Flexibility and participation: when consumers become part of the system

At Plenary 3 of the IX World Forum on Energy Regulation, in Tbilisi, I opened my presentation with a simple question: if much of the technology we need already exists, what is still missing to turn consumers’ distributed resources into real value for the power system? [1][2]

The question grew out of work that began with my doctoral research and was updated years later to address a power system very different from the one that existed when I defended my dissertation.

Today we have smart meters, distributed generation, batteries, electric vehicles, automation, digital platforms, and vastly greater computing power. Consumers can produce, store, reduce, shift or control their energy use. Technically, they can already do much more than simply receive electricity from the grid. Having that capability, however, does not mean it is integrated into the way the system works.

This was one of the points that struck me most in Tbilisi. In different sessions, with participants from countries with very different market structures, the same question kept coming back: how can new resources and new participants contribute to system operation without handing consumers a complexity they never asked to manage? The answer involves technology, of course. But above all, it involves regulatory design and market design.

Consumers are no longer just the end of the chain

For much of the power sector’s history, the architecture was fairly simple to explain. Large power plants produced energy. Transmission networks carried large blocks of electricity. Distribution companies delivered that energy to consumers. The physical flow and the economic flow largely ran in the same direction.

That architecture has not disappeared and remains essential. What has changed is what is happening at the grid edge.

A consumer may have solar panels on the roof, install a battery or charge an electric vehicle at different times. They may allow certain appliances to respond automatically to prices or grid conditions. A company may temporarily reduce its consumption when the system is under stress. And thousands of small resources can be coordinated by an aggregator and, for certain purposes, operate collectively as a resource that matters to the system.

At WFER, the Australian experience was particularly illustrative. During the plenary on competitive markets and incentive regulation, Anna Collyer, chair of the Australian Energy Market Commission, described a new form of competition linked to consumer-owned energy resources. The goal is to create conditions for these resources to contribute to reliability, lower costs and better use of the grid, with consumers receiving a share of the value they helped create in return. No one is proposing to turn millions of households into professional market operators. [3]

That distinction matters. No one needs to force a family to understand dispatch, spot markets, ancillary services or grid constraints. Consumer participation means allowing people to take part when it makes sense, directly or through third parties, with understandable rules and identifiable benefits. Consumers can provide flexibility without being forced to manage the complexity of the system.

Flexibility needs to be treated as a resource

Flexibility is a term used increasingly in the power sector and, precisely for that reason, it risks meaning everything and nothing at the same time. Put simply, flexibility is the ability to adjust production, consumption or storage in response to the needs of the system. On the demand side, it can mean shifting some consumption to another time, temporarily reducing a load, coordinating electric vehicle charging or using energy stored in a battery when that is useful.

The International Energy Agency has been treating demand flexibility as an increasingly important component of power systems. In a report published in 2026, the IEA highlighted that digitalization, electrification, the growth of variable renewables and new loads increase the need for flexibility and expand the potential value of demand response. The agency also notes that much of this potential remains untapped because of market barriers, regulatory limitations, a lack of enabling technologies and difficulties in participation. [4]

ACER reached a similar conclusion when analyzing barriers to demand response in Europe. Among the measures it points to are better price signals, participation of aggregators, smart metering and the removal of obstacles that make it hard for small resources to enter markets. [5]

The principle is fairly intuitive. A kilowatt of flexibility available at a congested location, exactly when the grid needs it, does not necessarily have the same value as a kilowatt available at another time or at another point in the system.

That is why recognizing flexibility takes more than creating a product with that name. We need to know what was delivered, when, where, for how long and with what degree of reliability. Then comes the harder question: how much is that delivery really worth to the system?

The market needs to see what consumers can offer

A resource that cannot be measured cannot readily be compensated. That is one of the reasons measurement, data and verification come up so often when people talk about active consumers.

If an aggregator claims that a thousand households reduced demand at a given moment, the system needs to be able to trust that information. If a battery provides a flexibility service, it is necessary to distinguish what was actually delivered from what would have happened anyway.

