Transactive Energy – American Perspectives on Grid Transformations

Published: Mon 16 Sep 2013
A blog entry by Christine Hertzog

Contributed by:

Christine Hertzog
Managing Director
Smart Grid Library

Christine Hertzog's Blog

There are many Smart Grid pilots ongoing in the USA initiated courtesy of funding from the American Recovery and Reinvestment Act of 2009 (ARRA) program.  But a few of them originated from utilities before the economic meltdown.  These utilities realized that like many other business sectors, it’s imperative for them to reinvest in the business through R&D activities.  Bonneville Power Administration (BPA) is one of those far-sighted utilities.  Based in the US Pacific Northwest territory (Idaho, Oregon, Washington, western Montana) and including customers in eastern Montana, California, Nevada, Utah and Wyoming, this federal nonprofit agency self-funds its operations and R&D through sales of wholesale power and transmission services.

BPA has been an active proponent of a concept called Transactive Energy*. Terry Oliver, Chief Technology Innovation Officer for BPA provided an overview of a key pilot that enhances overall industry knowledge about Transactive Energy.  BPA participates in a region-wide pilot called the Pacific Northwest Smart Grid Demonstration Project. Terry described the pilot scope as “a vertical slice of the grid because it covers generation, transmission, distribution, and consumption. What makes this pilot so integral to Transactive Energy is that it explores the interactions and coordination of variable generation and variable loads – in other words – manage these to play nicely with each other.”  That’s an important aspect to Transactive Energy because it envisions a grid with a much greater percentage of intermittent renewables, and a much greater role for Demand Response and dynamic pricing to influence loads.

The pilot was launched in late October 2012, and incorporates activities among 11 utilities, including BPA.  The pilot will gather data to help the regional grid deliver an abundance of wind-generated electricity (supplementing plentiful hydro power) and avoid transmission congestion, and learn how energy storage devices and smart appliances play roles in building reliability and resiliency at local and regional levels.

Transactive Energy is more than technology investments and upgrades.  It also presumes that markets and business models – for utilities, consumers, and other stakeholders – will transform.  Paul De Martini, Managing Director of Newport Consulting and visiting scholar at Caltech’s Resnick Sustainability Institute offered some insights into fostering these needed changes.

He noted that there are four main drivers in the USA for Transactive Energy transformations.  First, there’s an evolution in customer expectations and behaviors as they transform into prosumers of electricity.  Second, federal, state, and even local policies are placing greater emphasis on renewable sources of electricity generation that are impacting our local utilities’ distribution grids.  Similar policy impacts on energy efficiency standards and building codes are the third reason, and finally, innovative technologies in generation and information and communications technologies offer new alternatives to existing means of managing electric grids.

There are significant challenges to completing this transformation of the electric grid. The current business model hinders much needed value creation for bi-directional transactions of electricity sales.  Paul stated, “Changing this business model is essential to create opportunities for new classes of market participants.  It requires transparent pricing and rules-based monetization structures. For instance, demand response programs to reduce peak demand and services to balance realtime system operations could have very different values.  The right market and business models can accommodate those distinctions in value.”  Enacting these changes will also require regulatory changes to eliminate barriers to technology investments, markets access, and greater consumer engagement.

Transactive Energy is a complex answer to a complicated problem.  Terry and Paul are two of the presenters for a session I’m chairing titled Building Resiliency in the Distribution Grid at European Utility Week on October 17. They are part of a global list of participants sharing information and ideas on this topic representing utility, policy, and technology perspectives.  Join us there!

*Here’s the Transactive Energy definition from the upcoming 5th Edition of the Smart Grid Dictionary:  A software-defined grid managed via market-based incentives to ensure grid reliability and resiliency. This is done with software applications that use economic signals and operational information to coordinate and manage devices' production and/or consumption of electricity in the grid. Transactive energy describes the convergence of technologies, policies, and financial drivers in an active prosumer market- where prosumers are buildings, EVs, microgrids, VPPs or other assets.

Christine Hertzog
Smart Grid Library