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Transactive Energy Markets will Drive Distributed Power
Transactive energy markets hold the promise to achieve economic efficiency and reliability across the bulk power system and distribution networks.
have previously discussed how distributed power is gradually becoming a
serious part of the new business model for Smart Grid and explored the
reasons why common sense is now starting to change regulatory powers.
We highlighted how in Germany the utilities are coming together with
owners of distributed energy to invest in major distributed power
schemes that will benefit all the stake holders and reduce CO2
we have seen a lot of discussion on distributed energy in the US;
taking into account how it would apply there given the differences in
the structure of utility operations and the need to accommodate major
swings in electrical demand. This includes “transactive energy” which
roughly translates into interactive pricing through combining Smart
Grid hardware and economic / time of use software now making real time
pricing a possibility.
As Kathleen Wolf-Davis, editor of Intelligent Utility puts it in her article http://www.intelligentutility.com/article/13/05/transactive-energy-isn-t-new-ability-make-it-work transactive energy markets can open doors to allow distributed energy, including renewables, microgrids, CHP generation projects (now called “prosumer markets”) on the downstream rather than the up. However in order to get this into operation, it would require some fundamental changes to the electricity utility business model.
time deregulation has created incentives that have enabled the growth
in demand response to kick in. This cannot however meet the need for
flexible resources to integrate wind and solar PV into the bulk power
system. Transactive energy markets hold the promise to achieve economic
efficiency and reliability across the bulk power system and
distribution networks. There is a significant untapped potential of
distributed energy resources in the developed economies of the world to
leverage a new class of flexible mixed distributed assets (e.g.,
distributed generation, responsive demand, storage, electric vehicles
etc); what has been called DR 2.0, to manage the power system. But,
this requires changes in both market models and grid operations.
enable distributed resource participation in a local market that is
coordinated with the bulk power system, it will require two fundamental
changes to the market model. The first is to resolve the balance
between efficiency and reliability across transmission and distribution
systems in a coordinated manner, and the second is to install market
rules that are more accessible to customers. But first of all in the
US, there is the need to sort out regulatory policy for distributed
energy resources and markets. This could raise jurisdictional issues
between FERC at the wholesale level and state regulators at the
distribution and customer level if the significant potential value from
distributed resources is to be realized.
the moment Power prices aren’t based on market demand or even true
cost. They are, essentially controlled by regulatory forces that must
agree rate changes, increases in charges and even attempts to recover
costs. So this must change because currently prices aren’t really free
to fluctuate at all, let alone respond to minute-by-minute pricing
previously highlighted that in German markets they are successfully
integrating flexible customer distributed generation through virtual
power plant (VPP) demonstrations. They have addressed participation
rules barriers for small generation, but have yet to tackle demand
response and “transactive energy”.
far as we are aware they have not made any major changes to laws and
policy governing the central utility model. At least one major utility,
RWE, has taken the view is you “can’t beat them then join them” and
they have taken the initiative to set up an organisation and to invest
and manage it together with stakeholders in distributed energy. They
are sailing in uncharted waters but we believe have the fortitude to
make it work. By the close of 2012, RWE Deutschland had connected more
than 250,000 plants to the distribution grid which feed in subsidised
electricity pursuant to the Renewable Energies Act (EEG). They are
continuing to drive forward the introduction and use of innovative grid
technologies (Smart Grids) in order to guarantee secure integration of
renewable energies and improve the opportunities for grid control.