I just got back from the Third International Conference and Workshop on Transactive Energy in Portland. There is wide consensus on the inevitability of transactive energy even as there are struggles as to how to get there.
Transactive energy was initially conceived of as a way to set spot market prices for electric energy (power) during times of peak demand or temporary supply shortfall. Transactive energy is based on the path-breaking research of Clearwater and Huberman at the Xerox Palo Alto Research Center (PARC) published in 1993. At PARC, they created moment-by-moment thermal markets to manage data center cooling; an agent on each server bid for the cooling it needed. This approach eliminated hot spots and reduced energy costs even as it eliminated the need to develop ever more complex control and sensing strategies.
Distributed energy makes the problems of effective grid operation worse. Distributed energy refers to the developing model in which every node on the grid is potentially a power source as well as a power user, driven largely by renewable energy such as solar photovoltaics (PV) and wind. Distributed energy changes the centrally managed, essentially hub-and-spoke distribution model in which energy flows down into what is potentially a two-way peer-to-peer network over the same infrastructure. Sites which contain Distributed Energy Resources (DER) can choose whether or not to come to market at any moment. Transactive energy is the developing means to manage this growing complexity.
Distributed energy is local, so distributed energy markets (and prices) must be local. Traditional local prices in power, referred to as locational marginal pricing (LMP) or nodal pricing is based on physical limits of the transmission system—a single bottleneck can affect all “downstream” points. LMP can be set centrally, calculated based on line physics and historical use. DER potentially places the power sources downstream of the congestion, and alongside the power customers. Nodes containing DER can decide whether the energy available is used to support the grid or internal purposes. Only actual markets and set clearing prices for DER.
There is no effective ownership of DER without local storage. Without local storage, grid nodes are always price-takers. Grid operators have a strong and legitimate interest in throttling how much DER is dumped onto the grid at any moment. Without local storage, grid operators must be able to turn off DER, i.e., set when a node can come to market. Even if a node invests capital in DER asset, if a third party determines what prices the node must take for the product of that asset, and controls when that asset can come to market, then the owners of that node cannot be said to own the asset.
Local markets will not really work without local storage. Local storage is necessary to create actual economic ownership of DER.
The best use for DER is and will always be local consumption. A building need not be Net Zero Energy (NZE) to consume power locally first. Use energy locally first. The next best use for DER is to store energy locally, perhaps for later consumption on site. Any excess, or any deficits in local power can then be made up through market operations. This is the essence of the new power movement, sometimes called Farm-to-Plug.