The EU’s energy future depends on flexibility, and we’re running out of time

• 6 days ago (2025-05-19)
• Junior Isles

Demand side response 3 Renewables 796

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By Simon Bushell , CEO, Sympower

Europe’s energy system is at a critical crossroads. Growing geopolitical tensions and Europe’s dependence on energy imports have made energy security a top priority, amplifying the urgent need for greater flexibility – the ability to balance electricity supply and demand – especially as the continent rapidly scales up renewables and electrifies its economy. While policymakers rightly focus on expanding renewables and reinforcing the grid, they often overlook a critical enabler of both: demand-side flexibility (DSF) – the fastest, most cost-effective way to support a stable, clean energy system.

This is more than an environmental imperative:  Europe’s target of doubling energy flexibility by 2030 will support energy sovereignty, increase industry competitiveness and help reduce energy prices.

The flexibility crisis: why we need to act now

The European Commission’s Action Plan for Affordable Energy (2025) recognises that high energy costs undermine the EU’s global competitiveness. Industrial electricity prices in the EU are now over twice as high as in China and the United States, putting European businesses at a competitive disadvantage. Meanwhile, congestion costs are skyrocketing – referring to the costs incurred when electricity can’t flow freely through the grid due to capacity constraints – currently costing the EU an estimated €140 billion each year . These costs could increase more than 40 % by 2050 EU-wide.

DSF is a readily available, scalable, low-cost solution that can complement longer-term infrastructure investments such as transmission lines and energy storage. By tapping into DSF now, Europe can unlock immediate benefits for grid stability, affordability, and decarbonisation – bridging the gap while larger projects are built-out.

Demand-side flexibility: the lowest-hanging fruit

Commercial and industrial (C&I) businesses across Europe are sitting on an energy flexibility goldmine: around 126 GW (1) of untapped C&I flexibility could be activated immediately to balance and strengthen our grids. Processes like heating, cooling, and refrigeration, and in some cases, data processing, can be adjusted or scheduled to help balance supply and demand, often without disrupting core operations.

The numbers speak for themselves:

· Global operational demand-side flexibility could grow from 40 GW to 200 GW by 2040 .

· The EU estimates show that grid-friendly flexibility can reduce annual grid investment needs by up to €12 billion .

· Full activation of flexibility from buildings, transport, and industry by 2030 could defer grid reinforcements, saving up to €29.1 billion per year , particularly at the distribution level.

· If scaled properly, expanding grid infrastructure and increasing demand flexibility could reduce European electricity prices by 11% by 2035 and 30% by 2040 in a net zero scenario.

Unlike electricity storage or new grid infrastructure, demand flexibility requires little to no capital investment – it’s about optimising existing industrial and commercial assets. It’s fast to deploy and delivers immediate benefits: lower energy costs, new revenue streams, and reduced emissions.

Why is DSF being overlooked and who’s blocking it?

Despite its benefits, DSF has historically been left behind or actively resisted by large energy producers and grid operators. The reasons behind it are threefold:

1. Traditional energy market structures favour generation over flexibility

In many EU countries, grid operators are financially incentivised to build infrastructure, not optimise demand.

Capacity markets still prioritise power plants over demand-side solutions, despite DSF being cheaper and faster to deploy.

2. Incumbent energy giants have fought against DSF

Despite EU legislation requiring demand-side flexibility to be accessible to all market participants, some national frameworks still block independent aggregation. In countries like Spain, the role of flexibility has remained largely in the hands of traditional utilities, with legislation effectively preventing new entrants from participating in aggregation and limiting the broader rollout of independent DSF providers.

3. Policy blind spots: DSF is missing from key EU strategies

While the Clean Industrial Deal highlights the need for affordable, decarbonised energy, it fails to mandate DSF adoption at scale.

Many member states have been slow to implement existing EU flexibility rules. Sweden has delayed key DSF legislation for years, preventing independent players to participate in aggregation activities still today

DSF must be at the core of EU energy policy

Europe has set ambitious electrification and decarbonisation targets. But without DSF, these goals will be expensive, difficult to reach, and geopolitically risky. What needs to happen?

To unlock the full potential of demand-side flexibility, the EU must integrate it into core energy policy, treating it on par with generation and renewables. This means setting clear targets, providing financial incentives, and ensuring DSF can participate across all relevant energy markets – balancing, capacity, and congestion – to fully unlock its value. Grid operators should be required to prioritise flexibility as a first response before investing in costly new infrastructure.

Market reforms are also essential. Barriers for aggregators and independent DSF providers must be removed, and businesses contributing with their flexibility should be fairly remunerated, following best practices from countries like the United States and the United Kingdom, with national regulators keeping the pressure on to deliver real change.

But reforming market access is only part of the puzzle. To truly scale flexibility, we need to shift how it’s perceived – not just as a technical fix, but as a strategic asset. Demand-side flexibility isn’t only about balancing the grid – it’s about controlling our energy destiny.

Flexibility as an energy sovereignty tool

Europe’s dependence on imported fossil fuels has long been a strategic vulnerability. In 2022, the EU’s fossil fuel import bill hit €604 billion, underscoring the urgency of reducing reliance on volatile global markets. Demand-side flexibility directly enhances energy sovereignty by:

· Reducing the reliance on fossil fuel imports by shifting and optimising demand.

· Increasing grid resilience. Demand-side flexibility helps to build a stable and resilient energy system by mitigating blackouts, grid congestion and renewable energy curtailment.

· Being faster and cheaper than new infrastructure . While building transmission grids takes years and billions in investment, DSF leverages existing assets to provide immediate relief to strained grids.

If the EU is serious about energy sovereignty, integrating DSF into national and EU-wide energy strategies is non-negotiable.

Flexibility as an industrial competitiveness driver

High energy prices are crippling European industries, making the region less attractive for investment compared to the US and China. In 2023, industrial electricity prices in the EU were 2.2x higher than in the US and twice those in China. Without intervention, Europe risks losing key industries to cheaper energy markets.

DSF can reduce costs and boost industrial competitiveness by:

· Unlocking new revenue streams: industrial players can monetise the flexibility of their energy-intensive equipment on balancing markets.

· Protecting businesses from price volatility by hedging against extreme electricity price fluctuations.

· Enabling faster electrification : DSF helps industries switch to electricity-powered equipment, like heat pumps, without overloading the grid. By shifting flexible loads and flattening demand peaks, DSF reduces strain on already congested networks, which means industries can electrify faster and add new equipment without waiting for costly grid upgrades.

The bottom line: the cost of inaction is too high

Without flexibility, Europe will pay the price through high energy costs, further weakening of its industrial base, and continued dependence on fossil fuel imports.

With DSF, Europe can accelerate its energy transition, secure its industrial base, and enhance its geopolitical resilience - all at minimal cost.

Policymakers need to wake up to this reality. DSF is not just a technical fix - it’s an economic and strategic necessity. Europe has five years to get this right. Let’s not waste them.

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(1): Sympower's internal analysis based on Eurostat, industry reports and academic studies.