Transactive Energy Platform: Trends, Benefits, and Challenges of Grid Modernization

As demand for energy soars and shifts toward renewable resources, grid modernization becomes necessary. Offering solutions to these and other challenges are transactive energy platforms, on which consumers become active participants in the market.

The transactive energy system offers solutions to several significant challenges for the modern energy grid, including high demand and grid complexity. Learn about the trends, challenges, and technologies involved in transactive energy and the factors driving its consideration.


Effect of Transactive Energy Platform on the Economy

Transactive energy decentralizes the energy distribution system and presents opportunities to improve efficiency and reduce costs for consumers. This type of system automatically adjusts for supply and demand to better balance the grid and quickly negotiate energy transactions between individuals producing distributed energy resources (DERs).

How a Transactive Energy Platform Improves Energy Costs for Consumers

Transactive energy has the potential to improve the utilization of valuable natural resources and grid infrastructure. It enables transactions between the DER prosumers and other consumers. As a result, this system has the potential to improve efficiency and reduce costs by increasing availability and flexibility. Further, purchasing energy from geographically local energy providers is cheaper than distant sources.

An integral part of a transactive energy platform is the availability of detailed pricing and demand information. Using a smart grid enables consumers who produce DERs to manage their own production without disrupting the overall grid. Increased transparency for consumers creates more opportunities to make cost-saving decisions.

Further, internet-connected smart devices make it possible to surface more details to producers and consumers, which contributes to more intelligent decisions. For example, smart devices can monitor usage and automatically change their behavior to emphasize efficiency, cost savings, or another goal of the customer. In addition, the transactive energy system makes it possible for energy-consuming devices to know when it’s cheaper to consume energy and optimize its usage to make more cost-effective transactions.

What Market Opportunities Exist for a Transactive Energy Platform

The increasing popularity of renewable energy resources presents a significant opportunity for transactive energy. Some renewable energy generation devices are residential generators based on solar and wind. These DERs require a flexible approach to energy transactions, and transactive control represents a potential solution.

A transactive energy platform can implement advanced communication and monitoring tools—such as smart devices—to automate the transactions between the individuals who produce energy and those who need it. A faster response to changes in demand can help improve grid reliability. This increased connectivity helps efficiently tie an increasing number of personal energy generation devices into the existing grid.

How Transactive Energy Influences the Economy

Adopting transitive energy systems requires some grid modernization efforts. These projects may include significant upgrades and the addition of smart devices, such as transactive agents, that connect distinct parts of the system.

Many states working on grid modernization have also undergone regulatory restructuring. They’ve separated the energy system into three parts: generation, transmission, and distribution. Transactive electricity represents a next stage in this process of modernization, where consumers can become participants in a decentralized energy platform.

In doing so, transactive energy connects the three segments more closely and unlocks opportunities for a higher-efficiency, more cost-efficient system.


Current Trends in the Worldwide Transactive Energy Market

According to the Pacific Northwest National Laboratory (PNNL), the future of energy distribution worldwide requires automatic transactions between the power grid, residential buildings, and commercial structures. Several international trends are increasing the interest in and testing of transactive energy platforms.

Key Processes Driving the Shift to Transactive Energy

High demand for electricity worldwide requires more intelligent grid management, including balancing supply and demand and improving resiliency against damage and weather-related outages.

Further, the desire for more efficient and cost-effective electricity is a strong market force that encourages the adoption of transactive energy. By decentralizing the energy distribution system, transactive energy may offer greater responsiveness and reliability than the traditional grid, according to the National Institute of Standards and Technology (NIST). In addition to helping the grid withstand severe weather events, energy trading may also promote consumer energy consumption habits that are gentler on the grid.

DERs and Renewable Energy

The increased availability of DERs, such as home solar panels and batteries, is another important catalyst for the transactive energy concept. As more people become producers of some or all of their own energy, greater changes occur in demand and usage of the public energy grid.

In addition, solar and wind provide examples of renewable energy that depend on environmental conditions and are prone to fluctuations. As more people use them, the energy grid may also experience larger fluctuations in usage based on those same environmental conditions.

Internet of Things Devices and Smart Microgrids

The implementation of advanced metering infrastructure, including internet-connected monitoring devices, is a key driver of transactive energy platforms. Internet of Things devices, along with advanced communications and control technology, pave the way for significant automation and speed. These tools support rapid communication between individual prosumers and make faster transactions.

In a microgrid system, which groups DER producers that are geographically close, consumers and prosumers with DERs supply energy to other participants through a third party. A smart microgrid makes participants even more independent by using internet-connected devices to carry out transactions and balance the grid.

Transactive Energy Research and Pilot Programs

In the US, studies are underway on the implications of transactive energy and microgrids. For example, the NIST is working with the US Department of Energy on a challenge to create modeling tools and improve the analysis of transactive energy. The organization aims to identify and promote the potential benefits of transactive energy systems as it applies the systems to real grid problems.

In addition, US states including New York, California, and Hawaii are restructuring their energy grid markets to prepare for new solutions. Efforts to modernize grid infrastructure and advance transactive energy are active in other countries, including Australia and the Netherlands as well.

