The Energy Balancing Dilemma: Can Innovation Keep Up?

Did you know that consumer grid costs could nearly double by 2050?

Renewables are struggling to integrate —putting the EU’s decarbonization goals at risk and driving up electricity prices.

At Venture IQ, we uncover the technologies and market trends shaping the future of energy balancing, ensuring a smarter, more resilient grid for the energy transition.

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The Evolving Role of Energy Balancing

Historically, power grids relied on large, centralized power plants—such as coal, gas, and nuclear facilities—to maintain a steady electricity supply. These plants could adjust production as needed, ensuring generation matched consumption and keeping the grid stable. However, the rise of renewables and distributed energy resources (DERs) has introduced new challenges. 

Unlike traditional plants, renewable sources like wind and solar generate electricity intermittently, with output fluctuating based on weather conditions. This variability can lead to supply surpluses or shortages. DERs, such as battery storage and electric vehicles (EVs), operate independently and can inject or withdraw power at different points across the grid. These assets require real-time adjustments to stabilize power systems and ensure electricity flows efficiently where it’s needed.

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The Biggest Challenges in Energy Balancing

1. Infrastructure Bottlenecks

European electricity grids are struggling to integrate increasing volumes of variable renewable energy. As renewable energy integration accelerates, it is projected that flexibility requirements will double by 2030 (ACER, 2024). Yet, grid investment continues to lag behind. In 2023, grid congestion drove price increases and eroded the profitability of renewable assets, although day-ahead prices remained twice as high as pre-2020 levels (ACER, 2024). 

Additionally, an analysis of 35 national grid development plans from European Transmission System Operators (TSOs) found that grid congestion is expected to worsen in the short term, particularly in markets with aging infrastructure (Ember Energy, 2024). Spain, for example, spent more on congestion costs in 2023 than on actual grid expansion.

2. Regulatory Fragmentation

Despite ambitious EU energy targets, energy policy remains largely fragmented across national borders (IMF, 2025). Each country prioritizes its own energy security, pricing mechanisms, and balancing strategies, leading to inefficiencies and missed opportunities.

• Diverging national regulations prevent flexibility providers from scaling their operations across multiple countries.
• Slow implementation of standardized balancing rules creates barriers for new entrants and slows down investment in flexibility solutions.
• Imbalanced incentives—exporting countries may hesitate to send surplus electricity abroad if it raises domestic prices, while importing countries push for greater interconnection (IMF, 2025)

3. Limited Financial Incentives

Despite the rapid expansion of renewables, financial incentives for flexibility services remain limited.

• Network tariffs in most EU countries fail to differentiate between consumers who provide flexibility services and those who do not (ACER, 2023).
• Consumers who shift electricity usage to off-peak hours receive little to no financial reward.
• High entry costs discourage small players from participating in balancing markets, leaving flexibility services dominated by large utilities (ACER, 2023).

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How Innovations are Bridging These Gaps

While challenges persist, emerging technologies are steadily addressing infrastructure, regulatory, and financial barriers. Venture IQ has identified the following key innovations driving the future of energy markets; AI-powered forecasting, Virtual Power Plants (VPPs), Automated Demand Response (ADR), and Energy Trading. 

Using our proprietary software, Venture IQ has analyzed 100+ companies, mapping how startups, SMEs, and larger corporations are adopting these innovations. Our findings reveal that trading and VPP solutions dominate across all company sizes, with startups emerging as key drivers of innovation.

AI-Powered Forecasting

AI-driven forecasting enhances grid operations by predicting fluctuations in renewable generation, demand patterns, and congestion points. These insights allow balancing service providers to:

• Minimize curtailment through predictions of when and where oversupply is likely to occur
• Determine the most profitable times to provide flexibility services, enabling strategic bidding, charging, and consumption
• Reduce the reliance on expensive last-minute balancing interventions

By improving forecasting precision, AI is ensuring that renewables are better integrated into the grid and are more profitable, reducing overall system costs.

Virtual Power Plants (VPPs)

VPPs aggregate DERs into a single, dispatchable resource, allowing small-scale assets to participate in balancing markets as one entity. By integrating battery storage, rooftop solar, and flexible industrial loads, VPPs:

• Enhance decentralized flexibility, reducing strain on centralized infrastructure.
• Allow DERs to bypass market entry barriers by participating collectively.
• Optimize energy dispatch based on real-time grid needs, maximizing efficiency.

Automated Demand Response (ADR)

ADR uses AI, smart meters, and IoT devices to detect grid signals and adjust energy consumption without manual intervention:

• It allows businesses, aggregators, and industrial consumers to sell their flexibility into balancing markets
• Participants can bid their demand reduction into balancing markets, earning payments for providing reserve capacity.
• By automating consumption shifts, ADR allows users to avoid expensive peak-hour rates and take advantage of real-time price fluctuations

This transforms energy flexibility from an into a competitive market opportunity.

Energy Trading Platforms

Historically, balancing markets were dominated by large utilities and TSOs. However, new energy trading platforms are democratizing participation:

• Small-scale energy producers and storage operators can trade electricity directly, bypassing traditional intermediaries.
• Decentralized energy trading improves price transparency, market efficiency, and competition.
• Greater liquidity in balancing markets leads to lower costs 

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Final Thoughts

The energy industry is at a turning point, with next-generation balancing technologies rapidly transforming power systems. These solutions are enabling greater renewable integration, reducing reliance on fossil fuels, and lowering energy costs for businesses and consumers. A more adaptive grid also strengthens resilience against disruptions and market volatility.

The challenge now is not just adoption, but strategic positioning. Companies that move early will lead in a smarter, more sustainable, and cost-efficient energy system.

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About Venture IQ

Venture IQ is a consultancy firm specializing in scouting technology companies and providing deep market insights. Catalist, our proprietary software platform, enables us to go beyond standard databases to uncover emerging innovations and hidden players across any industry.

Unlike traditional market research firms or manual scouting approaches, our AI-driven methodology and extensive data capabilities allow us to deliver a more complete, accurate, and time-efficient overview of relevant companies. Over the past 10 years, we have helped 100+ corporates, VC, and PE funds navigate complex markets, identify breakthrough investment opportunities, and stay ahead of technological shifts.

Venture IQ provides not just data, but actionable intelligence—empowering clients to make informed decisions faster.

Want to learn more about how Venture IQ can help with technology scouting? Book a meeting or read more about our market mapping services now!

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