This problem is not new. What changes is the scale. When only a small number of consumers take part in specific programs, relatively manual processes can work. When we imagine mass participation, measurement and verification need to become digital, scalable and auditable.

That is why, in the Energy Conservation 2.0 architecture I presented in Tbilisi, aggregation, measurement and verification appear alongside the market interface, consumer protection, cybersecurity and grid coordination. No single device solves this. What makes the difference is the ability to coordinate different resources within a coherent architecture. [2][6] That coherence is what turns technical potential into an economic resource.

Aggregation can be the bridge

If participation depends on each consumer dealing directly with complex markets, it is unlikely to scale. That is where aggregation becomes important.

The aggregator brings together many small resources and manages the complexity on behalf of participants. It can coordinate batteries, flexible loads, distributed generation, electric vehicles and other assets. To the system, it offers a measurable service. To the consumer, it should offer a much simpler relationship.

This separation is fundamental: the system can become more sophisticated without making the consumer experience more complex. Simple contracts, clear rules for sharing benefits, data protection, comfort limits, the ability to opt out and transparency about how equipment is used are as important as the technology that coordinates the resources.

ACER has been highlighting precisely this point when dealing with consumer flexibility. Inadequate contracts, low smart meter penetration and barriers to participation can prevent technically available resources from actually participating in the market. [5]

Giving consumers the opportunity to participate is the first step. The next is making that participation practical and worthwhile.

Perhaps the regulatory question has to change

There is a shift in perspective that I consider especially relevant. For a long time, when faced with a grid need, the regulatory discussion started with the asset: do we need to approve a new line? A transformer? A substation?

Those questions remain legitimate. In many cases, conventional grid expansion will be the best solution. But perhaps an earlier question should come first: what does the system need? It may be more capacity, congestion relief, reliability, resilience or flexibility.

Once the problem is identified, different solutions can be compared. Grid expansion can be compared, where technically feasible, with storage, demand response, automation, distributed resources, or combinations of these alternatives. No one is advocating flexibility at any cost. The point is that it should be considered before a preferred solution has effectively been chosen.

In the material I prepared for Plenary 3, this reasoning appeared as a shift in focus: moving from approving assets to enabling solutions. The regulator defines the need, the expected outcome, and the constraints related to safety, reliability, and consumer protection. The technology used to achieve that outcome does not, in every case, need to be prescribed in advance. [2]

This logic favors technology neutrality and creates room for innovation without making innovation a synonym for permissiveness. That is an important difference.

Those who create value should be able to share in it

The discussion about flexibility cannot stop at technical efficiency, because every market change distributes costs and benefits.

During Plenary 3, one of the discussions dealt precisely with who should pay for the transformation of the system. My answer started from three elements: cost causation, beneficiaries and the value produced for the system. [2]

If an investment mainly serves the private interest of one party, there is a strong reason for that party to bear its cost. If the solution produces verifiable benefits for the system as a whole, such as reduced congestion, deferred investment, greater resilience or lower capacity needs, there may be a case for sharing part of that cost.

The problem lies in the word “verifiable.” It is fairly easy to claim that a technology is modern, sustainable or innovative. It is much harder to show which problem it solves, which alternative it will avoid, who benefits, and how much that benefit is worth.

This discipline also matters to protect consumers who do not own distributed resources. A poorly designed transition could allow consumers with the capital to buy solar panels, batteries, or electric vehicles to capture benefits while shifting some of the costs to those who lack access to these technologies. That would be difficult to justify.

Participation needs to expand opportunities, not create a new way of dividing consumers.

