A comparative analysis of local flexibility markets in Europe: Market design, performance, and regulatory alignment

As the demand for grid flexibility grows to ensure the safe and secure operation of electricity systems, Local Flexibility Markets (LFMs) are emerging as a new mechanism for harnessing flexibility from energy resources in distribution grids. Despite the rapid development of LFMs across Europe, comparative evidence on their performance and alignment with new regulations remains limited. This study addresses this gap by presenting a comparative analysis of existing LFMs in Europe, structured around three key dimensions. First, an overview of LFMs is presented in terms of their design, implemented functionalities, flexibility products, and market architectures. Second, a quantitative performance assessment is conducted, covering traded flexibility volumes, pricing dynamics, and the level of market competition. Third, the alignment of national LFMs with the forthcoming EU Demand Response Network Code (DR NC) is evaluated. This analysis is intended to better understand and quantify the potential of LFMs both for flexibility providers, who may generate additional revenue, and for flexibility buyers, who may rely on LFMs to meet network needs. The results reveal that more than twenty-eight DSOs are already procuring flexibility, with thousands of MWh per year in some countries, and that flexibility prices, can exceed day-ahead energy prices by two orders of magnitude. Furthermore, we identify key regulatory deviations with respect to the DR NC, including inconsistencies in baseline calculation practices and limited product competition. This study provides a better understanding of the potential of LFMs for key stakeholders and offers guidelines for policymakers in ensuring compliance with the DR NC.