Distribution Flexibility Market
A distribution flexibility market enables DSOs to procure locational services such as peak shaving, voltage support, or congestion relief from aggregated DERs. Unlike wholesale markets, these platforms operate at the feeder or substation level, paying resources that respond to local needs identified through DERMS analytics.
Flexibility markets may use auctions, pay-as-bid contracts, or standardized tariffs. Participants include virtual power plants, community storage projects, and industrial load aggregators that can deliver verified responses within minutes. Settlement relies on AMI data and secure communications to capture performance.
Pilots in Europe, Australia, and parts of North America demonstrate how flexibility markets complement non-wires alternatives by creating scalable procurement processes. They also provide DSOs with visibility into DER availability, supporting coordinated planning with TSOs.
Successful markets require clear baselines, transparent dispatch notifications, and data-sharing agreements that respect customer privacy while enabling regulators to audit performance.
Technical Details
- •Operates at feeder or substation level with locational bids
- •Procures services such as peak reduction, voltage support, and congestion relief
- •Integrates with DERMS, AMI, and settlement systems
- •May adopt auction, pay-as-bid, or tariff-based compensation
- •Requires standardized telemetry, baselines, and verification protocols
Why It Matters
Distribution flexibility markets create repeatable revenue streams for DER portfolios and accelerate grid decarbonization. Tera tracks market pilots, procurement results, and technology requirements so aggregators can prioritize geographies with favorable rules.
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