Barriers and Opportunities
Challenges Hindering Progress
Technological Gaps: Advanced metering and data management systems are critical for integration.
Regulatory Challenges: Policy evolution is needed to support innovations like VPPs and local markets.
The Bright Side
Despite these hurdles, subdomains like VPPs offer impressive financial returns, with EBIT margins up to 43% and revenue growth rates exceeding 100% in certain cases, as identified by Susten.
Increasing Number of Deals in Flexibility
Flexibility is the cornerstone of a renewable-powered future. Recent years have seen strong M&A activity, driven by leaders like Shell and Schneider Electric, highlighting market interest and validation.
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