CAPEX vs FLEX: The optimal investment mix to integrate decentralized electricity production

[en] Decentralized production increases grid congestion, forcing solar panels to disconnect to prevent over-voltage, a negative externality linked to installed capacity that limits system penetration. Key solutions include network reinforcement (Capex), and investing in flexibility resources (Flex) to boost self-consumption. Using an agent-based model with prosumers, a retailer, and a DSO, we study the trade-off between Capex and Flex by linking a disconnection probability to these investments. Our results indicate that, due to the externality, market outcomes feature excessive Capex and insufficient Flex compared to the optimal mix. While tariff adjustments and Flex subsidies can help, challenges remain because of information asymmetry and heterogeneity.

Disciplines :

Microeconomics

Author, co-author :

Andriamaromanana, Voahary Iangotiana ; Université de Liège - ULiège > HEC Liège Research > HEC Liège Research: Economic analysis and policy

Gautier, Axel ; Université de Liège - ULiège > HEC Liège : UER > UER Economie : Economie industrielle

Poudou, Jean-Christophe ; MRE, University of Montpellier, France

Language :

English

Title :

CAPEX vs FLEX: The optimal investment mix to integrate decentralized electricity production

Publication date :

June 2026

Journal title :

Energy Economics

ISSN :

0140-9883

eISSN :

1873-6181

Publisher :

Elsevier B.V.

Volume :

158

Pages :

109316

Peer reviewed :

Peer Reviewed verified by ORBi

Development Goals :

7. Affordable and clean energy

Additional URL :

https://api.elsevier.com/content/article/PII:S0140988326001957?httpAccept=text/xml

Available on ORBi :

since 05 May 2026

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