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Transactive energy is a system that brings economic and control mechanisms together to allow supply and demand to be dynamically balanced across the entire power grid.

Transactive Energy May Bring a Whole New Grid

June 29, 2020
Can the laws of economics function harmoniously with the laws of physics in the age of DER?

Power grid operators are perpetually walking a tightrope, trying to balance the supply of generation and the capacity to deliver it with customer needs at any given moment and location within the service territory. The gradual decentralization of power generation and delivery is adding a new facet to this challenge: How can the power grid account for customers who generate their own power?

Reversing the flow of electricity is not something anyone intended when power grids were first designed and built. But what if all stakeholders involved were coordinated and could use real-time price signals to determine the best course of action automatically, in accordance with supply and demand? What if the laws of economics could function harmoniously with the laws of physics?

The term “transactive energy” is what the GridWise Architecture Council calls “a system of economic and control mechanisms that allows the dynamic balance of supply and demand across the entire electrical infrastructure using value as a key operational parameter.” This idea has yet to be put fully into practice, although tests are being run under pilot project conditions with some promising results. Some experts on the subject are optimistic about the industry’s technological footing.

Utility and Customer Buy-In

Mark Knight, a former chair of the GridWise Architecture Council and currently an industry adviser at 1898 & Co., part of Burns & McDonnell,          as well as a member of the Smart Electric Power Alliance (SEPA) transactive energy working group, said one piece not missing in the electric utility industry when it comes to transactive energy is the technology.

“If we had to go out and start building a transactive energy system tomorrow, I think the technology is there,” If transactive energy is seen essentially as a retail-level market to balance load and supply dynamically, there needs to be a central server to run the market. Other necessities include a way to measure goals and constraints as well as some top-shelf communications infrastructure to make everything run together.

Furthermore, utility buy-in is needed. Knight said he believes utilities already have the skilled staff that transactive energy requires, if not the utility interest.

“At Gridwise Architecture Council and IEEE PES, we’ve been trying to get more utility interest in this. You’re going to need cross-functional teams working together within the utility, and there will be a tipping point eventually where there’s not only an interest in transactive energy, but you will need it. I think we have the skills and capabilities because they are running the grid on a day-to-day basis anyway,” Knight said.

Ben Ealey, the principal of grid integration at SEPA, works with the communications systems that could make transactive energy possible. He agreed with Knight’s take that the technology for a transactive energy market may be available already.

“One thing that’s interesting about transactive energy is it’s a bunch of technologies that are brought together for a new purpose. We have devices that are being installed on the grid that are built to react to certain conditions,” Ealey said.

Ealey expects utility staff would have to learn some new skills to be brought up to speed with the technology. The public, too, needs consideration.

“There likely will need to be some kind of public education,” Ealey said. “I think most people aren’t as aware about what happens on the grid to get energy to them. I think the general public needs to know something about why they would want to participate.”

When asked why customer buy-in is needed, Knight said customers are the main driver for the whole concept.

“When people talk about transactive energy, they think of it in terms of people producing their own power with, say, solar power and selling it onto the grid when they have an excess. The value delivered to customers is one of the primary benefits in transactive energy,” Knight said. “Without customers, you’ve got nothing.”

Ealey said there is an interesting psychology involved with changing end users’ behavior. What drives people to make different choices on their energy consumption can vary wildly from person to person. Some might be technology-driven early adopters who enjoy apps that can tell them about their energy use. Others might be too busy to think about it. In short, customers are not a monolithic group, and it is important to find different ways to reach them.

Chip Fox, director of product management, energy portfolio management solutions at Hitachi ABB Power Grids, said more consumers generating their own power will be a big driver in establishing transactive energy. He also agreed with Knight that the technology for transactive energy may already be in use today.

“I do think the technology is there for prosumers to participate in these markets and provide voltage regulations,” Fox said, adding that Hitachi ABB Power Grids  has software solutions enabling prosumers to participate in local energy markets.

To have a transactive energy market, there must be a choice in what energy one uses as well as the power to engage in transactions, Fox said. The consumer must also be interested in participating. Fox said he has some skepticism about the number of consumers who would get involved in their own energy decisions even if they had the ability to do so.

“I think, right now, power is relatively cheap and people don’t want to be inconvenienced,” Fox explained. “They want to do laundry when they have the time to do it rather than wait for when energy is cheaper. They want to turn on the air conditioning when it’s hot.”

According to Fox, a local-scale transactive energy system could forecast the wind and solar resources and then combine this data with high-powered computing and analytics solutions to optimize across different criteria, like energy cost and using more green power.

Transactive Energy Technology

Hamideh Bitaref, senior adviser for grid edge solutions with Hitachi ABB Power Grids, envisions one possible transactive energy application for large commercial and industrial consumers that involves electric vehicles (EVs). According to Bitaref, with the proper transactive energy topology applied, a large customer with a fleet of EVs could optimize their use of renewable energy and know when to charge EVs to maximize factors like cost and green energy use.

“The main thing we need to find out is the pattern of consumption,” Bitaref said. “That would optimize the use of renewables and knowing when to charge your EVs to optimize that. We need computers to be able to forecast the wind and solar resource as well the EV consumption patterns. The objective being to optimize the costs and maximize the benefit when using on-site generation.”

Bitaref said energy trading among consumers using blockchain in a peer-to-peer system shows promise for scaling up.

“[Blockchain] actually enables transactions between consumers without the traditional third-party involvement. So, the usual system would be a utility or bank that manages the transaction. Blockchain uses a decentralized model and enables trading electricity from distributed energy resources, like storage,” Bitaref explained.

This represents a shift from a centralized to a decentralized model that allows for negotiation between stakeholders. Today’s information technology systems could support such a model, but regulatory approvals are needed still, Bitaref said.

