The Dream of Transactive Energy Tariffs for Microgrids Inches Forward

April 7, 2023
For years the microgrid industry has discussed the need for transactive energy rates. Now, utilities are beginning to make it happen.

Transactive energy tariffs for microgrids and other distributed energy resources have long been a dream of the microgrid industry, and they’re slowly becoming a reality.

Generally, transactive energy tariffs are designed to help control the flow of power in an electrical grid using economic or market-based tariffs.

Microgrid supporters say that these tariffs from utilities will help boost the financial viability of microgrids by having utilities pay microgrid owners for power provided — at the real-time value of that power.

“This is the value for providing power from the microgrid,” said Melissa Chan, director of grid solutions and strategic partnerships at Fermata Energy, a Charlottesville, Virginia, company that offers bidirectional charging for electric vehicles (EV) connected to grids and microgrids. Plymouth State University, a Fermata Energy customer, is now using New Hampshire Electric Cooperative’s (NHEC) transactive energy rates for EVs capable of bidirectional charging to and from the grid.

Who's doing what with transaction energy

The number of utilities launching transactive energy tariffs continues to grow. In 2020, the California Energy Commission (CEC) created a project to test transactive energy tariffs called the Retail Automated Transactive Energy System platform and concluded that these tariffs are feasible in actual operation. The pilot took place in Southern California Edison (SCE) territory with 115 SCE customers. 

A CEC report on the project concluded that the commission should develop a road map to evaluate the impacts of utility business models that create a distribution system price that’s based on real-time system and market conditions.

In 2020, SCE launched its own effort, a project under which it used transactive energy management software from Opus One Solutions to improve the dispatch of distributed solar panels using price signals.

Now a few other utilities are approving or developing transactive energy tariffs. In addition to SCE and NHEC, the utilities starting this process include San Diego Gas & Electric (SDG&E)  and Roanoke Electric Cooperative in North Carolina, said Chan.

NHEC’s tariff, for all customers, forecasts electricity pricing one day in advance and sends customers daily alerts about the next day’s hour-by-hour electricity prices, she said.

Two Nissan Leaf EVs at Plymouth State University provided 1 MWh of energy to the university’s ALLWELL Center over a six month period.

Under the day-ahead electricity pricing tariff, Plymouth State University can buy electricity from the cooperative at low prices and store that energy in the EVs’ batteries. The university discharges the batteries to the cooperative’s system when prices are higher.

Microgrid role

A microgrid could also participate in such programs. In grid-connected mode, the microgrid would serve as a distributed energy resource on the utility grid and a microgrid controller would optimize the use of its resources and stored energy, as well as decide when to purchase grid electricity, said Chan.

With Fermata Energy’s bidirectional charging platform, Fermata analyzes data from utilities and customer driving patterns and utilization, weather and utility rates. It helps EV fleet customers by sending alerts about opportunities to earn revenue from their local utilities when discharging EV batteries to the grid or buildings. After the customers agree to discharge the batteries during those time frames, the Fermata platform signals the EVs to discharge the batteries, she said.

The EVs could be included in a microgrid as batteries on wheels, Chan noted.

California utility pilot

Meanwhile, SDG&E has proposed a pilot transactive energy tariff.

The real-time pricing pilot would pass onto customers, as their commodity cost, the wholesale price of electricity, according to a filing by SDG&E before the California Public Utilities Commission. This “dynamic” pricing is designed to encourage customers to reduce their energy use during evening peaks and help meet California’s clean energy goals. The goal is also to increase load flexibility by allowing for the integration of higher levels of renewables. This will reduce rolling blackouts and increase the use of electricity during times when there is a surplus of renewable energy on the grid, according to the proposal.

The SDG&E pilot would introduce real-time pricing slowly, with up to 100 medium and large commercial customers participating in the first stage. During the second stage of the pilot, SDG&E would make the tariff available to all customer classes except street lighting.

Real-time pricing, along with vehicle-to-grid or vehicle-to-microgrid programs, can significantly expand the resources in a microgrid and provide for flexibility, said Chan.

When there’s an energy emergency and the microgrid is designed to only power critical loads, bidirectional EVs from outside the microgrid can provide flexible power as needed. With transactive energy tariffs, the EV owners are paid real-time prices, boosting their incentive to help out grids or microgrids.

Transactive energy tariffs are indeed a dream moving toward reality, said Chan.

“This is a pricing signal that fits into what people have been talking about for years,” she said.

Interested in transaction energy? Learn more at Microgrid 2023: Lights On! in Anaheim, California on May 16-17.

About the Author

Lisa Cohn | Contributing Editor

I focus on the West Coast and Midwest. Email me at [email protected]

I’ve been writing about energy for more than 20 years, and my stories have appeared in EnergyBiz, SNL Financial, Mother Earth News, Natural Home Magazine, Horizon Air Magazine, Oregon Business, Open Spaces, the Portland Tribune, The Oregonian, Renewable Energy World, Windpower Monthly and other publications. I’m also a former stringer for the Platts/McGraw-Hill energy publications. I began my career covering energy and environment for The Cape Cod Times, where Elisa Wood also was a reporter. I’ve received numerous writing awards from national, regional and local organizations, including Pacific Northwest Writers Association, Willamette Writers, Associated Oregon Industries, and the Voice of Youth Advocates. I first became interested in energy as a student at Wesleyan University, Middletown, Connecticut, where I helped design and build a solar house.

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