Who gets my flex? An evolutionary game theory analysis of flexibility market dynamics

Highlights: • Competitive DSO compensation price ranges, differ on case by case basis. • Low forecast error variability causes less efficient flexibility allocations. • Equilibrium confidence intervals narrow as amount of flexibility providers increase. • EGT is ideal for analyzing strategic choice dynamics of competing business cases. Maintaining a real time balance between energy consumption and production is challenging when faced with increasing penetration of Renewable Energy Sources (RES) because of the increased variability in generation output. Demand-Side Management (DSM) techniques address this issue by steering consumers' energy off-take, thereby enabling further penetration of RES. Present paper addresses the problem of overproduction from distribution grid connected wind generation. We present and analyze two business cases in the Belgian-European energy landscape for using upward consumption flexibility to deal with excessive wind power injection. We focus on the perspective of the flexibility providers and the strategic choice they face in choosing the business partner that maximizes their expected financial compensation. Evolutionary game theory is used to model this strategic choice and to provide a framework for quantifying realistic financial compensation bounds based on real world market and wind production data for multiple locations in Belgium. Results show that in a competitive market setting compensation payments for flexible power consumption are higher when dealing with higher wind forecast error levels. These results validate the economic benefits of having accurate wind production forecasts.