4 Myths About Scaling Distributed Energy Flexibility

Coming back from E-World in Germany, one thing was unmistakable: flexibility dominated the conversations. Across the halls, discussions ranged from large-scale front-of-the-meter storage systems to behind-the-meter optimization of small-scale distributed energy resources (DERs).

But during all these discussions, I noticed something else: that several persistent myths are buzzing around, and shaping how the market perceives distributed flexibility.

Now, let’s take a closer look at four of them.

1. Small-Scale Flexibility Is Not Worth It

Today, there is the assumption that large-scale battery storage optimized in front-of-the-meter, primarily for grid services, is the highest currency for flexibility. The market is overheated. While there is still strong momentum, distribution grid operators cannot keep up with grid connection permissions. At the same time, investors are becoming more cautious due to regulatory uncertainty.

Meanwhile (and much more quietly), small-scale flexibility is steadily scaling across residential and commercial customer segments: solar, storage, electric car fleets, and even electrical heating. 

Individually, these assets may not provide the same capacity as a utility-scale battery. But collectively, they form a diversified portfolio of consumption and production profiles. This creates a resilient and efficient “Lego block” of flexibility, modular, scalable, and located closer to where electricity is actually consumed.

Distributed energy resources are easier to permit, faster to deploy, and inherently aligned with electrification trends. Leveraging them means overlooking a rapidly growing source of energy capacity.

2. The Value Lies Only in Ancillary Services

Currently, much of the monetization opportunity for flexibility lies in ancillary and balancing services. That may be true…for now.

But it’s worth remembering that ten years ago, monetizing flexibility in grid services was considered unrealistic. The energy market evolves, and value migrates.

As electricity systems become more volatile and decentralized, revenue streams diversify. It will become increasingly important to operate across the full value stack:

• Grid services
• Balancing markets
• Market dynamics
• Congestion management
• On-site optimization

Flexibility is not a single-market play. It is a multi-layered capacity strategy spanning from and integrating behind-the-meter optimization to front-of-the-meter market participation.

The ability to orchestrate distributed flexibility across these layers will define who captures long-term value.

3. Customers Need to Understand Flexibility From A to Z

If you ask the average electricity customer about their energy setup, you can consider it a success if they know the name of their supplier. 

Flexibility, however, sits deep within the complexity of the energy system. Even industry professionals require time to grasp it fully. So, expecting customers to understand flexibility from a systemic perspective is unrealistic and even unnecessary.

Customers care about: 

• The value generated
• The risks involved
• The effort required to join or exit a service

So let’s provide clear and simple communication. The complexity belongs in the orchestration layer, and not in the customer journey.

4. "Integration Is Too Complex"

Even when customers are convinced, technical integration remains a concern.

Depending on the setup, integration can range from hardware-based solutions to the now more popular API-based connections. The market includes everything from reverse-engineering integrations to fully contractual-backed connections.

There will not be a single universal integration solution anytime soon. Standardization is underway, but it takes time.

In the meantime, success requires pragmatism:

• Support multiple integration pathways
• Focus on scalable API-first architectures
• Prioritize the integration methods that cover the majority of the market 

Flexibility scaling is not blocked by technology, but it does require thoughtful system design.

The Take-Away

Distributed flexibility is not a sizing issue. It’s not a technology or investment risk. And it’s no longer in the experimental phase.

It’s moving from innovation to scale.

What it does require is courage and the willingness to source a new form of energy capacity, which significantly contributes to a sustainable, resilient, and affordable energy system.

The question is no longer whether distributed flexibility works. The question is who will scale it.