Electricity cannot be easily stored, and the networks that transport it obey a simple rule: supply and demand must balance at every moment. The International Energy Agency estimates that approximately 100 GW of demand response is currently used worldwide, while flexibility needs could be multiplied by two to seven depending on regions by 2035. The low-carbon transition therefore raises a question that the debate over power plants and high-voltage lines often leaves aside: who adjusts their consumption, when, and at what price.

The Essentials

  • Demand flexibility can significantly reduce the costs of the electricity system and, in certain situations, cost far less than adding new capacity, according to the IEA.
  • Approximately 100 GW of demand response is currently used worldwide, while flexibility needs could be multiplied by two to seven by 2035 depending on regions (IEA, Scaling Up Demand Flexibility, June 2026).
  • Ireland and Germany illustrate both the potential of flexibility devices and the difficulties of deploying them at large scale.
  • Flexibility raises a question of power: who controls connected devices, who captures the value generated, and who protects the consumer from uncontrolled tariff exposure.
  • The answer to these questions will influence the architecture of the post-fossil electricity system for the next two decades.

A Network Under Constant Strain That Renewables Amplify

Engineers managing an electrical network work under a constraint that economists often call supply-demand balance, but which is actually a much more straightforward physical constraint: if production exceeds consumption, frequency rises and equipment can experience difficulties; if it falls short, frequency drops. Reserves, regulation mechanisms, and as a last resort, load shedding are precisely designed to prevent an imbalance from automatically transforming into a complete blackout. For decades, the response to this constraint was simple: build dispatchable power plants, running on gas or coal, capable of ramping up in a few minutes to absorb evening or morning consumption peaks.

The rise of variable renewables changes this equation structurally. A wind farm produces when the wind blows; a solar park produces when the sun shines. The two do not necessarily coincide with moments when stoves are turned on or electric cars are plugged in. The network must therefore manage not merely predictable demand peaks, but dual variability: that of production and that of consumption.

Jean-Marc Jancovici, engineer and co-founder of the Shift Project, has often emphasized this physical constraint as the primary determinant of the energy transition. His thesis is that massive electrification—of transport, heating, industry—cannot function without rethinking the form of networks and the rigidity of uses. One cannot, he argues in essence, superimpose millions of new power outlets onto an architecture designed for predictable flows without the system cracking at peak moments. This reading gives demand flexibility the status of structural necessity, not mere optimization option.

The IEA reaches a convergent conclusion through a quantitative approach. In its Scaling Up Demand Flexibility report published in June 2026, it emphasizes that the approximately 100 GW of demand response currently used worldwide remains modest in relation to the expected evolution of electrical systems. The multiplication by two to seven of flexibility needs depending on regions by 2035 illustrates the scale of transformations needed to manage networks with a large share of solar and wind power, while limiting certain additional investments in the system.

The Hidden Cost of Peak Plants

Building a gas power plant to respond to a limited number of extreme peak hours of a national network means immobilizing considerable capital for marginal use. This calculation, well known to energy economists, is shifting in scale with the transition. The higher the share of renewables, the wider the gaps between periods of overproduction and periods of tension become, and the greater the relative value of flexible resources increases in the system.

Demand flexibility offers an alternative among others. Shifting the washing machine cycle, scheduling electric car charging during less strained hours, temporarily reducing hot water heater temperature: these individual adjustments seem trivial, but aggregated across a large number of households or businesses, they can represent significant network piloting capacity.

The economic potential is real. Studies conducted in several European countries suggest that demand flexibility can reduce network infrastructure costs significantly, particularly by avoiding costly distribution line reinforcements in areas where electric vehicle charging concentrates. But this economy remains conditional: it depends on market rules, adapted equipment, and mobilization methods understandable to consumers. Price signals and automation can contribute, but direct payments, alerts, and demand response contracts also constitute possible instruments.

Dani Rodrik, Harvard economist, has shown that the aggregate benefits of economic policy do not automatically distribute equitably. This tension nuances the thesis of pure efficiency. Demand flexibility can generate systemic savings while placing the burden of adjustment on households that are least well-equipped, least informed, or least capable of investing in connected devices. A well-designed flexibility policy must therefore integrate the distribution of gains and charges from the outset, rather than adding it as a political correction at the end.

