Business strategies for flexibility aggregators to steer clear of being “too small to bid”

Abstract

Flexibility aggregation is seen as a promising solution to facilitate the integration of solar and wind power into the energy system. While the solution is well known, it remains fairly uninvestigated in terms of the components needed to result in a business success. This study investigates the long-term business dynamics of flexibility aggregators with a simulation model. Our study finds that new entrants in flexibility markets are likely to be trapped in a “technology valley of death” situation on account of being “too small to bid”. Therefore, we test different strategies to overcome this critical initial phase. Diversifying revenue streams and introducing a leasing offer for flexible prosumers to enlarge the customer base are promising strategies to reach the relevant bidding size required to compete in balancing power markets. The analysis offers insights on the long-term uncertainties of the business case. The findings of this paper contribute to the discussion on how to develop functioning and robust business models for low-carbon flexibility. Furthermore, the study is of high practical relevance, as one of the burning questions for new entrants in flexibility markets is addressed with a concrete strategy analysis.