Why electrification cannot scale through generation alone…
The incoming COP31 Presidency has placed a clear number at the centre of the global electrification debate: increasing electricity’s share of final energy demand from just over 20 per cent today to 35 per cent by 2035.
The target is ambitious, memorable and strategically important. It connects climate action with energy security, industrial competitiveness and the reduction of fossil-fuel dependence. It also shifts the transition debate beyond power generation. Electricity must increasingly reach transport, buildings, industry, heating, cooling and digital infrastructure.
Yet the headline conceals a more difficult implementation question.
| If electricity is to serve a much larger share of the economy, who will ensure that it is available at the right time, in the right place and with the reliability those new uses require? |
The next phase of electrification will not be constrained only by how much clean electricity can be generated. It will also be constrained by whether power systems can balance, shift and deliver that electricity and whether markets can create investable business models for doing so.
This is the emerging flexibility economy.
Electrification multiplies the system task
For much of the energy transition, progress has been measured through installed renewable capacity. More solar and wind meant more clean electricity and, therefore, greater decarbonisation potential.
That metric remains essential, but it becomes less complete as variable renewables and new electrical loads grow together. Solar generation may peak when demand is moderate. Wind output may rise or fall faster than expected. Electric-vehicle charging may cluster in the evening. Industrial electrification can create large, continuous loads. Heat pumps and cooling systems can amplify seasonal peaks. Data centres require high-quality power with almost no tolerance for interruption.
The power system must therefore do more than produce additional megawatt-hours. It must manage timing, location, ramping, congestion, reserves and reliability across a more dynamic network.
IRENA has estimated that the global power sector may require between 2.5 and three times more flexibility than in 2019 to integrate rising shares of renewable energy efficiently. Its 2026 work on the transition away from fossil fuels similarly identifies grids, storage and system flexibility as prerequisites for rapid electrification.
In other words, 35 by 2035 is not only an electrification target. It is also a flexibility target—even if flexibility is not the number displayed in the headline.
Flexibility is not another word for batteries
Battery storage will be one of the most visible assets in the flexibility economy, but flexibility is broader than any single technology.
It is the ability of an energy system to respond to changes in supply and demand across different timescales and locations. It can come from:
- utility-scale and distributed battery storage;
- industrial and commercial demand response;
- smart charging and, eventually, vehicle-to-grid services;
- flexible operation of heating, cooling and industrial equipment;
- interconnections and stronger transmission and distribution networks;
- dispatchable renewable and other low-carbon resources;
- digital aggregation of many small distributed assets; and
- more responsive energy consumption enabled by data, automation and price signals.
This distinction matters for strategy. If flexibility is treated only as a battery procurement question, companies and policymakers may focus on equipment cost while missing the wider commercial architecture: which service is being provided, to whom, under which market rule and in return for what revenue?
The real asset is not simply the battery, the smart charger or the controllable load. It is the verified ability to change the system’s position when that change has economic value.
A physical need does not automatically become an investable market
The technical value of flexibility is increasingly clear. It can reduce renewable curtailment, manage imbalances, support frequency, relieve congestion, defer network reinforcement, improve resilience and help customers optimise energy costs.
The commercial problem is that these benefits often accrue to different actors.
- A system operator may benefit from balancing and reserve capability.
- A distribution company may defer or better target grid investment.
- A renewable generator may reduce curtailment and improve the value of its output.
- An energy supplier may lower imbalance exposure.
- An industrial customer may gain reliability, lower peak costs or protect production continuity.
- The wider economy may benefit from lower system costs and improved energy security.
But who signs the contract? Who makes the payment? Which benefit can be monetised, and which remains an avoided system cost that never reaches the asset owner?
This is why technically valuable flexibility can remain commercially stranded. The system needs the service, but the market may not yet have a clear buyer, product, price signal or contracting mechanism.
| The central investment question is not whether flexibility has value. It is whether that value can be converted into predictable and financeable cash flow. |
The revenue stack is not the same as bankability
Flexibility investments are often justified through a revenue stack: energy arbitrage, balancing services, capacity payments, congestion management, network services, behind-the-meter savings and resilience value.
In theory, stacking several revenue streams improves project economics. In practice, it may also conceal risk.
Some services may not be open to storage or aggregated demand. Others may require separate technical qualification. Two markets may call on the same capacity at the same time. A revenue source may be deep enough for the first projects but shrink as more assets enter. Merchant income may be volatile. Network tariffs or market rules may change. Battery degradation may increase when the operational strategy pursues every available opportunity.
An attractive spreadsheet can therefore overstate the commercial strength of the project if revenues cannot be contracted, combined operationally or sustained over the financing period.
