22.10.2025
One of the key speakers at the Energy Club forum “Balancing Europe’s Energy System: Challenges, Solutions, and Prospects,” held on October 9 in Vienna, was Stephen Woodhouse, Director at AFRY Management Consulting, a recognized international expert in market design, digitalization, and the energy transition. With over 25 years of experience in the electricity sector, he focuses on the strategic market response to dynamic changes, the development of flexible balancing mechanisms, and the evolution of electricity markets in the context of decarbonization.
Balancing in the Era of Decentralization: From Megawatts to Milliseconds
In the first panel of the forum, Stephen Woodhouse emphasized that as the energy system decentralizes, the challenges of balancing become increasingly multidimensional—from milliseconds to seasonal scales: “We will be using many more decentralized, distribution-connected, consumer-owned resources to solve balancing problems in the future. This does not mean centralization—on the contrary, it is a path to deeper decentralization.”
The expert explained that despite the common perception of growing generation scales, true decentralization relates specifically to the types of flexibility, not the generation sources. Gigawatt-scale offshore wind farms are becoming the norm, but local resources and consumers will be increasingly involved in grid stabilization.
Stephen Woodhouse noted the Ukrainian experience, where local generation resources are helping to provide balancing during the war, and stressed the importance of developing island power systems and local resilience: “I don’t live in a country at war, but during a storm, my lights went out for 20 hours, even though I had a car with an 80 kWh battery sitting nearby that I couldn’t use. Future resilience goes far beyond just keeping the lights on.”
Market Challenges: Volume Risk, Lack of Tools, and the New Role of Batteries
Modern markets are facing new types of risks. While in the past the focus was on price fluctuations, today the main risk is volume risk—the instability of generation from renewable sources.
“We don’t have trading instruments to manage volume risk. Liquidity is drying up, so markets are looking for new models—Contracts for Difference (CFD), capacity support mechanisms, subsidies. No one wants to take on both price and volume risk simultaneously,” noted the AFRY Management Consulting Director.
Batteries and energy storage systems (BESS) can partially address these challenges, but they are not a universal solution. Two- or four-hour batteries cannot compensate for seasonal fluctuations in wind or solar generation, which can last for tens of hours. “Batteries are not the antidote to wind intermittency. They are needed for short-term flexibility, but they will not replace stable generation,” Stephen Woodhouse stated.
The expert recalled that Great Britain has already introduced a stability market, which allows for the construction of synchronous compensators, grid-forming batteries, and the development of system services. The value of energy as a commodity is decreasing, while the share of stability services is growing—from 4% to over 20% in five years.
Digitalization, Machine Learning, and Demand Flexibility
In the context of market digitalization, Stephen Woodhouse emphasized that artificial intelligence and machine learning are already playing a key role in demand management: “Electricity is the most volatile commodity on the planet. But even crypto-mining has become a predictable factor in system operators’ forecasting models. We are already seeing demand from data centers becoming an element of balancing.”
AFRY’s projects for Google and Microsoft have shown that consumption flexibility can be built even into data centers—by regulating cooling, shifting computations, or changing loads over time. Thus, even digital infrastructure can become an active participant in the energy market.
The Future of Balancing: The Consumer as the New Center of the System
In the second panel, Stephen Woodhouse focused on the role of the consumer and the development of Vehicle-to-Grid (V2G) systems. “By 2030, Great Britain will need 900 MW of V2G capacity, and by 2040, 28 GW. This is only 4 million cars—a completely achievable goal for a country with 30 million,” the expert said, stressing that the future of flexibility depends on consumer behavior models. If flexibility is integrated right from the start during the electrification of transport and heating, the costs of balancing in the future can be significantly reduced.
Batteries, Hydrogen, and New Market Models
Although Stephen Woodhouse acknowledged the important role of batteries, he offered a moderately critical assessment of the technology: “I have never been an optimist about hydrogen, but I am also cautious about batteries. They often remain unused resources. 70% of batteries today are in vehicles, and it’s a shame we aren’t using them for grid resilience.”
He noted that investments in batteries are accompanied by high risks: capital expenditures depreciate quickly due to technological progress, and the markets do not yet provide stable revenue streams. “Battery developers are increasingly turning to governments for subsidies. This indicates that the economic model is not yet self-sufficient,” stated the AFRY Management Consulting Director.
Sustainable Value is in the Customer Relationship
Concluding his speech, Stephen Woodhouse outlined the main thesis: the future value of the energy system will not be in asset ownership, but in the relationship with the consumer: “Long-term value will be created by companies that have a direct connection to the customer, understand their behavior, and know how to manage demand flexibility. This is where the future power of the energy sector lies.”
Stephen Woodhouse identifies three key directions for energy development:
The energy transition requires not only new technologies but also a new architecture of interaction between market participants—from generation to the end consumer.
