The “APE – Appunti di Energia” series continues with a new in-depth analysis dedicated to Local Flexibility Markets (LFM), innovative tools developed to support the management of distribution networks in an increasingly decentralized electricity system. The article analyzes the technical and regulatory context that led to the development of LFMs and their role in managing operational criticalities in distribution networks.

The document describes how the growing electrification of end uses and the spread of distributed generation are transforming the operation of electricity distribution networks. Networks are becoming more dynamic and must manage increasingly variable consumption profiles. For this reason, local critical issues such as congestion, voltage problems, and energy flows that are no longer unidirectional are emerging. In the past, these issues were mainly addressed through infrastructure interventions, which today are proving to be increasingly inefficient in terms of cost and time.

In this regard, Distributed Energy Resources (DER) play a central role as operational tools for managing distribution networks, as the flexibility they provide may mitigate the critical issues caused by increased electricity demand and the spread of distributed generation (mainly non-programmable renewable energy), thereby reducing the need for structural interventions and improving the overall management of the electricity system.

In this context, Local Flexibility Markets (LFMs) provide a mechanism for promoting and coordinating flexibility, allowing network operators to source flexibility services locally from aggregated distributed resources.

The document analyzes the main types of local flexibility services traded in LFMs, together with the different market design choices adopted in European and international experiences (participants, time horizon, type of remuneration and pricing mechanisms).

Significant attention is devoted to the state of experimentation in Italy, with an analysis of the Italian LFM pilot projects currently underway (E-DGE, RomeFlex, and MiNDFlex) and the initial results in terms of contracted volumes, prices, and operator participation. The experiments represent a fundamental step in assessing the effectiveness of LFMs and defining operating rules and market models consistent with the evolution of the national electricity system.

Finally, the document illustrates the main opportunities offered by LFMs in terms of integrating renewable sources, managing local congestion, and reducing infrastructure investments. At the same time, the text addresses the critical issues related to market complexity, flexibility reliability, and the regulatory framework, addressing the challenges associated with integrating local flexibility into distribution network planning processes.