Why every utility MUST learn the word transactive


By: SGN Staff


By Jesse Berst


In the 1950s and 60s, the Soviet Union used a centrally planned economy. Although it worked for a while, it eventually broke down and the country shifted to a market-based model.


Our electric power system is undergoing a similar transition. For reasons I'll explain, we must shift from central planning to a "transactive" system for managing the decisions on generation and use of electrical power. I'll give you a quick preview below. At the end, I will tell you where to get more information.


Why the traditional model will not work much longer

Traditionally, power systems have been centrally managed for one-way supply. There has been little use of market-based mechanisms for adjusting the demand side. Those that are in existence are either extremely complex or cause problems for distribution control systems and won’t scale.


But the electric power world is changing. We are rapidly approaching the day when power will be flowing in every direction from distributed generators scattered throughout the system. No central approach could ever hope to coordinate and dispatch hundreds of thousands of distributed energy resources, especially since many of them will be variable resources such as wind and solar.


We simply must transition to a market-based approach. Fortunately, this switch is underway, thanks to ground-breaking work from Pacific Northwest National Laboratory and efforts of the GridWise® Architecture Council (GWAC). Go to the bottom of this article for links to two GWAC events where you can get up to speed.


Defining transactive energy

Transactive energy means managing electricity supply, delivery and demand with economic value through markets, rates, contracts or other value based mechanisms. In particular, this means adapting these concepts to distributed energy resources and distribution operations. The term "transactive” comes from considering that decisions are made based on a value. In some cases - time of use rates, for instance - it may be a real transaction triggered by real prices. But you don't need actual prices, you just need a mechanism to signal relative value.


In simplistic terms, transactive schemes allow energy resources to be priced.  Pricing could result from organized distributed markets, bi-lateral contracts between customers and others, or utility tariffs and programs. GWAC is developing the necessary framework, guidelines and architecture to support this evolution and alignment with fundamental principles of reliable grid operation.