Lessons from Irish and German Experiments

Ireland offers one of the most documented case studies. Faced with an island network with a large share of wind power, EirGrid conducted a pilot program for residential demand response. Dynamic tariffs, meanwhile, are offered by electricity suppliers within the framework regulated by the Commission for Regulation of Utilities (CRU). These devices aim to give consumers the ability to adjust part of their uses to electrical system conditions.

But the Irish experience also reveals the difficulties of participation. Load shifting is not spontaneous. It can be facilitated by smart meters, readable tariffs, programmable equipment, and minimal trust in the system. Households with hot water storage tanks, heat pumps, or other controllable uses generally have greater opportunities to shift part of their consumption. Tenants, low-income households, and residents of apartment buildings with aging installations can, conversely, face stronger constraints.

Germany provides a complementary, more ambivalent lesson. Deployment of smart meters has fallen behind the initial schedule, partly for data protection reasons, partly due to political and technical resistance. The law on intelligent metering systems has been amended several times since 2016. By the end of 2025, the aggregate target applicable to cases of mandatory deployment had been exceeded, but the share of all metering points actually equipped remained low. Residential flexibility thus remains largely under-exploited.

The lesson emerging from these two experiences is simple to state, difficult to execute: demand flexibility cannot be decreed. It is built, with infrastructure, clear rules, and transparent participation modalities for consumers.

The Question of Control and Remuneration of Flexibility

Behind the techno-economic argument lies a deeper question of power. When a flexibility aggregator remotely controls a household’s hot water heater to sell capacity to the network operator, the value of this transaction is distributed between the consumer, who bears the constraint, the aggregator, who organized the transaction, and the network operator, who benefits from it.

The answer to this question is not neutral: it determines incentives to invest in flexible equipment and the political legitimacy of the system.

In Europe, regulators are beginning to tackle the issue. The obligation to allow aggregator participation already exists in the 2019 European directive on the internal electricity market. The 2024 revision of the electricity market design framework strengthens consumer rights and protections, as well as the conditions for their participation in various electricity markets. But transposition remains uneven across countries, and compensation mechanisms are often complex to the point of being incomprehensible to an ordinary household.

It is precisely this opacity that constitutes the most immediate political risk. A consumer who does not understand why their car was not charged at the expected time, or why their bill varied significantly from one month to the next, will not necessarily become a sustainable participant in the flexibility market. They may become an opponent of dynamic pricing, and their opposition may rest on a real deficit of clarity and control.

Experiments that work generally seek to leave complexity on the system side and simplicity on the user side. Applications that clearly indicate when equipment will be controlled and what advantage the consumer can derive from it are more accessible than raw hourly price curves. Intelligent automation of equipment—hot water heaters, heat pumps, electric vehicles—can greatly facilitate this simplification, without being the only possible path.

The Ownership of Network Flexibility by 2035

The multiplication by two to seven of flexibility needs by 2035 that the IEA projects goes beyond engineering: the ownership, control, and remuneration of this flexibility in an electricity system with a large share of variable renewables remain to be defined.

Two trajectories are emerging, without being mutually exclusive. In the first, large industrial actors—electric vehicle manufacturers, steel or aluminum producers, data center operators—constitute the bulk of mobilizable flexibility. These actors have the size, equipment, and technical teams to negotiate directly with network operators. They can adjust their consumption over several-hour periods without their end customers noticing. Their participation is economically rational and contractually solid.

In the second trajectory, residential flexibility takes an increasingly important place, driven by the diffusion of electric vehicles, heat pumps, and home storage systems. A growing number of households can become micro-providers of capacity, aggregated by digital platforms. This trajectory presents considerable volume potential, given the rapid expansion of the electric vehicle fleet in Europe, but it rests on much more demanding political and social conditions.

Both trajectories can coexist and complement each other. Their articulation nevertheless requires regulatory choices that member states have not yet all made: the right to aggregate residential flexibility, the conditions under which an aggregator can control household equipment, and the share of created value that must return to the consumer in a verifiable form.

These questions are not technical. They concern political choices about the distribution of power in tomorrow’s energy system, terrain where, as Thomas Philippon’s work on market concentration shows, allowing dominant positions to establish themselves without regulatory framework produces lasting rents and social costs difficult to correct afterwards.

