What is Transactive Energy and Why is it Important to Microgrids?

June 23, 2020
The growing emphasis on using microgrids to generate revenue is leading to increased discussion of transactive energy, a concept described in a new paper by Monash University researchers and featured at the recent Microgrid Knowledge Virtual Conference.

The growing emphasis on using microgrids to generate revenue is leading to increased discussion of transactive energy, a concept described in a new paper by Monash University researchers and featured at the recent Microgrid Knowledge Virtual Conference.

The Monash paper, “Transactive Energy Market for Energy Management in Microgrids: The Monash Microgrid Case Study,” offers by way of example a microgrid being developed at the Australian university consisting of 20 buildings — a load of 3.5 MW — plus 1 MW of solar, a 1 MWh battery and two electric vehicle chargers.

Located on the university’s Clayton campus, the microgrid will receive and store energy from numerous renewable energy sources.

The university, Australia’s largest, also has proposed creating a Microgrid Electricity Market Operator, a third party entity that would coordinate distributed energy resources (DER) and interface with the wholesale electricity market and the ancillary services market. DER owners participating in the market would be compensated for providing grid services, such as frequency and voltage control.

Defining transactive energy

A microgrid market operator would help enable transactive energy — “the ability to control the electrical grid, the flow of power in the electrical grid using economic or market-based constructs,” as defined by Kay Aikin, CEO and co-founder of Dynamic Grid, an affiliate of Introspective Systems. Aikin spoke at the Microgrid Knowledge virtual conference June 3 in the session, “How Microgrids Make Money.”

In their paper, Monash University researchers say transactive energy encourages “dynamic demand-side energy activities based on economic incentives and ensures that the economic signals are in line with operational goals to ensure system reliability.”

The paper noted that transactive energy benefits both DER operators and the central grid. DER operators are able to tap into new revenue streams by selling services to the grid; the grid gains greater stablization from the services.

Aikin also said that employing transactive energy helps with two major challenges to microgrid development: capital and operating costs.

“One way we can actually make microgrids lower their operations cost and increase value streams is use this idea of transactive energy, and that is making loads integrate into the microgrid and actually contribute to the operation of the grid,” she said.

Creating pricing signals is an important part of this process, the Monash University researchers said.

Monash University plan

Monash University’s plan is to integrate distributed energy resources and actively manage them, predicting their demand and flexibility. Customers will be rewarded for providing services.

The university microgrid will be capable of controlling when and how to use its energy, and that can lower demand and strain during peak periods. It will also help stabilize the grid by providing resilience that will benefit the larger community, especially during severe weather.

The project will examine a number of scenarios, including peak demand events. The electricity retailer might ask the university to decrease load in return for financial incentives, creating a market event. In this scenario, potential flexible resources would be identified — distributed energy resources such as electric vehiecles, solar and storage. They could reduce their demand or provide resources for the grid. After an event, the microgrid operator would log transactions for billing purposes.

Microgrid assets will be monitored in real time, which will help provide efficient and reliable supply. With a transactive market in place, each building will be able to buy and sell electricity, and also respond to pricing signals.

The university engaged AZZO, an Australia-based company, to build a medium voltage SCADA distribution management system and power quality monitoring solution for the three medium voltage rings on the Clayton campus in preparation for the microgrid automation. AZZO deploys EcoStruxure products by Schneider Electric for metering, monitoring and control of electrical distribution systems, microgrids, utility scale solar photovolatics and battery energy storage systems.

Smart buildings plus microgrids

In her presentation, Aikin cited a possible scenario in which a university with a microgrid on campus might include solar and storage. Numerous buildings within the microgrid would work together to balance the microgrid. The microgrid would sell services to the larger grid. The microgrid would balance variable generation — from solar energy, for example — and provide peak load reduction. In doing so, it could decrease costs for the entire grid

“Smart buildings integrated with microgrids provide advantages to the entire system,” she said. “You can provide multiple services to both the building owner and also to the microgrid operator.”

In this example, balancing the microgrid would require load — such as appliances and heat pumps — to provide flexibility by reducing or increasing energy use as needed. Benefits would be shared among all the microgrid users.

To balance the microgrid when power availability from the main grid is dropping — on a cloudy day, for example — the building owners would lower consumption, and more energy from the battery would be used. On sunny days, when power is available from solar, the buildings would consume more energy, providing balance by using available solar that might otherwise be wasted, Aikin said.

By Introspective Systems, for “How Microgrids Make Money,” Microgrid Knowledge Virtual Conference

“The idea of transactive energy is when power is scarce, for instance, there’s a cloudy day, consumption will go down and production will go up from the battery,” said Aikin. “And when power is abundant and you have a very sunny day, consumption will actually go up to help balance the grid, and production will go down.”

Under this scenario, the buildings inside a campus are each their own value center. The buildings could supply services to the microgrid so the microgrid could provide expanded services to the outside grid.

The buildings might have heat pumps, for example, that help contribute to this balancing act. The heat pumps would reduce their demand when power availability is low and use grid power when power availability is high.

“In this case, the buildings that have the heat pumps are receiving value for services they’re providing and helping to balance the grid using power when it’s very abundant, and when power is not abundant, they lower their loads. So they provide value to the grid,” Aikin said.

Overall, using transactive energy, microgrids can yield more value and income by working along both sides of the “fence,” she said. They provide services to consumers at the lower end of the grid, and benefits to the larger grid.

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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.

Twitter: @LisaECohn

Linkedin: LisaEllenCohn

Facebook: Energy Efficiency Markets

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