Local Flexibility Market: The Future of Energy Communities as New BSP Players

Introduction

Europe’s energy transition is no longer focused solely on energy production from renewable sources, but increasingly on the ability to intelligently manage energy flows. In this context, the Local Flexibility Market (LFM) is emerging as an innovative tool designed to balance electricity supply and demand in real time, reduce grid congestion and improve the overall efficiency of the system. This represents a fundamental step involving not only major energy operators, but also Renewable Energy Communities (RECs) and small prosumers, within an increasingly distributed and participatory energy ecosystem.

What is the LFM and why is it strategic?

The Local Flexibility Market was introduced in Italy through ARERA pilot projects (Resolution 352/2021 and subsequent measures such as Resolution 118/2024/R/eel of 2 April 2024) to enable DSOs – Distribution System Operators to purchase flexibility services from distributed energy resources connected to their grids. The objective is to ensure system stability without the need for major infrastructure investments.

The main players are:

• GME (Gestore dei Mercati Energetici – Italian Energy Markets Operator), which organises auctions and manages financial flows
• DSOs, which monitor distribution grids and identify balancing needs
• BSPs (Balancing Service Providers), which aggregate production and consumption resources to provide flexibility to the market
• RECs and prosumers, which provide flexible consumption capacity, energy storage or renewable energy production

The market potential is significant: at European level, according to Eurelectric, demand for flexibility is expected to increase by 133% by 2030 and by 250% by 2050. In Italy, estimated DSO investments by 2030 range between €375 billion and €425 billion, representing a major opportunity for domestic market players as well.

The role of BSPs (Balancing Service Providers)

BSPs play a central role in the emerging flexibility market. Their task is to aggregate and coordinate heterogeneous resources – photovoltaic systems, battery storage, heat pumps, industrial loads and demand response systems – to provide balancing and reserve services to the grid.

Their main activities include:

• Aggregation of distributed energy resources (DERs) and creation of Mixed Enabled Virtual Units (UVAMs).
• Participation in flexibility auctions organised by GME (upward or downward flexibility).
• Provision of ancillary services to DSOs, such as reducing consumption during peak demand or increasing production during periods of renewable energy surplus.

In Italy, the number of BSPs is growing rapidly: from 14 registered operators in March 2024 to 21 in June of the same year.

Energy Communities as key market players

Renewable Energy Communities (RECs) were created to share locally produced energy, but their role is set to evolve far beyond simple self-production and self-consumption. The Neta platform already includes a solution supporting the current Italian Renewable Energy Community market.

Thanks to the BSP4CER model, a platform currently being developed by Engineering, an Energy Community will be able to become an active player in the LFM by aggregating all its Points of Delivery (PODs) and participating directly in flexibility markets. This solution will combine the REC’s core objectives, such as self-consumption and incentive maximisation, with the market objectives of flexibility, linked to the remuneration generated by the provision of ancillary flexibility services.

The benefits for a REC evolving into a BSP are numerous:

• New revenue streams: the community can be remunerated for its ability to reduce consumption or increase production in response to market requests.
• Greater energy autonomy: participation in the LFM enables the community to make better use of locally produced and stored energy.
• Environmental and social benefits: intelligent flexibility management supports decarbonisation targets and strengthens the sense of community.

In this scenario, REC members become informed prosumers, capable of influencing the market not only as consumers but also as active providers of energy services.

Digital solutions supporting the Local Flexibility Market

Participation in the LFM requires advanced digital infrastructures. Several pilot projects have already demonstrated, and continue to demonstrate, the feasibility of this model.

• RomeFlex (Rome): a project launched by ARERA, Areti, Engineering and Siemens, in which RECs and prosumers have participated in local flexibility mechanisms. The auctions have enabled resources to be activated in real time, reducing demand peaks in the Italian capital.
• MindFlex (Milan): a pilot project involving Unareti/A2A and GME, which procured more than 9 MW of flexibility resources between June and August 2024.

The industrialisation of solutions currently used in pilot projects, such as:

• Market Interface Platform: an integrated platform connecting BSPs, DSOs and GME, implementing the electricity flexibility procurement process between grid operators (DSOs) and flexibility service providers (BSPs);
• BSP4CER: a solution designed to interact with the relevant DSO and ensure the correct monitoring of flexibility requests within the distribution grid that the BSP can fulfil through its contracted DERs.

Together with other architectural components already available within the Neta ecosystem, such as Data Lakehouse and API Manager, these solutions can extend Neta’s Energy Community offering and unlock a new business dimension for RECs, enabling them to become active market players, contribute to grid stability and benefit from new revenue streams.

Conclusions

The Local Flexibility Market represents one of the most significant innovations shaping the future of the electricity system. In this scenario, Energy Communities will no longer be simply local consumers and producers, but new players capable of providing balancing and flexibility services, evolving into genuine local BSPs.

Neta, through its Energy Community platform and solutions dedicated to DSOs and Utilities, is positioning itself as a technology enabler of this transformation, supporting businesses, communities and institutions on their journey towards a more decentralised, resilient and sustainable energy ecosystem.