Four years ago, Zarko Sumic from Gartner predicted that the biggest electricity company by 2020 would have a similar business model as Uber’s (1). This means that the company will not own assets associated with the production of electricity. Like a shared economy platform, it will merely superintend the data of energy consumers and producers.

The Vice President of Gartner didn’t see any technical problems in his vision. The only thing standing in the way at the moment is governmental regulation. This prediction was made as Zarko saw that “energy flows are increasingly determined by market forces (referred to as transactive energy).” Since then, transactive energy increasingly became a controversial topic of discussion in the energy industry. But what exactly is it?

What is Transactive Energy?

Transactive energy systems mean that anyone can merchandise electricity on the grid. With these transactive energy systems, the current electricity consumers will be able to generate and vend their excess level of electric power (capacity) back into the electrical grid.

Basically, transactive energy is a concept to organize the growing population of autonomous energy-producing agents. It looks into the administration of energy agents without damaging the unidirectional or centrally governed grid in which they are associated.

Note that electrical grids that disseminate electricity from power producers to everyday users are now changing into smart grids. This allows for subsidiarity and automation of managing energy. Diverging from a concentrated grid in the direction of a deconcentrated network of nodes will possibly provide a more effective power grid. This electric grid will utilize more renewable assets to produce electricity. More importantly, it will grant final consumers the ability to take part not just as end-users but also as electricity producers.

All in all, transactive energy can be summarized as a two-way trade system. It is a scheme in which the electrical energy can be valued appropriately and channeled to where it is needed.

Perhaps a lot of people only use electricity when they need to—without thinking whether it’s peak or off-peak electricity time. This can result in costly and ineffective usage of energy.

To avoid this, people may wantto start employing smart grid technology like transactive energy. Through transactive energy systems, consumers and small producers can restructure the grid to be more practical and cost-efficient. Final users of energy can relieve any strain on the electric grid by contributingenergy to it. They can reduce their energy consumption during peak demandtimes as well.

Wind Turbine

The benefits of a Transactive, decentralized energy system

Here are some of the main benefits of transactive energy (2):

  • The concept of transactive energy does not exclude small-scale energy producers. This means that any qualified individual can become an energy producer by setting up a rooftop photovoltaic power station or PV system. Transactive energy promotes the usage of solar power.
  • Internet of Things (IoT) gadgets and appliances will only use power when it is low-priced. IoT devices that use a large amount of energy like automatic washers, air conditioners, or dishwashing machines can be automated to utilize electricity when it is less than a specific price. Through transactive energy, electric automobiles that depend on a battery will likewise use energy (for charging) when it is in its most affordable form.
  • Keep in mind that if you use energy from a closer source, you will pay less compared to acquiring energy from a remote power provider. With transactive energy systems, you can purchase power from your neighbors with solar panel kits or even solar spins. Think of it like the decentralized finance industry, where the middleman are removed and transactions are peer to peer in nature.
  • Since the supply of power doesn’t come from a single source, energy failures will diminish. Note that the transactive energy system will be deconcentrated. This means that there will be fewer central points of power disruptions. For example, people who are not gravely affected by a typhoon won’t have to deal with large-scale power outages any longer.
An image of a decentralized wind farm

And now for the Challenges…

Here are some of the challenges totransactive energy systems:

  • Security threats to energy infrastructure
  • Making grid-tied devices interoperable
  • The task of governing the platform (sinceit’s decentralized)

Gunther Pragmatic Transactive Energy

Erich W. Gunther from the Institute of Electrical and Electronics Engineers (IEEE) released a study entitled “Pragmatic Transactive Energy: A Green Field Campus Design.” The study’s summary objective is to “achieve business continuity with a system that pays for itself and supports environmental stewardship.”

For you to better understand transactive energy Gunther (3) explains the following:

  • “Bartering and transactions occurred using monetary values but with no market and energy cost was not a factor. . .
  • Transactive energy based control and optimization doesn’t have to involve energy or a market
  • Transactive energy based control and optimization does require good information and process cost/value knowledge”

Transactive Energy a Sustainable Business and Regulatory Model for Electricity

On the whole, transactive energy is an economical and efficient mechanism. It can make people’s lives easier and benefit small-scale energy producers in the future.