What Is Transactive Energy?
Transactive Energy is Decentralized, Smart Energy.
Transactive energy describes a system where anyone can trade electricity on the grid. Through this system, traditional consumers of electricity can generate electricity and sell their excess capacity back into the grid.
Electrical grids, which distribute electricity from producers to consumers, are evolving into smart grids which enable decentralization, and automation of energy management. This move away from a centralized grid, towards a decentralized network of nodes will allow for a more efficient electricity grid. This grid will leverage more renewable generation assets and allow end users to participate not just as consumers but also as producers of electricity.
What’s wrong with our current electrical system?
The current electricity system operates in real time: electricity is generated when it is consumed. However, electricity consumption can be highly variable. For example, electricity consumption is typically higher after people begin to wake up and lower during the nighttime. Additionally, consumption habits vary over the seasons: use is high in summer in most locations and lower in the cooler months.
The variability in electricity consumption is important because it impacts the design of the electricity network and the sources of electricity generation. Generation sources like natural gas or hydro can offer some flexibility in the time of generation, by providing quick electricity when demand suddenly increases. Therefore, these generation sources are called ‘peaker plants’. In contrast, current nuclear technologies can provide stable constant electricity, but output cannot easily be increased in response to increased demand.
Renewable generation sources offer another variation because they do not use fuels for electricity generation – rather, they use the sun or wind. End users can therefore install their own generation capacity. However, to produce electricity, these assets are reliant on the sun to shine and the wind to blow, creating variability in the supply of electricity.
Most of us just use electricity when we need and do not think of peak electricity as a concern. However, this can be expensive and inefficient. Using smart grid technologies and mechanisms like transactive energy, we can re-design the grid to be more efficient and more productive. End consumers can help alleviate strain on the grid by providing electricity into the grid, or reducing their own consumption when the demand for electricity is high.
Transactive Energy is economical, efficient, reliable and resilient:
- Anyone can become an energy producer by installing a rooftop solar panel, since Transactive Energy does not discriminate between big and small producers. This will promote the use of solar energy.
- Internet of Things (IoT) devices will use energy when it is cheapest, since IoT-connected washing machines, air conditioners, dishwashers, and other energy-intensive devices will be programmed to use energy only when it is below a certain price (for example, at night). Battery-powered electric cars will similarly charge when electricity is cheapest.
- Energy generated closer to you will be cheaper than energy from a distant power plant, and Transactive Energy infrastructure will make it easier to purchase energy generated closer to you (for example, from a neighbor’s solar panel).
- Resilience during storms will increase, since a Transactive Energy system will be decentralized with fewer central points of failure. The length and frequency of outages will reduce.
- Fewer additional power plants will need to be built, as new suppliers in the electricity grid will reduce the stress on power plants. This will allow us to avoid economic and environmental costs.
- There will be a better balance between real time supply and demand, especially with the use of blockchain-enabled electrical platforms.
- How to ensure security? Cybercriminals, nation states, disasters, and errors all pose security threats to our existing, aging electrical grids. How can we adopt Transactive Energy in a way that secures our energy infrastructure?
- How will we make grid-connected devices smart and interoperable? Can we upgrade all involved devices to the level of automation and interoperability required? At what cost?
- Will the smart grid scale well? Will the distributed platform function well even when the number of smart devices in the system increases significantly?
- Who will govern the platform? Ironically, realizing a decentralized national or international energy grid will likely require strong, centralized governance or new business models.
- How can we make the system easy for people to understand and
participate? Transactive Energy will make people’s lives easier because it will allow for higher efficiency and greater access. As these platforms become more accessible, they will attract more participants, benefiting everyone.
Transactive Energy has the potential to make our electrical system more efficient, by better matching supply and demand in real time, having IoT devices use energy when it is cheapest, and reducing reliance on large, distant suppliers.
It will also allow anyone of any size to participate in the electricity grid, incentivizing people to install rooftop solar panels to sell electricity to their neighborhood.
As our electrical grids evolve into efficient and resilient smart grids, we need to ensure their security, promote interoperability between connected devices, and make it easy for anyone to participate.
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