The challenge for European regulators is to act now, while flexibility markets are being structured, rather than correcting afterwards market architectures that will have crystallized interests. The rules of the game set in the coming years will determine who captures the value of flexibility in the decades that follow. This is a narrow window, and several European countries are still watching it close.

Consumer Protection Is Not a Brake on Flexibility

One objection repeatedly appears in expert debates: protecting consumers too much—against variable prices, against remote control of their equipment, against temporary cuts—risks blocking the flexibility necessary for the network. The argument deserves serious examination, because it contains both truth and error.

The truth: entirely smooth pricing, without any price signal at tense hours, reduces incentives to shift certain uses. But mobilization methods are not limited to variable prices: rewards, credits, alerts, or demand response contracts can also encourage participation.

The error: believing that price variability alone suffices to produce flexibility. The most documented experiments show that low-income households, poorly equipped, poorly informed, or poorly housed can experience this variability without having the means to respond to it. Without adapted protections, dynamic pricing can then increase budget risk for vulnerable households. It is not, however, in all cases a source of unpredictable stress.

Good design is design that differentiates: optional dynamic pricing for households equipped to benefit from it, protected pricing for others, with mechanisms for access to flexible equipment for moderate-income households. Several systems are experimenting with targeted aid for acquiring connected heat pumps or smart electric vehicle chargers, to broaden the social base of flexibility. The question, like what is observed in other areas of digital transition, as debates on AI and access inequality show—is not to choose between efficiency and equity: it is to design systems that produce both simultaneously.

Social inclusion is an important condition for the acceptability of flexibility. It must be considered as a design constraint, not as a good-conscience add-on.

Smart Meters Are Only the First Step

Deployment of smart meters in Europe is advancing at very unequal rates. Spain and Sweden have achieved near 100% rates. Germany remains behind, while France has implemented very extensive Linky deployment. These deployment gaps are often presented as the central problem: if all households had smart meters, flexibility would naturally follow.

This reading is too simple. The smart meter is an important tool, but far from sufficient. It allows consumption measurement and transmits tariff information, but the consumer must still decide to respond, and their equipment must be capable of doing so. A household equipped with a smart meter but having a home with few controllable appliances will see its flexibility potential limited, though not necessarily zero: it can still shift or reduce certain uses.

The real leverage, by 2030–2035, is the combination of three elements: smart meters, connected flexible equipment—heat pumps, electric vehicles, smart hot water heaters—and user interfaces simple enough that participation requires no daily cognitive effort. None of these three elements is sufficient alone. Their articulation is a systems engineering challenge, but also a user experience design and regulatory challenge. Energy policy in the coming years will need to address all three simultaneously, without overestimating the automatism of technological diffusion or underestimating the social conditions that allow this diffusion to produce its effects.

The final challenge is this: a low-carbon electricity system that mobilizes greater residential flexibility can reduce certain peak capacity needs and complement industrial resources, storage, dispatchable production, or interconnection. A system that succeeds in making households active participants in network balancing, on condition of giving them the means and compensating them for the value they create, can be less costly to build and operate. The difference between trajectories will be determined less in energy market dealing rooms than in public policy decisions on equipment access, tariff protection, and consumption data governance.

Sources

  1. International Energy Agency, Scaling Up Demand Flexibility, June 2026, https://www.iea.org/reports/scaling-up-demand-flexibility
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  3. European Union, Electricity Market Design directive, 2024 revision, available on EUR-Lex
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  5. Bundesnetzagentur, reports on smart meter deployment in Germany (Smart Meter Gateway), available on www.bundesnetzagentur.de
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  11. EirGrid and Electric Ireland, Residential Demand Response Programme, Project Initiation Document, https://cms.eirgrid.ie/sites/default/files/publications/Electric-Ireland-EirGrid-Residential-DR-Prog-PID_Public-Version-for-Website_Clean.pdf
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  13. Bundesnetzagentur, information on intelligent metering systems deployment, https://bundesnetzagentur.de/DE/Fachthemen/ElektrizitaetundGas/NetzzugangMesswesen/Mess-undZaehlwesen/iMSys/start.html
  14. European Union, directive (EU) 2024/1711, https://eur-lex.europa.eu/eli/2024/1711/oj
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