The flexibility is there. The Local Constraint Market shows what needs to come next.

When the Local Constraint Market launched in 2023, the question was straightforward: could distributed flexibility help NESO manage transmission constraints?

Three years later, the answer is clearly yes.

In 2025 alone, 12 active providers offered 35.4 GWh of flexibility into the market. EV chargers, batteries, heating systems and industrial loads were aggregated and made available to support one of the UK electricity system's most expensive challenges.

Piclo built and operated the marketplace behind the LCM, covering provider onboarding, auctions, dispatch and settlement. We are proud of what the market achieved, but its most useful lesson may be what the numbers revealed about how flexibility needs to be bought in future.

A marketplace fit for a control room

The LCM was created to test whether flexible demand could help manage constraints between Scotland, where much of the UK's wind generation is located, and the major centres of demand further south. The alternative often involves paying renewable generation to turn down and other generation to turn up elsewhere. NESO expects constraint costs to reach around £3.2 billion over the next twelve months.

Turning distributed assets into something a national system operator could use was not simply a case of opening a tender. Providers had to be onboarded and qualified. Auctions had to work. Dispatch instructions had to reach assets reliably, and completed actions had to be settled correctly. At points, our team worked directly alongside NESO's control room as the LCM moved from market design into an operational service.

Over time, participation grew. Providers do not take part simply because a new service exists. They need a clear opportunity and a practical route to access it. Through the LCM, providers could qualify, bid, receive dispatches and be settled through one marketplace.

The flexibility also became cheaper as the market developed: average accepted prices fell from £60/MWh to £35/MWh over the life of the market. That came from greater competition, better market information and steady improvements to the rules. Changes such as the ABSVD opt-out removed barriers that had previously made participation harder for aggregators; of the six FSPs bidding since the opt-out was introduced, four use it, all of them aggregators.

It was not dramatic work, but it is how liquidity is built.

What the numbers said

Despite 35.4 GWh being offered in 2025, only 2.52 GWh was accepted.

NESO found that 68% of bids were rejected, generally because the constraint requirement had changed after procurement. Of those rejected bids, 70% expired before the need returned.

More than 90% of the flexibility offered therefore went unused. That was not because the resource did not exist, providers could not participate, or the platform failed to attract supply. The flexibility was qualified, priced and available. The difficulty was matching it to a system need that could change quickly.

A process built around forecast, tender, bid and wait will always struggle when the underlying requirement moves faster than the procurement cycle. The LCM made that problem visible in hard numbers.

A trial that did its job

NESO is now moving these constraint-management actions into the Demand Flexibility Service, where the LCM's learnings will carry on.

The LCM demonstrated that distributed flexibility can support transmission constraint management. It created genuine liquidity and produced three years of operational learning across participation, pricing, dispatch and settlement. It also showed the limits of buying a dynamic resource through discrete procurement events.

We are proud of the role Piclo played and wish NESO well as the service moves into its next phase.

"We are grateful to Piclo for their support and collaboration in trialing new approaches to managing network constraints. The Local Constraint Market has provided valuable insights into how flexibility can help us manage the electricity system more efficiently, and the lessons learned will help shape the development of future flexibility services."
Jon Wisdom, Head of Market Change Delivery, NESO

Our next question: What happens if we start with the flex?

The next question is no longer whether flexibility exists or whether providers will participate. We know both are true. The question is how buyers access that flexibility when they actually need it.

Today, much of the market begins with an individual buyer identifying a requirement, creating a product and asking providers to respond. If the need changes, the bid can expire and the process begins again.

We think the market can work differently. Start with the flexibility. Let providers make their capacity visible, qualified, located, priced and ready, and allow buyers to procure closer to real time and closer to their actual requirements.

An asset should not have to sit within one service, one tender or one buyer's process. The same pool of distributed resources can be visible to multiple potential buyers, with qualification, availability, dispatch and settlement managed consistently.

That is how flexibility moves from something the industry trials to something grid operators can use every day.

We know the resource is there. The next job is making it easier to buy, including making flex visible at the right time and in the right place.

That is what we have been building with our partners, and we look forward to sharing more in the coming weeks.