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Developing flexibility: the new cornerstone of the grid.

Article 2: Gap analysis - a summary of current versus ideal future state grid regulation

We found in the previous section that the electricity system will increasingly be built around renewables and flexibility as the least-cost and cleanest electricity system. Flexibility will become the core grid function, the cornerstone of the grid. That is where technologies and business models such as smart EV charging, battery storage, DSR, interconnection, prosumers and aggregators of distributed energy resources will come in.

But the market for flexibility services at present is artificially limited by a legacy network that has operated in fundamentally the same way for more than a century. In this section, we describe some practical examples of how present regulations perpetuate the electricity system of the past, for example through connection charges, availability requirements, minimum size thresholds and capacity and ancillary market rules. Collectively, these legacy regulations discourage investment in flexibility and so delay a shift to majority renewables and increase system costs overall. Where electricity markets reform is taking place, this may be happening in an incremental way that heightens complexity and uncertainty and leaves investors with limited visibility regarding how they will be compensated and a less convincing business case.

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