Engaging small-load flexibility-service providers in electricity markets: a value-incentivising framework for active customers participation and aggregator business model viability

Abstract

Integrating renewable energy sources (RES) into electricity systems is crucial for achieving a sustainable, low-carbon future. However, the intermittent and variable nature of renewable power generation poses challenges that require increased flexibility in the electricity system. Flexibility programmes, particularly incentive-based or explicit flexibility, are vital in addressing this challenge. These encourage energy flexibilisation in return for compensation so that customer flexibility is sold in electricity markets either directly or through aggregators. By bundling flexibility from individual customers, aggregators enable seamless incorporation into the system, supporting the effective utilisation of renewable energy sources. Recent research indicates a limited willingness among small-load flexibility-service providers (SL-FSPs), such as residential customers, to actively participate in providing flexibility services, primarily due to a perceived lack of value associated with their involvement. This undermines the assumption that customers are passive price takers and threatens the feasibility of flexibility services and business models. To tackle this issue, this paper proposes a comprehensive valueincentivising framework based on an extensive review of existing flexibility programmes in the United States. The framework guides the design of incentivising strategies to effectively engage SL-FSPs in flexibility markets, considering the restrictions established by the DSOTSO. The two-layered incentive framework integrates five components that together foster SL-FSP participation, meet DSOTSO requirements, and ensure the viability of the aggregator's business model. The findings and recommendations presented in this paper offer valuable insights for policymakers, market operators, and stakeholders, promoting active customer engagement and enabling the successful integration of renewable energy sources in electricity systems.