Flexibility’s Hidden Issue – and the Formula Shaping Tomorrow’s Winners

Is flexibility echoing the Dot-Com era?

In the late 1990s, the Dot-Com boom became a groundbreaking display of fast-paced innovation. The rise of the internet promised a complete transformation of society, triggering a surge of startups racing to win ground in a highly innovative but gold rush-like market. Where speed was king and business fundamentals were secondary, the lack of reliable, long-term business models eventually became one of the key factors that turned the party sour. The bubble famously burst in the early 2000s, virtually tanking the market and leaving only a few well-structured players in control of the internet industry’s fate.

In the Dot Com era, speed was king and business fundamentals were secondary. Is flexibility in a similar place?

Although the flexibility sector, unlike the Dot-Com era, is emerging within an existing industry – the energy industry – and is facing widely different challenges, the similarities are significant. The fast growth of flexibility has opened up groundbreaking innovations and launched a competitive race towards building the most advanced technologies. But it has also created a scattered field of market players, all with different niche products, market incentives, and industry experiences, that has raised concerns about how the level of progress and performance can be sustained.

What’s slowing the sector down

Whether it’s a race to access the most trading markets, building the most advanced algorithms or integrating assets with the most speed and precision, flexibility has largely been powered by fast-paced innovation and competition. This has been a key to its success so far, but it has also opened up flaws in the system that create uncertainty for its stakeholders. This is particularly reflected in the varying actors of the industry and their mismatched priorities.

For instance, aggregators, who mainly bundle assets into software-controlled VPPs (Virtual Power Plants), are often unaware of on-the-ground basics, like local grid conditions. Actors defining themselves as traders are generally more concerned about market swings than the state of the grid. And optimizers, who mainly focus on delivering smart asset control, often lack insight into the trading strategy. Large stakeholders like TSOs (Transmission System Operators), who above all value stability in the system, require solid actors who can provide real-time response and operation of energy assets. Most actors in flexibility today can’t.

Early signs of market saturation are also showing. Prequalified BESS volume on the Swedish FCR markets, for example, has increased substantially during the last year, and has now reached its demand cap according to the Swedish TSO Svenska kraftnät. At the same time, average prices on these markets are continuing to stand at an all-time low, while the main issue at hand, volatility, is still looming large.

The next phase of flexibility

As the flexibility industry leaves the fringe, moving towards the epicenter of handling an increasingly variable energy system, more than battery volume are needed to make it work. The industry needs a revitalization where innovations that accelerate the energy transition – battery storage, dynamic trading algorithms, real-time forecasting, automatic dispatching – work together in harmony.

The system is growing larger and more complex by the day, affecting more than just asset owners. Trust from large stakeholders like TSOs, policymakers or electricity-consuming businesses is therefore becoming a key factor in the years ahead. This means getting serious about optimizing according to grid needs, taking ownership of energy delivery and generating real system-level value.

Actors defined as “End-to-end flexibility providers” take responsibility for the full value chain – at asset level, market level, and grid level. This approach allows them to gain invaluable trust from stakeholders like TSOs, policymakers and electricity-consuming businesses.

Realizing this comes down to accountability. The actors that can take responsibility for the full value chain – at asset level, market level, and grid level – and control several crucial business segments under one roof, will have an advantage. This means stepping out of merely solving isolated tasks like aggregating assets optimally, managing and prequalifying assets with efficiency or delivering the best bids – and instead embracing and fine-tuning all pieces of that puzzle simultaneously.

This end-to-end model is the key to winning trust with TSOs who value a responsible balance between performance and purpose. It aligns with the policymakers’ agenda, who reward pure grid-supporting actions rather than niched software-only services. It also increases certainty for large-scale electricity consumers, who seek price stability in an insecure world.

A model to solve volatility

The winners coming out of the Dot-Com era (most commonly exemplified by Google and Amazon) certainly didn’t shape their strategy around solving fragmented challenges. They expanded in new product segments, took responsibility across the value chain, and materialized a long-term, revenue-scaling business model – instead of jumping blindly into the next hunt for revenue. As the next phase of flexibility is in its starting blocks, adopting and refining a similar approach is what will define the true leaders in the future market.

Flower’s end-to-end approach.

As the most financially-backed flexibility actor in the Nordics, and with pure in-house expertise stretching from real-time asset control, project development, prequalification, advanced optimization and trading, PPA offtake, and more – Flower’s business model is uniquely built around maximizing value at system level. With its end-to-end approach, Flower is already gaining trust from asset owners and grid operators all over Europe, shaping the system for the next era of clean power.

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