Brazil has already joined this discussion

I do not see Brazil as a spectator of this movement. The country has already been experimenting with instruments that speak to several of these challenges. ANEEL, the Brazilian electricity regulator, runs tariff sandboxes precisely to test new tariff and billing models in a controlled environment, seeking to learn about technological change and consumer behavior before consolidating broader solutions. [7]

The agency also has a more general framework for regulatory sandboxes, designed as experimental environments where new models, techniques and technologies can be tested under predefined conditions. [8] In 2026, the regulatory framework also advanced for electricity storage systems, including stand-alone batteries and systems associated with power plants. [9]

Market opening is another part of this transformation. In 2026, all Group A consumers, generally those connected at medium and high voltage, were already eligible to migrate to Brazil’s competitive electricity market, while the framework in force at the time set additional phases of market opening for low-voltage consumers. [10]

None of these developments, on its own, solves consumer integration or means that the future market design is settled. But they show that the country is already dealing with issues that come up in international discussions: regulatory experimentation, new resources, greater freedom of choice, digitalization and the need to rethink the relationship between consumers and the system.

This matters because, when we take part in international debates, there is a tendency to imagine that innovation is always happening somewhere else. That is not always the case. Sometimes the instruments are different or at different stages of maturity. But there is a global conversation under way, and Brazil is part of it.

An old idea in a new system

Perhaps this was the most interesting aspect of my participation in Tbilisi. The paper I presented at WFER, which won the 2025 Maria Cristina Portugal Prize awarded by RELOP, the association of energy regulators of Portuguese-speaking countries, grew out of questions I had already been studying in my doctoral dissertation, defended in 2014. [11][12]

The power system at the time was different. Batteries were more expensive. Electric vehicles were far less common. Smart meters were at another stage. Artificial intelligence did not play the role it does today. The very language of flexibility, aggregation and distributed resources was not yet as central as it is now in many regulatory debates.

For that reason, it would make no sense simply to bring back a 2014 solution and treat it as the answer for 2026. What caught my attention was something else: the structural question was still alive. How can energy efficiency, demand response, and distributed resources be integrated so that consumers are no longer merely passive endpoints and can contribute to system operation?

The updated version of the paper sought to answer this by incorporating aggregation, artificial intelligence, digital measurement and verification, flexibility, cybersecurity, consumer participation and an adaptive regulatory architecture. [6][12]

When this work encountered WFER discussions on active consumers, aggregation, batteries, flexible markets, technology neutrality, and new regulatory models, what seemed most relevant to me was the convergence in the underlying problem rather than any overlap in terminology.

In the Australian plenary, I heard the discussion about consumer-owned resources creating value for the system. In other sessions, flexibility came up in relation to grids, storage, innovation and market design. In my own plenary, the debate kept returning to the need to allow innovation without losing reliability, consumer protection and fairness. [2][3]

That does not turn a framework into a universal solution. Power systems and tariff structures are different, and economic, technological and social conditions vary enormously from country to country.

But it reinforces an idea that seems increasingly hard to ignore. The power sector transition will not be achieved just by adding new technologies to the old model. At some point, the market itself will have to learn to recognize new kinds of value.

A consumer who reduces load when the grid is congested can create value. The same goes for a battery coordinated at the right moment or for thousands of small aggregated resources. Persistent energy-efficiency improvements also create value, although they are not always compensated in the same way as supply-side infrastructure expansion.

The regulatory task is to find out how to measure that value, how to pay for it when it makes sense and how to prevent private benefits from being presented as system benefits without sufficient proof. It is a problem of engineering, economics and regulation all at once.

Perhaps that is why the idea of the active consumer runs deeper than it seems. Giving consumers more options is only part of it. What is at stake is allowing participants who have historically sat at the far end of the system to become part of its operation when doing so creates economic value and a system-level benefit.

Technology has made this possible. The challenge now is to make rules, markets and institutions able to recognize the value of this participation without handing consumers the complexity that the system itself should solve.