Fox said that to implement a transactive energy economy, blockchain or other types of distributed ledger technology must be scalable as well as secure.

“Low latency is key. When dealing with power and real-time transactions, it has to be quick. And, in order to scale, it has to be low cost,” Fox said.

According to the National Renewable Energy Laboratory (NREL), blockchain serves as a distributed digital record of actions agreed to and performed by multiple parties. The main value in applying the technology is the mathematical proof about the state of the data, so all parties can agree on outcomes regardless of their relationship with one another.

“When you have hundreds of thousands or millions of devices out there that want to interact, you face a significant trust challenge,” said Tony Markel, a senior engineer in NREL’s secure cyber-energy systems group. “Trust between devices can only be achieved through methods that verify and enable proof that each system does what it said it was going to do. With blockchain, we may have a path to achieve secure, trusted communications between players without a need for central control.”

Real-World Testing

NREL put these ideas to a test, conducting experiments on homes connected by blockchain and equipped with rooftop solar arrays. In the system, the homes had the ability to sell surplus electricity to one another. This functionality required a secure data signal with information on energy generated as well as payment information between the buyer and seller.

NREL’s home energy management system, called foresee, was the keystone to this. It can interconnect solar panels, energy storage and smart appliances and then apply machine-learning algorithms, data analytics and physics-based modeling to analyze usage patterns. Foresee alerted one home when solar power was cheaper to buy from the other rather than paying utility rates, then used digital currency to buy the power. According to NREL, this shows the potential ability to make purchasing decisions automatically that benefit all participants as well as regulate demand from end users.

Dylan Cutler, senior engineer with NREL and the lead investigator on the project, said the experiment provided valuable evidence of the technology’s potential.

“There’s a lot of talk and buzz out there about blockchain but very little documentation,” Cutler said. “This project was a necessary first step in this field — for me, at least, and I think the lab in general — to get some comfort with the technology.”

Cutler added that blockchain’s use in the energy market requires a closer look at grid resiliency, reliability and cybersecurity concerns. According to NREL, the scope of Cutler’s research did not consider what role a utility might play in peer-to-peer energy transactions.

A larger study was commissioned by the California Energy Commission using support and customers from Southern California Edison (SCE) as well as technology by prime contractor Universal Devices Inc. and TeMix Inc. Ron Gales, senior adviser for corporate communications with SCE, said the Retail Automated Transactive Energy System (RATES) pilot tested a technology-enhanced interface that enabled customers to adapt end-use consumption to hourly dynamic prices transmitted to an in-home hub.

SCE participated in the pilot to better understand how the technology interface could work with real-time independent system operator (ISO) and distribution system operator (DSO) prices as well as learn more about the sensitivity of consumption to retail prices that change hourly. Gales said the RATES pilot offered the option for customers to hedge their risk exposure to the dynamic price by subscribing a preselected amount of energy consumption available at the retail tariff.

According to Gales, the ISO manages supply and demand characteristics on the bulk generation system today that results in hourly generation energy prices. Because the distribution system is different from the bulk generation system, industry participants will have to partner with regulatory commissions and market settlement agencies to define the economic optimality of hourly prices on the distribution system. Protocols will have to be established to determine the pecking order of local constraints cascading up to bulk system constraints.

“Billing systems, customer load management and information sharing between industry participants and market settlement agencies will need to be coordinated to ensure the efficient functioning of such a decentralized approach,” Gales said, adding that processes and standards will act as enablers for disaggregated load management while also reducing the potential for gaming the system.

What Was Learned?

According to a summary of transactive energy pilot programs supplied by SEPA, the electric utility industry has learned much in the past decade about transactive energy’s far-reaching potential to remake the power grid. According to SEPA documents, the designers of pilot programs identified tariff establishment and other policy changes as key early steps to pursue.

“Once this is in place, designers can focus on pursuing customers and vendors. However, the main lesson learned is that this form of transactive energy is effective,” SEPA authors wrote about the RATES pilot. “By pairing mechanics and transactions, and studying the thermodynamics of buildings where devices reside, the system can work reliably.”

Mark Knight, one of the coauthors of the report, said there are a lot of policy changes needed to pave the way for a transactive energy future.

“It’s illegal most places for me to sell my power if I produce my own, because that means I’m acting as a utility and I can’t do that,” Knight said, adding that — in areas where there are no policy barriers — large facilities that make their own power, like college campuses or commercial and industrial complexes, might make their own markets.

Chip Fox of Hitachi ABB Power Grids said he agrees the technology for allowing buildings and customers to trade and purchase power among one another is there.

“The thing that is missing is the economics and the market side of things,” Fox said. “We could have it tomorrow from a tech perspective. The regulatory side and the economics are kind of preventing it.”

Fox said with 50 states and 50 different utility commissions in the U.S., what is needed to move forward is some consistency and agreement on the benefits a transactive energy market could provide.

For more information:

Hitachi ABB Power Grids | www.abb.com

Burns & McDonnell | www.burnsmcd.com

GridWise Architecture Council l www.gridwiseac.org

IEEE PES l www.ieee-pes.org

NREL l www.nrel.gov

SCE  l www.sce.com

SEPA l https://sepapower.org

TeMix l www.temix.net

Universal Devices l http://www.universal-devices.com

About the Author

Jeff Postelwait | Senior Editor

Jeff Postelwait is a writer and editor with a background in newspapers and online editing who has been writing about the electric utility industry since 2008. Jeff is senior editor for T&D World magazine and sits on the advisory board of the T&D World Conference and Exhibition. Utility Products, Power Engineering, Powergrid International and Electric Light & Power are some of the other publications in which Jeff's work has been featured. Jeff received his degree in journalism news editing from Oklahoma State University and currently operates out of Oregon.

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