Flexibility markets favor centralized storage over distributed systems

⚡ AI Executive Summary

Researchers examined how market rules in flexibility systems convert available renewable energy capacity into monetizable grid services, using case studies from El Hierro's island microgrid and an Italian Alpine cooperative. The analysis reveals structural barriers that make distributed battery storage economically unviable without additional revenue streams, while centralized systems achieve modest returns. For grid operators and utilities, this finding underscores a critical market-design problem: current regulatory frameworks inadvertently penalize the local, distributed flexibility that modern grids need most. As penetration of renewable sources increases, the inability of market rules to properly value location-specific grid services threatens to lock in centralized architectures that may prove inflexible as demand patterns evolve. The implication is clear—policy makers must redesign flexibility products to explicitly compensate for locational benefits, or risk under-investment in the distributed flexibility infrastructure the energy transition requires.