Importance of International Trends in the Transactive Energy Market

The trend toward decarbonization in energy production and distribution is a global one. A major part of that trend is producing more energy from renewable sources instead of fossil fuels, which drives the growth of DERs and increases the grid’s complexity.

Related is the growth in popularity of blockchain technology around the world, according to the Atlantic Council. Blockchain has potential benefits for energy transactions as well as financial ones. As it advances globally, it also presents opportunities to further decentralize energy distribution through transactive energy systems. However, challenges remain in several aspects of the blockchain ecosystem, including scalability, efficiency, and privacy.


Integrated Energy Efficiency and Flexibility of Demand for Transactive Energy

On the traditional grid, the only seller of electricity is the energy provider, whose grid has to support potentially millions of people. It cannot support various DER producers, who risk overloading or straining the grid.

A transactive energy system integrates DERs efficiently into the energy market. In combination with advanced monitoring technology, it can actively regulate production and efficiently source energy according to changing demand.

How a Transactive Energy System Improves the Flexibility of Energy Delivery

Transactive energy decentralizes energy delivery, allowing individuals to produce some or all of their own energy while still offering the opportunity to purchase energy from the central grid. In addition, consumers can purchase energy from prosumers. The result of this is additional flexibility as energy can come from multiple sources and various forms of production—solar, wind, and other intermittent renewables, for example.

The transactive energy model also helps balance the electric grid based on changing supply and demand conditions. This helps improve stability, reducing the risk of dangerous problems like transformer overloads. When the grid faces an issue, such as congestion points approaching peak load, the operator has more available flexibility on a transactive energy platform to avoid problems.

Why It’s Important for Transactive Energy to Be More Efficient and Flexible Than Current Energy Systems

It’s crucial that a transactive energy platform is more flexible than existing energy systems because it will have to support higher usage of intermittent renewable resources, such as wind and solar power, as well as growing demand. Efficiency gains are also necessary as states struggle to meet demand for electricity during periods of high usage, such as periods of severe heat or cold, storms, and other weather-related emergencies.

Further, a transactive energy system will have to be more efficient and flexible than current energy systems to overcome economic and historical resistance by existing players in the industry. New technology requires upgrades to infrastructure, which results in upfront costs that the efficiency gains will have to justify. Benefits of a transactive energy platform must be significant to overcome resistance from traditional market participants.


Transactive Energy Expansion in the US

From flexibility and resilience to cost savings and efficiency, transactive energy platforms present significant potential benefits. As the concept expands in the US, it is important to consider its requirements and challenges.

Requirements for Transactive Energy to Expand in the US Market

To expand transactive energy systems in the US requires a new market design. The flat-rate pricing model, based on seasonal average prices, isn’t compatible with a transactive energy platform that needs better demand flexibility.

Smart grids will be key to implementing a transactive energy platform. Internet-connected grid technology, such as two-way communication and smart meters, enables better energy management for both consumption and production ends. This infrastructure requires stable internet connectivity and adequate bandwidth. Established providers may have to upgrade existing infrastructure to support smart control, monitoring, and communication capabilities.

Upgrades may also include implementing new technologies, such as blockchain. Blockchain could enable automated peer-to-peer transactions, where connected devices communicate and respond to each other’s requests with no intermediary.

Obstacles to the Transactive Energy Concept in the US

One major obstacle to the wide expansion of transactive energy in the US is security. The security of the country’s energy infrastructure is critical, but questions remain about how to adequately secure a transactive energy platform. However, blockchain-powered technology is a potential solution to the security challenges involved in transactive energy, according to a study in Applied Energy.

Scalability presents another challenge involved in designing a transactive energy system. The system will have to be able to support thousands of distributed energy providers, communicating securely between them and managing supply and demand in real time.

A third key challenge facing transactive energy systems is the current reliance on legacy infrastructure and potential reluctance to replace it. Transactive energy may work with some existing tools, such as advanced metering infrastructure and smart meters. However, upgrading infrastructure—including software tools and networking devices—is crucial to implementing an efficient, secure transactive energy platform.

Organizations Expanding the Transactive Energy Concept in the US

The US Department of Energy is involved in several transactive energy projects. For example, the agency’s Grid Modernization Initiative included a Pacific Northwest National Laboratory project that sought to implement and scale transactive control technologies across campuses.

The NIST created the Smart Grid Interoperability Panel to coordinate standards for building smart grid systems. The panel performs outreach to raise awareness of the benefits of smart grid technology. It also educates industry stakeholders and provides a framework for the creation of industry standards to advance the concept.

In addition, IEEE’s P825 is a standard for implementing smart grid interoperability features.


Promise of Transactive Energy Platforms for the Future

A transactive energy platform offers a solution to global challenges faced by the modern energy industry, including soaring demand, increasing grid complexity, and the integration of DERs.

Interested in learning more about transactive energy platforms? Get involved with IEEE Blockchain-Enabled Transactive Energy (BCTE). This program is series of regionally diverse virtual forums addressing Blockchain-enabled transactive energy in the domain of electrical power and energy application development. To learn more about IEEE Blockchain, join the IEEE Blockchain Technical Community to stay informed of latest activities.