Why is Demand‑Side Flexibility Europe’s untapped competitiveness advantage?

Europe’s energy transition is well underway, but let’s be clear: we are not moving fast enough in the areas where it matters most. Significant investments have been made in renewables and grids. Yet, we continue to overlook a critical enabler that’s already in our toolbox: Demand-Side Flexibility (DSF). If the EU is serious about affordability and competitiveness, DSF needs to be at the core, not on the sidelines, activated by a specific clean tech industry, the Flexible Demand Management Industry (FDMI).

The Competitiveness conversation we are not having  

Across Europe, industries are under pressure.Energy costs are higher than in North America or Asia.

Electricity demand is rising, yet our grids are increasingly constrained. And while supply-side solutions receive the majority of funding, we are underusing the fastest, cleanest solution we have: flexible demand.

Simply put, DSF allows energy consumers—flexumers—to shift or reduce their electricity use in response to price signals or grid needs. That flexibility helps balance the system, integrate more renewables, and reduce the need for expensive backup generation. It also cuts emissions, lowers energy bills, and gives businesses a competitive edge.

The opportunity is massive. According to https://smarten.eu/reports/report-l-demand-side-flexibility-quantification-of-the-benefits-in-the-eu/ unlocking DSF across Europe by 2030 could deliver:

• €71 billion in annual consumer savings
• €11– €29 billion in avoided grid investments
• 61% less renewable curtailment
• Over 2.7 GW of avoided peak generation

These are not marginal gains. These are systemic changes. 

Undervalued and underused: the DSF Gap

Today, in most EU countries, DSF is still stuck in pilot projects or early-stage markets—far from the scale we need.  For example, Demand Response Aggregators face high entry barriers, regulatory uncertainty, and inconsistent rules across countries.

smartEn’s latest Market Monitor, developed with LCP Delta, shows that only a few countries (France, Belgium, Sweden, and the UK) are making efforts in enabling DSF across wholesale and balancing markets. The rest lag behind due to incomplete market design implementation, patchy smart meter rollouts, and outdated rules that still prioritise supply-side responses.

Even in countries where DSF is technically allowed, market design often fails to support it. Capacity mechanisms still favour fossil backup. Industrial tariffs remain static. And while the EU Electricity Market Design reform (EMD) provides the right direction, we are certainly not delivering on the ground.

Let’s call it what it is: a missed opportunity that we can no longer afford.

DSF is a competitive strategy for the European industry.

For industrial consumers, DSF is a strategic tool. It enables companies to control their energy costs, hedge against volatility, and turn energy management into a revenue stream. This is already happening where the regulatory environment supports it.

In France, for example, some energy-intensive industries (EIIs) have joined balancing markets via aggregators and now generate revenue by adjusting their loads. In the UK, flexible demand already participates in capacity markets and provides grid services. The same should be possible across all of Europe.

When combined with digitalisation, on-site storage, or renewable self-generation, the business case becomes even stronger. Flexible plants could align production with low-cost hours, reduce peak charges, and enhance grid stability—all while shrinking their carbon footprint.

For Europe, this translates into cleaner industry, cheaper electricity, and stronger energy security.

Five things Europe needs to do to unlock the DSF potential –Now

Policy inertia, inconsistent or lack of implementation, and a supply-side mindset, no longer fit the system we are trying to build. To unlock the full value of flexible demand, Europe must deliver on what is already agreed, and support what is still missing.

Here is what should happen next:

Full implementation across all Member States of the 70 EU legislative provisions in the Electricity Market Design and Fit for 55 package to allow the FDMI to scale-up

Existing EU rules already require Member States to allow consumers to receive price signals and incentives to activate their flexibility with the support of business models offered by the Flexible Demand Management Industry (FDMI). For instance, Flexibility Service Providers must have non-discriminatory access to wholesale, balancing, and capacity markets and should be compensated in a manner that reflects the actual value of the services they deliver (e.g., avoided grid costs, reduced peak demand, or balancing support). 

Support data interoperability

DSF starts with visibility. Without accurate metering and (near) real-time data, flexumers can’t respond or be rewarded. Europe needs EU rules for data access and sharing in an interoperable way. 

Accelerate the Smart Electrification of the EU power system

To support the cost-effective clean transition, electrification should be the no-regret option. However, by simply electrifying demand congestions and peaks in demand will occur. While increasing the electrification rate from 23% to 32% in the next five years, equal efforts must be put to speed up the flexibility of (existing and future) electricity demand.

Include DSF in industrial State aid and clean PPA frameworks

The EU is deploying financial tools like the Clean Industrial Deal State Aid Framework (CISAF) and clean PPA support to drive decarbonisation. These frameworks must recognise DSF as an eligible measure. It helps industry align consumption with renewables, avoid peak prices, and ease grid pressure —resulting in lower emissions, lower costs, and smarter industrial electrification.

From niche to normal

We know DSF works. We have the data, the tools, and the technology. What we need is political will and regulatory follow-through. We also need to change the narrative: DSF isn’t niche -it is a smarter way to run our energy system and our economy.

Europe has led on clean energy before. We can lead again but only if we use every tool at our disposal. That includes DSF. 

If we want an energy system that is affordable, reliable, and competitive, we cannot keep leaving DSF on the bench.