Investors should distinguish between three categories:
- Contracted value: revenue supported by a long-term agreement, regulated payment or defined availability commitment.
- Market value: revenue earned competitively through energy, balancing or ancillary-services markets.
- Strategic value: resilience, avoided curtailment, deferred grid reinforcement, customer retention or continuity benefits that may be real but difficult to capture directly.
A bankable flexibility project needs clarity about how much of its case depends on each category—and who ultimately bears the risk when the expected value does not materialise.
What the flexibility economy requires
If COP31 is to advance implementation, the discussion must move beyond how many gigawatts of storage, renewable generation or new electrical load are announced. It must address the market conditions that allow flexibility to operate as infrastructure and as a business.
At least seven elements matter.
- Technology-neutral market access. Storage, demand response, aggregation and other non-fossil resources should be able to compete according to the service they can provide, not according to categories designed for conventional generation.
- Time- and location-sensitive signals. Flexibility is most valuable when and where the system is constrained. Pricing and procurement mechanisms should reveal that value.
- Accessible participation thresholds. Aggregators and smaller distributed resources require proportionate prequalification, metering and minimum-bid rules.
- Clear revenue-combination rules. Investors need to know which services can be stacked and how conflicts between commitments will be managed.
- Predictable grid-connection treatment. Connection queues, hybrid-asset rules and flexible connection agreements increasingly influence whether projects can reach operation.
- Reliable measurement and verification. A flexibility service must be measurable against a credible baseline and auditable by market participants.
- An appropriate balance between contracted and merchant exposure. Long-term signals may be necessary where system value is clear but short-term markets cannot yet support investment.
The European Union’s electricity-market reforms increasingly reflect this direction. The European Commission explicitly identifies demand-side response and energy storage as fossil-free flexibility resources that markets must integrate and attract investment into. The strategic shift is important: flexibility is no longer treated only as a technical support function. It is becoming a market-design priority.
The Türkiye opportunity: from technical participation to economic value
Türkiye has particular reasons to engage with this agenda. Renewable capacity is expanding, storage investment interest is substantial, industrial electricity demand is strategically important, electric mobility is growing and new loads will place different requirements on both transmission and distribution networks.
There are also signs of movement in the enabling architecture. In May 2026, TEİAŞ published steps relating to demand-side participation services. On 3 July 2026, it announced technical criteria and test procedures for the use of electricity storage units and facilities in ancillary services.
These developments matter because they begin to define how new flexibility resources can interact with the system. Yet technical eligibility is only one layer. The next questions are commercial:
- Which services can storage and flexible demand provide in practice?
- How will those services be procured and priced?
- Can multiple revenue streams be combined without creating delivery conflicts?
- Will market depth support the project pipeline now under development?
- How will distributed resources and aggregators participate?
- Which revenues will be sufficiently predictable for lenders and long-term investors?
For Türkiye, the opportunity ahead of COP31 is therefore not simply to present storage capacity or electrification ambition. It is to demonstrate how a growing, industrialising electricity system can translate flexibility needs into investable services.
This would connect climate policy with energy security, industrial competitiveness, project finance and market reform. It would also allow Türkiye to contribute to the COP31 implementation agenda through an issue that many countries increasingly share: renewable electricity may be abundant at certain hours, while dependable flexibility remains scarce.
What investors should ask
The flexibility economy changes investment due diligence. The cheapest battery or the most optimistic price-spread forecast is not necessarily the strongest investment proposition.
Investors should ask:
- What precise system or customer problem does the asset solve?
- Who benefits economically and who is legally committed to paying?
- Which revenues are contracted, regulated, merchant or merely assumed?
- Can the proposed revenue streams be delivered simultaneously?
- What grid-connection, dispatch and curtailment rights apply?
- How are availability, performance, degradation and replacement risk allocated?
- What happens to project economics as more flexibility enters the same market?
- Is the asset optimized for today’s market or adaptable to the system that will exist in ten years?
These questions move the analysis from equipment selection to business-model resilience.
From capacity targets to a flexibility economy
The 35 by 2035 target creates a powerful direction of travel. But electrifying a larger share of final energy demand will not be achieved through generation assets alone.
It will require grids that can connect new supply and demand. Storage that can shift electricity across time. Digital systems that can coordinate millions of assets. Industrial customers and households that can respond to signals. Market rules that recognise new forms of value. And financing structures that can convert system need into durable cash flow.
The key question is therefore not only how much flexibility the transition will require.
It is who will buy it, how it will be valued and whether investors can trust the resulting business model.Because electricity may power the next phase of the transition but flexibility will determine whether that electricity can be delivered when the economy needs it.