References

1. INTERNATIONAL CONFEDERATION OF ENERGY REGULATORS (ICER); GEORGIAN NATIONAL ENERGY AND WATER SUPPLY REGULATORY COMMISSION (GNERC). IX World Forum on Energy Regulation, WFER IX. Official program. Tbilisi, Georgia, Sept. 21 to 24, 2026. Available at: https://www.wfertbilisi2026.com/en/programa/general. Accessed on: Sept. 28, 2026.
2. WORLD FORUM ON ENERGY REGULATION, WFER IX. Plenary 3: Technology as a Driver of Energy Transformation. Tbilisi, Sept. 24, 2026. Based on the official program, the author’s personal notes from the session and his preparation notes.
3. WORLD FORUM ON ENERGY REGULATION, WFER IX. Plenary 2: Creating competitive energy markets by incentive regulation. Tbilisi, Sept. 23, 2026. Based on the official program and the author’s personal notes from the session.
4. INTERNATIONAL ENERGY AGENCY (IEA). Scaling Up Demand Flexibility: From peak management to efficient system operation. Paris: IEA, 2026. Available at: https://www.iea.org/reports/scaling-up-demand-flexibility. Accessed on: Sept. 28, 2026.
5. EUROPEAN UNION AGENCY FOR THE COOPERATION OF ENERGY REGULATORS (ACER). Unlocking flexibility: No-regret actions to remove barriers to demand response. 2025 Monitoring Report. Available at: https://www.acer.europa.eu/monitoring/MMR/barriers-demand-response-2025. Accessed on: Sept. 28, 2026.
6. ALCÂNTARA, Márcio Venício Pilar. Towards Energy Sustainability: Consumer-Integrated Energy Conservation through Smart Grids and Regulatory Reform. Technical English version prepared for WFER IX, 2026. Translation and update, for international circulation, of the paper that won the 2025 Maria Cristina Portugal Prize.
7. AGÊNCIA NACIONAL DE ENERGIA ELÉTRICA (ANEEL). Sandboxes Tarifários [Tariff sandboxes]. Available at: https://www.gov.br/aneel/pt-br/empreendedores/sandboxes-tarifarios. Accessed on: Sept. 28, 2026.
8. AGÊNCIA NACIONAL DE ENERGIA ELÉTRICA (ANEEL). Sandboxes Regulatórios [Regulatory sandboxes]. Available at: https://www.gov.br/aneel/pt-br/assuntos/governanca-regulatoria/sandboxes-regulatorios. Accessed on: Sept. 28, 2026.
9. AGÊNCIA NACIONAL DE ENERGIA ELÉTRICA (ANEEL). Sistemas de Armazenamento de Energia Elétrica Autônomos: Baterias [Stand-alone electricity storage systems: batteries]. 2026. Available at: https://www.gov.br/aneel/pt-br/centrais-de-conteudos/manuais-modelos-e-instrucoes/armazeamento-de-energia/sae-autonomos-bateria. Accessed on: Sept. 28, 2026.
10. BRAZIL. MINISTRY OF MINES AND ENERGY. Mercado Livre de Energia: entenda como funciona a migração e as regras para contratação de energia [Competitive electricity market: how migration and electricity contracting rules work]. Aug. 17, 2026. Available at: https://www.gov.br/mme/pt-br/assuntos/noticias/mercado-livre-de-energia-entenda-como-funciona-a-migracao-e-as-regras-para-contratacao-de-energia. Accessed on: Sept. 28, 2026.
11. RELOP. Conheça o vencedor do Prémio Maria Cristina Portugal 2025 [Meet the winner of the 2025 Maria Cristina Portugal Prize]. May 28, 2025. Available at: https://relop.org/news/conheca-o-vencedor-do-premio-maria-cristina-portugal-2025/. Accessed on: Sept. 28, 2026.
12. ALCÂNTARA, Márcio Venício Pilar. Rumo à Sustentabilidade Energética: Conservação de energia integrada ao consumidor via redes inteligentes e reforma regulatória [Towards energy sustainability: consumer-integrated energy conservation through smart grids and regulatory reform]. 2025 Maria Cristina Portugal Prize. RELOP, 2025. Available at: https://relop.org/wp-content/uploads/2025/05/Alcantara-Marcio-Rumo-a-Sustentabilidade-Energetica-Conservacao-de-energia-integrada-ao-consumidor-via-redes-inteligentes-e-reforma-regulatoria.pdf. Accessed on: Sept. 28, 2026.

The opinions and analyses expressed in this article are personal and do not represent the positions, decisions or institutional views of the Brazilian Electricity Regulatory Agency (ANEEL).