Can transactive energy mould the future of energy?

Transactive energy offers the potential to future-proof the energy market and bring forward game-changing trends, such as community energy, blockchain, smarter cities and new industry partnerships.
Published: Wed 12 Sep 2018

The energy market is experiencing a wave of modern trends that can completely change the landscape of the industry, such as blockchain, artificial intelligence (AI), machine learning, community energy and transactive energy.

In addition, the entrance of new stakeholders into the market might take the sweeping modernisation of the market a step further - such as emerging companies and startups acting as electric vehicle (EV) charging providers, blockchain and machine learning developers and transactive energy platform providers.

The industry might end up looking unrecognisable for traditional utilities. For example, energy trading platforms, such as Verv, are now enabling peer-to-peer energy trading within communities by using AI and machine learning. Community energy projects are also blooming across the globe, and in the future they can potentially transform the energy market into a more decentralised, renewable and consumer-centred system.

Following the inaugural Engerati Meets on transactive energy this June, we caught up with Jürgen Benkovich, founder and managing director of German market research and consultancy company ideenparc, on the ways in which transactive energy can impact the future of the industry.

The role of the prosumer

A key feature of the future energy industry is that the role of the consumer will change - not only are customers expecting better engagement and services from their utilities, but they are also taking on the more active role of small-scale energy producers. These customers also may trade and distribute excess energy produced with peers in their community.

According to Benkovich, this can be a significant problem as utilities still have a traditional view of the market and are not truly looking forward into the future, which means that their understanding of the consumer and the new trends in the market is relatively superficial.

“A lot of companies say that they understand the customer, how to take care of them and so on, but what we see is that many companies either use this as lip service - because they know what the market wants to hear - or they see it as a way to improve their business as it is right now,” explains Benkovich.

“They'd rather see it as a way to bring down costs if they change the way they engage with their customers, but they do not really take it to the fullest extent where we believe the market is heading."

As such, if utilities adopt this fixer-upper approach by applying new technologies and models to old systems, they might find themselves with a business model that ultimately does not fit into the modern view of the industry. "We've learned, from talking to top decision-makers in utilities and technology companies, that you will end up improving a system that by definition will not be there in maybe five or 10 years' time, because the energy world is really going to turn upside down,” says Benkovich.

“The market will be much more autonomous and democratised. They need to understand that the energy systems are going to be democratised - the power will be shifted to the consumer and prosumer, and also to a different set of stakeholders that haven't been active in the market before."

Smart city applications

An interesting point where transactive energy can cause a radical shift is in the application of smart city projects. Utilising energy trading platforms and locally-generated electricity can be a turning point for smart cities and potentially a missing piece of the puzzle to truly make them independent, decentralised, democratised and efficient.

“Smart cities initiatives have been around for around 10 or 15 years now, but a lot of these projects fail to deliver. However, aren't smart cities very much related to community energy?” says Benkovich.

“We believe that these elements need to come together to make sure the transformation really happens. That comes first of all from the initial ambition - you need to set a clear ambition on what you want to achieve. Many smart city initiatives were very outspoken on what they wanted to achieve and how they envisioned this city of the future, but the issue is that there are two other aspects that need to come in place in order to create impact, which are the enablers  and the leverage of market effects.

“The enablers for smart cities to work would include the right technology, favourable regulation, affordable prices, available expertise, viable markets, etc. The market effects include the entry of new players, emergence of new ecosystems, network effects, all of which can make sure that the technology enablers are deployed. Only when these two elements come together can you create a vision that truly works."

Thus developing transactive energy projects - be it with community energy or distributed energy resources and blockchain or advanced algorithms - into smart city initiatives is one of the most interesting ways in which utilities can future-proof and properly integrate transactive energy into their business model.

“Utilities are always looking for ways to prove their importance, and smart cities are areas where they can significantly contribute, but a core element is to make sure that you couple transactive energy with those initiatives, because that's one of the key barriers for true change."

The key is unity

Benkovich adds that a key element for the future of the industry is that different stakeholders need to come together to share ideas, experiences and projects. With so much innovation happening and new technologies, systems and models being introduced, it is in utilities’ best interest to liaise with different market entrants as well as their customers in order to have the most fruitful exchange possible.

“We always recommend that utilities engage with other stakeholders, which is something they're not used to because it means they need to integrate stakeholders which do not have the same information and expertise,” says Benkovich.

However, this is what makes the exchange truly complete and advantageous for both sides - utilities can connect with startups such as blockchain platform developers, energy trading platform providers and machine learning specialists to roll out projects on a larger scale by combining their industry expertise and know-how with the startups’ specialist knowledge and drive for innovation.

"The players in the market could work so much better together if they knew about the ambitions and agendas of the other ones, and they just don't communicate enough. They really need more ways to share not only knowledge, but also their goals and their joint momentum."

Keeping these different elements in mind when building the new energy industry will be essential, because, according to Benkovich, "transactive energy will be the backbone of the energy systems of the future."