Smart Disruption: The Transactive Energy System – part 2
Opportunities and Challenges in Transactive Energy Market
Growth in DER is the primary driver of the decentralized transactive energy market, and this will hold true as global efforts in decarbonization, decentralization, and digitalization of the energy system continue. Despite still being in its early stages, most experts see the opportunity presented by blockchain in facilitating complex processes in the transactive energy market. The figure below shows blockchain use classification from 140 blockchain initiatives in the energy sector, with decentralized trading, investment & cryptocurrency, and automation & asset management being the top three case use.
As we transition to the internet of energy, blockchain offers the benefits of transparent, secure, and tamper-proof systems amidst complex and data-heavy transactions combined with smart contracts. Report by Deloitte highlighted that blockchain-enabled platforms can reduce operational cost, increase efficiency, automate processes, increase transparency, and defer capital requirements for an energy firm, while also providing cost savings to participating consumers and prosumers. However, a report from Atlantic Council argued that the costs of blockchain in transactive energy processes, specifically in trading, are steep, pointing out the challenges in capital efficiency, scalability, and transaction volumes.
Another thing worth mentioning that can pose a challenge in this era of decentralization and transactive energy market is the reconciliation of policy, standards, and regulations. Traditional power systems have a unilateral flow of generation from central generators to consumers, and clear-cut regulations applicable to each participant from generators, utilities, retailers, and consumers. Now that the system is more complex, a different policy which permits flexible market design, and a more adaptable and effective oversight are needed from regulatory bodies.
Lastly, technical frameworks, specifically the accuracy of forecasting for variable renewable energy and demand, need to continue its progress through the help of AI and machine learning to ensure that real-time balancing of supply and demand amidst high DER participation will be met.
These challenges are not unsolvable, and only a matter of time until technology addresses these concerns, participant’s trading behaviors are more understood, and demonstration projects lead to replicable and scalable systems that can be the basis for crafting a solid policy and standards supporting various TE initiatives. The trend of moving towards an internet of energy, a transactive energy marketplace is inevitable given our focus on a more efficient decentralized energy system. An effective response to this trend, however, will indeed be dependent on how the governments, academia, energy corporations, utilities, consumers, and cleantech firms work together in ensuring that we harness the potential offered by transactive energy system in a real-life, large scale implementation, while addressing its current challenges and limitations.
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