Blog Graphics20150430.001If we look at the hourly demand for electricity on the grid we can see the “peaks” very clearly. The data on the left is for a summer-peaking midwest utility. All the “peaks” in the sample data are caused by weather variation. The peaks are caused by high air conditioning demand.

Today, generation planners use weather forecasts to plan ahead. See the California ISO website. The ISO plots show one-day ahead forecasts. ISO dispatchers use the weather forecasts to adjust power plant status and maintenance schedules in a way that maintains reliability and saves money.

The Transactive Energy (TE) business model makes forward and spot tenders and transactions available to all customers and prosumers. Customers can plan their purchases and sales using the latest weather forecasts. Imagine what will happen to the peaks when customers are able to look at weather predictions and adjust their energy usage? If they have thermal or battery storage they can buy power on the shoulders and sell it at the peak.

Blog Graphics20150430.003In future we do not know where the peaks are going to be.  Solar and wind will have a greater role in shaping net demand. Forward and spot transactions enable us to adapt quickly and efficiently. Customers will move toward low cost energy and away from high cost periods. The system will effectively “hunt” down high cost peaks and remove them.

The Transactive Energy model takes advantage of customers’ energy management systems (EMS.)  Every customer’s EMS will see the same weather forecasts that the ISO sees today. They will also see forward and spot prices for energy, day by day, hour by hour, minute by minute. They will use this information to adjust HVAC and appliance usage in a way that maximizes their net benefit. They will make the tradeoffs between comfort, convenience, and economy. (In practice, customers will tell their EMS systems what their preferences are and the EMS systems will do all the communication and computation with the TE Platforms.)

The peaks on the grid will decrease. They may disappear altogether if there are enough storage devices and smart appliances on the system.  The storage does not have to be batteries. It can be thermal storage in the form of hot or cold water. (Water heaters are a terrific energy storage device.) TE will allow electric vehicle owners to be an active part of the grid.

TE coordinates investment and operating decisions throughout the energy ecosystem with forward and spot transactions. Forward transactions allow customers to subscribe for energy before they need it. A big benefit of forward transactions is the coordination of customer and producer investments in solar, storage, and efficiency. We do not have a good way of doing this today.  We don’t have markets where customers can manage risk in the same way wholesale producers do.

The role of spot transactions is to “trim” the balance between producers and consumers and coordinate operating decisions. The spot transactions are used to make corrections when customers over or under subscribe to energy or distribution services. Spot transactions help reduce volitility in demand.

We won’t know how effective TE will be until we try it. We need pilot projects to demonstrate its capabilities. Perhaps we will see pilot projects soon in New York or California. See  New York’s Billion dollar bet on energy efficiency or Brown orders deep cuts in greenhouse gas levels.

For more about the TE business model see the book, Transactive Energy: A Sustainable Business and Regulatory Model for Electricity.

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The book is available for the iPad or Mac on iTunes.

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It is available for the Kindle and PC on Amazon.

To follow industry developments in TE visit the Transactive Energy Association group on LinkedIn.

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