Coordination Architecture, Participation Conditions, and Long-Term Feasibility in Local Flexibility Markets - A Qualitative Case Study of Effekthandel Väst

Sammanfattning

Local Flexibility Markets (LFM) have emerged as a promising market-based solution toaddress grid constraints and support the transition toward a more decentralized andelectrified energy system. Nevertheless, despite their technical potential, the participation ofindustrial and commercial actors remains limited and uneven. A substantial body of researchhas been dedicated to engineering and economic perspectives, while largely overlooking theorganizational and coordination challenges that influence the practical feasibility of thesemarkets in the future.This study investigates how the coordination architecture influences the functioning,participation, and long-term feasibility of LFMs. Adopting a qualitative research design, thestudy is based on an embedded single-case analysis of Effekthandel Väst in the Gothenburgregion, Sweden. Empirical data was collected through semi-structured interviews withstakeholders in the LFM ecosystem, including Distribution System Operators (DSOs),Flexibility Service Providers (FSPs), aggregators, platform operators, and regulatory experts.Enriched by the incorporation of supplementary empirical material, including reports andindustry insights, in addition to a comprehensive literature review.The findings reveal that LFM feasibility is determined by how effective coordinationchallenges are absorbed by market structures and intermediaries, and less by individualparticipation incentives. Evidence from the battery paradox, CapEx bias, key-persondependency, and the intermediary role of Max Usage illustrates how participation dependson the capacity of market arrangements to absorb and coordinate complexity acrossorganizational and institutional layers.The study makes four theoretical contributions. It substantiates coordination architecture asan analytical framework for LFM feasibility. Demonstrates that the productive anddestabilizing features of polycentric governance are inseparable in fragmented utilitylandscapes. Identifies participation accessibility as a distinct fourth market designdimension alongside price, product, and timeframe. Lastly, specifies the systemic layerswhere participation failures originate. Ultimately, this study implies that scaling LFMsbeyond early-adopter contexts is fundamentally a governance challenge requiringinstitutional and regulatory reform rather than isolated market design adjustments.