The Big Picture on Emerging Clean Technologies: "Transactive Energy"

Transactive Energy is On the Horizon Editor’s Note: This is the first in a series of Current columns on various alternative technologies in the pipeline that aim to make a greener and more resilient and affordable grid. Transactive Energy, an emerging approach to balancing the power system with flexible distributed energy resources, like rooftop solar and smart thermostats, took two important steps forward in the last month. The steps may lead to using far more transactive energy to improve power system reliability, lower emissions, and reduce utility bills. The underlying work has been pioneered by the Grid Wise Architecture Council in collaboration with the Department of Energy’s Pacific Northwest National Laboratory. The term "transactive" applies to value-based transactions that use demand flexibility to manage the system , according to the Grid Wise Council. It may be used to manage a part of the system, like the residential demand response that reduces energy consumption to lower stress on the grid. Or it may be used to manage the power system from “generation to consumption,” the Grid Wise Council said. The first step toward making transactive energy a reality was a California Energy Commission initiative in December to enable automated responses to real-time price signals from grid-connected residential clean distributed energy resources. The second step was the Pacific Northwest Lab’s Jan. 25 release of the results from the biggest-ever transactive energy simulation, showing it can help balance a Texas-sized power system while lowering all customers’ costs. The proposed Energy Commission platform would allow automated responses to granular price signals from smart customer-owned clean energy technologies that reduce system costs. Capturing the demand flexibility of customer-owned resources could be worth as much as $267 million through 2040 at the distribution level in California, CEC staff estimated . The Pacific Northwest Lab transactive energy simulation showed a possible $5 billion per year net benefit from using demand flexibility to optimize an Electric Reliability Council of Texas (ERCOT)-sized power market. The simulation included over 100 generation sources through 40 utility distribution systems serving 60,000 homes and businesses with 100,000 smart devices, the lab reported. The simulation verified that “stable and effective coordination” of flexible assets could provide a 9% to 15% reduction in peak loads, and a 20% to 44% reduction in daily load, with more distributed energy resources having a greater impact. These benefits were possible because transactive energy harmonizes energy supply and demand by allowing automated negotiation of energy needs and costs by electricity suppliers, energy markets, the power system, and DER users, according to Pacific Northwest Lab. The underappreciated potential Most wholesale power markets incorporate transactive energy to balance supply and demand by system operators between their bulk power and retail electricity providers. But only small, localized pilots have been implemented at the smaller distribution system level through the "prices-to-devices" transactions enabled by a CEC-like platform between utilities and customers. The potential of aggregated demand flexibility of distributed energy resources and smart devices in commercial buildings , residences , and other structures , which use over 70% of U.S. electricity, is significant, according to Pacific Northwest Lab. The simulation showed it can enhance reliability, reduce demand spikes, and mitigate system congestion to lower customer costs and greenhouse gas emissions. The Pacific Northwest Lab’s simulation is “instructive,” but no distribution system level transactive energy project has been commercialized, said Dynamic Grid Founder and Chief Product Officer Kay Aikin, a Grid Wise Council board member . Transactive energy is “still in demonstration hell,” she added. The closest to commercialization is the small TeMix-Southern California Edison pilot , which deployed TeMix’s “ Automated Transactive Energy ” operations technology along with smart devices, appliances, and time-varying rates in a Southern California neighborhood and reduced utility bills, she said. Transactive energy has been slow to advance because many regulators are not yet aware of automation’s value to consumers and system reliability, Aikin, Commissioner Andrew McAllister, who leads the CEC effort, and Pacific Northwest Lab transactive energy expert and simulation technical team leader Hayden Reeve told Current. Transactive energy has never been deployed at scale so there are “a lot of unknowns,” Pacific Northwest Lab acknowledged. But it was clear that California’s August 2020 blackouts were aggravated by “outdated market operations and energy trading practices,” and when demand flexibility was used it limited the problem, their paper concluded. The simulation The Pacific Northwest Lab’s simulation compared a “moderate” 16% renewables penetration scenario and a future “high” 40% renewables penetration with business-as-usual. It used varying deployments of flexible grid-connected home heating/cooling units, water heaters, behind-the-meter batteries, residential rooftop solar, and electric vehicles. Using the flexible assets produced economic savings through reduced costs for meeting demand spikes, reduced wholesale energy costs, and deferred transmission and distribution investments, Pacific Northwest Lab found. Simulated residential customers had 14% to 16% utility bill reductions and, after annualized costs for flexible assets, savings of 8% to 15% per year. The net annual benefit was $3.3 billion with lower renewables and $5 billion with higher renewables, a 12% to 19% cost reduction, Pacific Northwest Lab calculated. Because the simulated system represented 10% of U.S. electricity use, national savings could be $33 billion to $50 billion. The biggest savings were because of the reduced need for bulk generation, but there were also reduced distribution system costs from the use of demand flexibility, Pacific Northwest Lab’s Reeve said. “If transportation and building electrification grow quickly, demand flexibility can have an even bigger role and provide bigger benefits.” The study showed what transactive energy can do at scale , and it showed where technical, engineering, and system architecture designs need to be carefully worked out to keep transactions manageable and stable, the Lab’s Reeve told Current . It also showed that different customer classes and types benefit differently and that even customers without flexible assets may see annual utility bill savings of 10%. A key feature of the simulation was its 40 utilities acting as distribution system operators to integrate and coordinate the transactive day-ahead and real-time markets, according to the Lab. The distribution system operators automatically delivered the market’s 48-hour forecast of dynamic prices to customers’ devices and updated prices every hour based on changing supply and demand. But transactive energy "is not dependent on the distribution system operator structure because third party aggregators could also facilitate the marketplace transactions,” Reeve said. Either way, transactive energy “goes beyond prices to devices” because it “closes the loop” by allowing feedback from customers or their devices to utilities and system operators that leads to smoother, more stable, lower-cost operations. Scaling Transactive Energy “The electrical grid is the most complex machine in the world and Pacific Northwest Lab’s approach makes it more complex , especially with two-way communications between the bulk power and distribution systems,” Dynamic Grid’s Aikin said. Wholesale markets work with perhaps 5,000 generators, and there may eventually be 50 million or 100 million flexible assets at the distribution system level, she said. The two-way communications also “introduce security threats because recent power system and other industry hacks have come through edge devices without security firewalls,” she added. Dynamic Grid’s alternative is to place “gateways” at substations with machine learning capabilities and one-way communications delivering real time prices to consumers’ devices. The resulting demand allows power providers to optimize supply to meet a demand reduced by customers’ flexible assets, Aiken said. “U.S. distribution system infrastructure costs to meet electrification goals may reach $1 trillion,” Aikin said. Price signals that engage flexible assets to meet demand locally instead of rebuilding the distribution system to deliver central station generation could lead to significant savings , and it is scalable because the gateways can be deployed sequentially, she added. With real-time price signals coming from gateways at substations or transformers, the market will have an incentive to develop “an ecosystem of smart devices,” Aikin said. “It can start with installing ten at congested areas and that can become 50,000 across the wider system.” Transactive energy may seem a futuristic approach to system balancing, but the benefits have been demonstrated and simulated, and may soon be within reach.

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The Big Picture on Emerging Clean Technologies: “Transactive Energy”

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