The Number Nobody Can Verify

Every demand response event starts with a question that sounds simple: what would have happened if we hadn’t intervened?

The answer is the baseline. It determines how much flexibility was delivered, how much the provider gets paid, and whether the grid operator’s dispatch decision was justified. It is the single most consequential number in energy settlement.

It is also the number nobody can verify.

A calculated reality

Baselines are not measured. They cannot be — you cannot observe what would have happened. They are calculated, from models built on historical consumption patterns, weather adjustments, and methodology rules that vary by market, by product, and sometimes by individual contract.

Everyone in the industry knows this. What is less widely understood is what happens after the model produces a number.

In most European markets today, the baseline methodology is selected by the system operator or defined in market rules. The inputs — historical meter data, weather variables, time-of-use patterns — sit in the system operator’s systems. The calculation runs. A number comes out. Settlement proceeds.

At no point does the flexibility provider receive a signed record of which methodology version was applied, which input data was used, or when the calculation was executed. There is no independent way to reproduce the result.

The provider sees the output. They do not see the working.

Why this didn’t matter before

In a grid dominated by large dispatchable assets, baselines were a manageable fiction. A 400 MW gas plant either ran or it didn’t. The counterfactual was straightforward.

The maths changes completely with distributed energy resources.

A virtual power plant aggregating ten thousand household batteries does not have a single, obvious counterfactual. Each asset has its own consumption pattern. The aggregate baseline is a statistical construction — and small changes in methodology can shift the result by enough to turn a profitable dispatch into a loss.

Germany’s Redispatch 2.0 alone brought assets above 100 kW into mandatory grid balancing. Every one of them needs a baseline. Every baseline is a number nobody can independently verify.

The volume of unverifiable calculations is growing exponentially. The infrastructure for verifying them has not changed at all.

Where the methodology becomes the dispute

An aggregator dispatches a portfolio of commercial buildings for a demand response event. The TSO’s settlement system calculates the baseline using a “high X of Y” methodology — taking the highest consumption days from a recent window. The aggregator’s own platform uses a regression model that accounts for weather and occupancy. The two methods produce baselines that differ by 12%.

Twelve percent is the difference between full delivery and a penalty for under-delivery.

Neither party can prove the other wrong. Both methods are defensible. The dispute is not about fraud — it is about two legitimate approaches to an inherently uncertain calculation producing materially different results.

What opaque baselines cost the market

This is not about bad actors. Most system operators act in good faith. The problem is that uncertainty has a price — and the market is paying it whether it sees the invoice or not.

When flexibility providers cannot verify how their delivery was calculated, they price that risk into their bids. Higher risk premiums mean more expensive flexibility. More expensive flexibility means grid operators procure less of it — or fall back on conventional assets they understand better.

The result is visible. In markets with immature baseline transparency, flexibility participation rates are consistently lower than available technical capacity would suggest. Assets that could participate stay on the sidelines — not because the economics don’t work, but because the settlement risk is unquantifiable.

The irony is structural. The energy transition depends on unlocking millions of distributed assets for grid balancing. But the settlement infrastructure meant to reward participation is itself a barrier to entry. Every opaque calculation, every “trust us” from a settlement system, is a signal to smaller participants that the game may not be worth the candle.

Transparency is not a cost. It is a market-enabling condition.

A pattern other industries already solved

The shape of this problem is not unique to energy.

In financial services, when a trade is settled, counterparties do not simply trust the clearing house got the number right. The calculation methodology is published and versioned. Input data is referenced and timestamped. The output is reproducible — any party can take the same inputs and methodology version and arrive at the same result.

The primitives that enable this are not exotic. Versioned methodology rules with immutable publication records. Signed, timestamped inputs with provenance. Deterministic calculations that any party can replay. An audit log that records not just the result, but how the result was reached.

None of this eliminates the inherent uncertainty in baselines — you still cannot measure a counterfactual. But it transforms the dispute from “your number versus mine” into “we agree on the inputs and the rules, so let us examine why the outputs differ.” One of those is a tractable engineering problem. The other is a political negotiation.

Where the regulation is heading

Europe is actively legislating this space. On 7 March 2025, ACER submitted its proposed Network Code on Demand Response (NCDR) to the European Commission under Regulation (EU) 2019/943, Article 59(1)(c). National enforcement is expected by 2027. The code explicitly addresses baseline methodologies — requiring system operators to develop terms and conditions for demand response verification.

But here is the gap: Eurelectric’s consultation response (October 2024) flagged that system operators should not be validating their own baselining proposals. The conflict of interest is structural — the party that dispatches the flexibility is also the party that determines whether it was delivered. The code acknowledges the need for methodology. It does not yet mandate the infrastructure for independent verification.

This matters beyond Europe. Switzerland’s cross-border flexibility market — deeply interconnected with ENTSO-E but outside the EU regulatory framework — faces the same verification gap with an additional layer: baseline methodologies must reconcile across regulatory boundaries, making independent auditability even more critical. Meanwhile, greenfield markets like the UAE, now designing flexibility frameworks from scratch for rapid DER deployment, have the opportunity to build baseline transparency in from the start rather than retrofitting it into decades of legacy settlement infrastructure.

The question is the same everywhere. Who verifies the number?

One signal worth watching

Some aggregation platform vendors are beginning to offer baseline transparency features — giving flexibility providers access to the input data and methodology version used in their settlement calculations. This is not a regulatory requirement. It is a competitive differentiator emerging from customer demand.

When this becomes table stakes rather than a premium add-on — when providers refuse to participate in markets that cannot show them the working — the market will have established an evidence standard that regulation has not yet required.

That shift is already underway. It will not wait for 2027.

Sources & further reading

- ACER — Network Code on Demand Response proposal (March 2025)

- ACER — Public consultation on draft NCDR (2024)

- European Commission — Targeted consultation on NCDR

- Eurelectric — Response to ACER NCDR consultation (October 2024)

- Eurelectric — Consultation on draft NCDR (initial)

- Regulation (EU) 2019/943 — Internal market for electricity

- Ofgem — Case study: Germany Redispatch 2.0

- FfE — Congestion Management: Redispatch 2.0 in International Comparison (2023)

Grid Signal covers the intersection of grid modernisation, distributed trust, and digital infrastructure for energy. No hype — just structural insight for practitioners.

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