The Flexibility Trilemma: Residential, Industrial, or Grid-Scale Storage?

We polled our audience in our live broadcast, “Building a fully flexible energy system”, to find out which type of flexibility holds the most potential. The webinar, taking place in advance of Future of Utilities’ Energy Transition Summit (Amsterdam, March 18-19), gave a taste of the discussions to come onstage at the upcoming event.  The split was very telling: 34% chose residential (EVs, heat pumps, smart homes), 32% picked grid-scale storage, 19% selected distributed generation, and 16% opted for industrial and commercial. 

The near tie between residential and grid-scale storage reveals a fundamental strategic dilemma facing European utilities: where should they focus their limited resources, expertise, and attention? The answer, according to three flexibility experts, is more nuanced than simply picking a winner. 

“You need to engage with these different sectors in different ways,” explains Gerard Boyd, Head of Flexibility at SP Energy Networks. “They’ve got different needs, they’ve got different requirements, they’ve got different barriers to participation.” 

The real question isn’t which type of flexibility is best, but how to unlock each one effectively. 

Kevin McDonald, Product Manager for Residential Flexibility at EDF, sees the poll results as validation of a massive shift in the energy landscape. “We’ve only just scratched the surface,” he argues, pointing to dramatic cost reductions across residential technologies. Heat pump costs are expected to drop 30% over the next decade, Solar PV costs another 40%. Lithium-ion battery equipment costs plummeted 40% in 2024 alone. 

“With those costs coming down, hopefully everybody will be able to access it,” McDonald says. “We are just scratching the surface here.” 

But residential flexibility comes with a catch: customers don’t buy heat pumps or EVs to provide grid services. “They purchase that for a specific purpose—namely transportation, heating or self-sufficiency,” McDonald notes. “The flexibility is a byproduct.” 

This fundamentally changes the engagement model. Unlike grid-scale batteries that exist solely to provide flexibility, residential assets serve primary functions that can’t be compromised.  

The solution, according to McDonald, is automation and simplicity. EDF’s Sunday Saver Challenge—which offers free electricity on Sundays in exchange for reducing weekday peaks—has attracted 272,000 customers who’ve earned £5.5 million in bill credits, and it doesn’t require customers to think about flexibility at all. 

Grid-scale storage came in a close second in the poll, and for good reason. It’s proven technology with clear use cases. But Boyd reveals a surprising problem: the UK is massively oversubscribed. 

“We are three to four times oversubscribed in terms of NESO’s Future Energy Scenarios for what storage is looking to connect to the network,” he explains. “So there’s clearly a willingness to build out and connect storage to the network.” 

The challenge isn’t getting storage built, but creating viable market propositions that don’t cannibalise themselves. With so many batteries competing for the same arbitrage opportunities and grid services, the business case for each individual project weakens. 

Battery storage also faces a technical limitation: most systems can only operate for one to two hours before depleting. This makes them excellent for managing the dinnertime peak between 4-7pm but less useful for longer-duration flexibility needs. 

Still, Boyd sees potential in emerging models. SP Energy Networks has been working with E.ON on the VIDA project exploring longer-term contracts that give storage operators more revenue certainty while providing networks with reliable flexibility. 

Industrial and commercial flexibility finished last in the poll at just 16%, but Boyd argues this represents massive untapped potential that the industry is overlooking. The challenge is that unlocking it requires deep, one-to-one engagement. 

McDonald shares a case study that illustrates both the opportunity and the complexity. EDF worked with a frozen potato manufacturer on a refrigeration process. At first glance, there was no flexibility—the process had to run continuously. But deeper analysis revealed sub-processes within the defrost cycle that could be timed to avoid the 4-7pm peak without compromising product quality. 

“You really have to gain the confidence of your particular customer or client and really get under the skin of that business to understand where the flex is,” McDonald explains. “But there is usually flex there.” 

The problem is scalability. Unlike residential programs that can enroll thousands of customers with digital sign-up flows, industrial flexibility requires bespoke engineering analysis for each facility. That’s resource-intensive and slow. 

Boyd’s flexibility market engagement strategy actually identifies six vectors, not just the four in the poll. The two missing categories, community energy schemes with local authorities, and vulnerable or fuel-poor customers, represent some of the most interesting untapped potential. 

“Liverpool City Council have a number of large leisure centers with Olympic-sized swimming pools,” Boyd notes. “They’re great heat stores. So how can we unlock those resources?” 

Local authorities control substantial building portfolios with aggregatable loads. Community energy schemes can coordinate distributed resources at the neighborhood level. Both represent middle-ground solutions between residential complexity and industrial customisation. 

Vulnerable customers present a different kind of opportunity. Erica Niemi, Head of Energy Systems at E.ON Energy Distribution, emphasises the cost dimension: “Thinking of it from the customer perspective, they want the carbon-free future and support with the energy transition, but they don’t want to pay too much and unnecessary costs.” 

Flexibility can reduce grid infrastructure costs, which are rising even as electricity prices fall due to renewable penetration. If those savings can be passed through to customers, flexibility becomes an affordability tool, not just a grid management technique. 

But engaging fuel-poor customers requires completely different propositions than marketing to wealthy EV owners. They can’t afford upfront technology costs. They’re skeptical of utility programs. They need immediate, guaranteed bill reductions, not long-term optimisations. 

Niemi introduces a critical insight that transcends the residential-vs-storage debate: smart grids and flexibility aren’t competing solutions but complementary. 

“Sometimes smart grids and flexibility services can be set up as kind of in conflict with each other,” Boyd acknowledges. “And I think the reality is the opposite. I think they actually complement each other.” 

Niemi notes that in Sweden and many European countries, electricity costs are falling due to renewables, but grid costs are rising sharply. Flexibility markets and smart grid optimisation both attack the same problem: getting more capacity out of existing infrastructure without expensive reinforcement. 

So which type of flexibility holds the most potential? The webinar panelists’ answer is frustratingly but necessarily complex: all of them, deployed strategically with different engagement models. 

The poll results weren’t wrong. Residential and grid-scale storage do hold the most potential. But only if the industry stops treating them as competing priorities and starts building the diverse skill sets—from marketing to engineering to social policy—needed to unlock them all.