Smart Disruption: The Transactive Energy System – part 1

Reading Time: 4 minutes

Transactive Energy: Definition & Early Days

The rise of distributed energy resources (DER) brings forth new opportunities in revolutionizing the power grid system and how generation companies, consumers, and utilities interact in the transactive energy market. Generally defined, transactive energy pertains to the management of supply and electricity consumption through economic and market-based determinants.

Traditional buying and selling of electricity through the spot market are actually based on a transactive principle. However, what we are experiencing now is a different kind of transactive energy system dominated by DER, and powered by connectivity, internet, smart controls, Big Data, and Cloud Computing. The transition to a smart grid system brings to its center transactive energy as the decentralized marketplace, where grid players (Virtual Power Plants, microgrids, buildings) and grid assets (storage systems, DERs) can act as financial drivers and active participants in the real-time balancing of supply and demand.

Transactive signals, which depended on real-time and forecast load and generation, are critical not only in determining the market price but also in understanding the response of assets to the set price given technical constraints in reliability and grid efficiency. The figure below shows a simplified diagram of the power transaction in a transactive energy system with prosumer, third party DER/VPP, and consumer capable of demand response. This system can also be connected and also affects the locational marginal pricing at the distribution and transmission or wholesale market level.

Power transaction in a transactive market

One of the earliest, large scale transactive energy system projects is the Pacific Northwest Smart Grid Demonstration Project, which started in 2012 and ran for five years. The objective of the project was to improve systems reliability while showing the future of a smart grid with the near real-time balancing of utility-controlled distribution assets and demand response platforms. A total of 112 MW generation and load assets were interacting between each other through transactive signals across 11 utilities. The project concluded that features of a smart grid such as voltage control, smart meters, battery storage, and then a new energy management approach called transactive control could improve systems efficiency and reduce power cost.

Current Trends in Transactive Energy Market

Advancement in technology surrounding transactive energy systems has been monumental since the last decade. Increase DER also prompted the emergence of Virtual Power Plants (VPPs), which are often mentioned in discussions and projects on transactive energy system due to its decentralized and cloud-based operations. VPPs are networks of DERs, including wind and solar farms, and demand response participants (interruptible load), and storage systems, that may not be situated in the same locality, unlike that in a microgrid. The figure below shows VPP as the cloud-based management of various supply and demand assets and its connectivity to the main power grid.

Virtual Power Plant set-up (credit:

VPP facilitates the participation of various assets, including small prosumers, by acting as the aggregator and participant to the transactive energy market. By the 2nd quarter of 2019, almost 4GW of VPP capacity was operational based on the research done by Navigant, and the capacity is expected to grow by 9-fold by 2028. One of the largest VPP projects underway is the AutoGrid ENERES partnership, with projected 10,000 participating assets by 2021. AutoGrid will service the cloud-based Energy Internet Platform, which will aggregate storage capacity in the early stage of the project, with the final network including a mix of demand response platforms, electric vehicles, and other DERs. This large scale VPP aims to participate in the wholesale electricity market of Japan.

Aside from the cloud-based energy management in VPP, facilitating the trading of energy in the TE market is done by Distributed Ledger Technologies such as blockchain. Several on-going peer-to-peer (P2P) trading use data platforms backed by blockchain technology. In 2016, Brooklyn MicroGrid in the USA was established where prosumers in the community sell their excess electricity to their neighbors via auction scheme, through the platform acting as the transactive energy marketplace. Australian company Power Ledger launched in October 2019 a demonstration project in Kanto Japan using a blockchain-enabled platform for peer-to-peer trading of excess solar generation of 8 residential sites, with an aggregate capacity of 24kW solar and 3kW battery storage. This is the second P2P blockchain-enabled trading project of Power Ledger in Japan following the successful implementation of a demo project in the Kansai district. In the UK, energy technology company Electron has partnered with system operators to use blockchain technology to implement shared asset register of generation and storage, aimed at improved forecasting, modeling, and asset interactions. Other projects/companies with on-going demonstrations of blockchain-enabled transactive energy trading are Alliander in the Netherlands, BCPG Group in Thailand, BLOC in Denmark, Energo Labs in China, OMEGAGrid in the USA, Vector Energy in New Zealand, and more.

Don’t forget to subscribe to our Daily Roundup straight to your inbox, feel free to leave a comment, and make sure to check out part 2 of this series coming out in the following days. Don’t forget to read our other articles and interviews on our homepage, or continue the discussion on our Facebook and Twitter pages.

2 Responses

  1. March 11, 2020

    […] Smart Disruption: The Transactive Energy System – part 1 […]

  2. March 20, 2020

    […] hope you liked this series and in case you missed it, you can find part one here. Don’t forget to subscribe to our Daily Roundup straight to your inbox, check out our other […]

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: