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The value of distribution-level flexibility is increasingly important as electricity systems become more decentralized, variable, and prosumer-oriented. Prosumers, aggregators, and network constraints jointly shape whether flexible capacity becomes technically useful and economically valuable. Existing research lacks a unified theory that explains how flexibility value emerges from the interplay of prosumer decision-making, DER aggregation, and local congestion management. As a result, valuation is often treated as either a market-pricing problem, a network-operations problem, or a behavioural-participation problem rather than as a co-determined process. This article builds a theory model linking prosumer demand response, DER aggregation, and local congestion management to the valuation of grid flexibility. The model explains how distributed flexibility becomes valuable when behavioural willingness, aggregation capability, and network scarcity align. The model is developed conceptually, drawing on microeconomics, mechanism design, contract theory, and grid operation principles. It is intended to generate causal explanations and testable propositions rather than empirical estimates or optimization results. The model identifies causal pathways from prosumer behaviour and aggregator strategies to flexibility value, moderated by congestion intensity. Seven propositions articulate testable relationships, while the full model distinguishes flexibility creation, coordination, scarcity revelation, and value allocation. The theory provides a foundation for future empirical testing and can inform market design and regulatory decisions for flexibility services. It clarifies why flexibility value cannot be attributed to DER assets alone but must be understood as an institutional and network-contingent outcome.