How transactive energy will create a more participatory grid

The first step toward building a clean, modern, transactive grid, according to John Caldwell, Director of Economics at the Edison Electric Institute, could be avoiding the word “transactive.”

“Transactive energy is still a term — if you ask two people what it is, you’ll probably get entirely different answers,” Caldwell said in his opening remarks for a recent webinar, Moving to a More Participatory Grid, sponsored by the Smart Electric Power Alliance (SEPA). “It’s a little bit intimidating to a lot of people, even in our industry, because it’s still being fleshed out.”

But, subbing in the term “participatory” — used throughout the webinar — is not intended to redefine or replace “transactive,” according to Andrew Cotter, SEPA’s Senior Manager of Technical Services, who moderated the session.

Rather, Cotter said, “We are enabling energy industry actors to start using and understanding the concepts of transactive energy without scaring them off with intimidating jargon. It’s a way to say, ‘Look, we are already doing a lot of this; we just need to continue down this path.’ It makes the concept more accessible — more an evolution than a revolution.”

That the grid is changing — hopefully for the better — is now a given of the industry, Caldwell said. The emerging future grid will be different — as generation also transitions from central plants to distributed resources. Customers want and will have more choices in the kinds of energy products and services they want to use.

The SEPA webinar zeroed in on how this evolution is progressing, particularly in California and Hawaii, both states where high levels of solar and other distributed energy resources (DERs) are changing the grid and how customers interact with it. In addition to Caldwell, Mike Florio, a former member of the California Public Utilities Commission and now a Senior Fellow at GridWorks, and Colton Ching, Senior Vice President of Planning and Technology at Hawaiian Electric Company, discussed the different approaches and challenges to transactive energy emerging in these two states.

“Both Hawaii and California have been in this situation where solar plus storage are starting to happen on the grid. (These technologies) were approached as something the grid would figure out,” Florio said. “We have moved from how do we accommodate these things to how do we integrate them so they can provide grid support. We are finding out there is a lot of value we weren’t capturing.”

Capturing value — for individual customers and the grid — is a key driver for a range of issues related to transactive energy and the participatory grid that will make it possible.

Caldwell believes getting from the current, already-changing grid to a future in which customers have a range of options for participating in energy transactions will unfold in three stages. Stage 1 begins with the introduction of time of use (TOU) or other time-varying rates. Stage 2 adds locational value to rate design — so what you pay depends not only on the time you use energy, but where on a distribution system you use it.

Stage 3 is where the grid gets truly participatory, allowing customers to buy or sell energy or grid support services at the distribution or even wholesale level, he said.

“In the first two steps, the transaction is still happening with a central agent, which is probably the utility,” Caldwell said. “In Stage 3, the party at the other end (of the transaction) is a person, company or microgrid. The grid does not go away; it allows the transaction to occur.”

Florio agreed that TOU rates,which California is preparing to roll out in 2019, are a major catalyst for customer participation in energy markets. Traditionally, he said, the only way for customers to save money on their electric bills has been to simply use less electricity. Time of use rates — coupled with DERs such as solar, storage or electric vehicles (EVs) — provide “more options for customers to be more participative in their energy activities,” he said.

For example, low mid-day TOU rates could encourage EV owners to charge their vehicles in the early afternoon, when cheap, excess solar power may be available.

But, he said, “the first thing you need to do is clear away the barriers that (prevent) parties from participating. Interconnection rules are important. California spent years refining interconnection — how customer can attach devices to the grid. It’s a huge barrier if you don’t get it right. And you don’t do it once and it’s done. As technology gets more complex, (interconnection) changes.”

Ching agreed that getting the technology and regulations right is ongoing and critical. On the technology side, he sees a major gap in the communications networks that will support customer participation in the grid.

Caldwell’s three stages are “going to require a communications network that doesn’t just communicate data for transactions, but data for grid operations,” he said. “Utilities have been very good at providing communications at the bulk level, but to do that at the distribution and individual customer level, with fidelity and reliability, is a hole in the future solution set.

“Our premise around this idea is that we want to push as much of our distribution and grid-edge devices to operate autonomously, without centralized control,” he said. This kind of grid-edge strategy will also allow communications to be less centralized, more efficient and provide more visibility for distribution system operators, he said.

Customers — drivers or validators?

The role of the customer in the participatory grid was another central theme in the webinar, and the issues here were just as complex as the technology and regulations.

And, as Florio said, they may have to be continuously recalibrated.

Caldwell sees customers not as a major driver of the participatory grid, but rather as the critical validator. Customer acceptance and adoption of new technology and regulations are “the ultimate sign of whether a change will stick,” he said.

In Hawaii, where the state is moving toward running 100 percent on renewable energy by 2045, Hawaiian Electric’s recently approved grid modernization plan began with “a hard look at what our customers want,” Ching said.

“We spent half our time talking with customers and other stakeholders before we put pen to paper,” he said. “It was an important departure to how many utilities approach planning, by really looking at what customers want from the utility and electricity. How do we create and change our electric system to provide greater interconnection (of DERs) and leverage them to work together with the entire system?”

One of the key challenges in this transition, both Florio and Ching said, is protecting customers who still want traditional energy services — who don’t want to think about or transact with the grid.

“We have the privilege and the responsibility to serve all customers,” Ching said. “The magic happens when you provide customers with all options customers want in a way that ensures the electric system continues to operate well and efficiently, and benefits all customers, where one class isn’t obtaining benefits on the backs of others. That’s the hard part.”

At the same time, Florio said, the rate changes that are integral to the participatory grid and transactive energy — TOU and location-based rates — will create winners and losers. One example, customers who can not shift their electricity use to an off-peak time with lower rates — a homebound person who needs to keep air conditioning or a medical device on 24-7 — could see higher electric bills.

“The losers will resist,” he said. “It’s a highly politicized issue.”

No critical thresholds

Utilities and regulators should not wait to start untangling these challenges until a critical mass of customers adopt specific DERs.

“There is no critical mass threshold,” Ching said. “You want to create the framework and rules and rates and technical requirements early, with the first customer that participates in a program. States with low levels (of DERs) won’t get immediate benefits, but as more customers come in, you will build upon that foundation.”

A case in point is California’s move toward allowing aggregation of behind the meter distributed resources — such as solar and storage. The California Independent System Operator began the process of studying the issues, getting input from stakeholders and drafting regulations in 2015, when the underlying technology was in the early stages of development.

But he said, putting storage behind the meter and aggregating it has been “a very successful and dynamic development. You can start to capture multiple revenue streams — bill management for customers, demand response for utilities, and you may also be able to  to participate in energy or frequency response markets. We’re just beginning to figure out what energy storage can do for the grid.”

It also begins to break down the line between the customer and utility sides of the meter, said Ching, which he sees as a basic building block for a participatory, transactive grid.

But crossing that line will open new opportunities for utilities to also be more participatory, he said, with customers and the grid.

“The electric grid provides a range of services to our customers — be it backup power or the primary (platform) for everything that customers use electric power for,” he said. “If a customer invests in DERs, the grid can compliment that. If you want to monetize a DER, aggregate it, the grid enables it. That is the value proposition we talk about.”

Want to learn more about transactive energy. The Transactive Energy Systems Conference will be June 12-14, at the Massachusetts Institute of Technology in Cambridge, Mass.

Interested SEPA members are also invited to join our Transactive Energy Working Group. For more information, contact [email protected].