Transactive Energy Makes Buildings Part of the Solution to Grid Vulnerabilities

A very important conference occurred in Portland, Oregon last week – the Gridwise Architecture Council hosted the first international Transactive Energy Conference.  The topic of transactive energy is so new that there’s no formal definition yet, but as the author of the Smart Grid Dictionary, here’s my suggestion.  Transactive energy is a software-defined, low-voltage distribution grid that enables market participation by distributed energy resources (DER) bidding generation of negawatts or kilowatts.  Transactive energy describes the convergence of technologies, policies, and financial drivers in an active prosumer market – where prosumers are buildings, EVs, microgrids, or other assets.

Transactive energy will play a critical defining role in grid modernization and shaping the Smart Grid.  Buildings, as noted in last week’s article consume 40% of the nation’s energy.  And while building owners can justify purchase decisions on energy savings as well as sustainability values, there’s another crucial factor for building owners to invest in technologies that reduce energy use and deliver self-generation.  That reason is to address the increasing vulnerability of the electrical grid to momentary and sustained power outages to both natural and human causes.

Buildings and their occupants are impacted by grid-related power outages.  The negative impacts range from reduced work productivity and decreased occupant safety and health to reductions in lifestyle standards.  Just like real estate values are higher for green buildings with LEED recognition, in the future, buildings that are grid-hardened may command premium prices because they preserve delivery of services regardless of grid status.  It is a compelling new variable in value propositions for tenants and occupants.

Conference presenters from the Department of Energy, Pacific Northwest National Lab, and utilities including Bonneville Power Administration and Portland General Electric asserted that buildings and microgrids can and should become part of the solution.  Buildings and microgrids can become “hardened” nodes in the grid – meaning they can provide some or all of their own energy as situations dictate.  To do that buildings need to be much more intelligent and energy self-sufficient than they are today.  They need to be self-configuring in energy needs and engaged in continuous commissioning through data accumulated from energy generation, storage and consumption assets, occupant activities, and other sources like weather reports.

A quick gap analysis reveals that today’s technologies such as building energy management systems (BEMS) need to improve in several ways.  First, they need to become more ubiquitous and deployed in small and mid-sized buildings – not just large ones. Then, disparate BEMS made by different vendors will have to exchange data building to building, not just building to grid.  Finally, BEMS have to be easy to retrofit into existing building stock.  In short, BEMS need to be affordable, scalable, use open communications protocols, and be easy to deploy and user friendly.

Other gaps are policy-related, with more immediate impacts on utilities rather than building owners and facilities managers.   Regulated utilities are not incented or funded to be innovative, aside from the Smart Grid Investment Grants (SGIG).  Regulated utilities are also not motivated to build resilient grids, and today’s metrics for reliability are just regional guidelines rather than a national benchmark for a minimum uptime requirement.  The real costs of outages are not factored into regulatory decisions today.

Finally, we need to build transactive markets for assets that could be microgrid generation, building-based energy storage, or negawatts generation through ADR (Automated Demand Response) programs.  Simply put, the current market that exists at the wholesale or bulk electricity level has to be pushed downstream to the retail or distribution grid level and expanded to accommodate energy storage.  A challenge yes, but one that has been solved by Wall Street to create a large-scale distributed and decentralized market for stocks with participation by large funds as well as individual investors.

It will take time to get from point A, today’s grid and building technologies and power markets to point B, a Smart Grid with intelligent buildings and transactive markets, but it can be done.  And after participating in the Transactive Energy Conference in Portland and hearing about the initial plans and progress being made, I’m convinced that it will happen in my lifetime.

Building strategies to prepare for a transactive energy future will be discussed at IBcon in the session titled Smart Grid and ADR – How Far Have We Come?  I’ll share more insights into how buildings can be major transactive energy actors in the Smart Grid.


Smart Grid Policy Trends to Watch in 2013

The large-scale rollouts of smart meters heralded one of the first noticeable machine to machine (M2M) communications deployments.   It also launched a series of conversations about safety and privacy concerns, which will continue to play out in many other M2M applications.  DOE ARPA-E funding jumpstarted an interesting array of technologies that will shape grid modernization – particularly in renewables and energy storage.  The ongoing IT/OT convergence will continue to influence utility operations and consumer interactions.

So what will be the most influential Smart Grid trends in 2013? There’s always the potential for technology breakthroughs – particularly in fixed and mobile energy storage.  However, we’re well overdue for gamechanging policies, because the current practice of applying technology innovations within existing utility business models is akin to pouring new wine into old wineskins.  Something’s gotta give.

Here are four policy trends that will gain momentum in 2013:

  1. Industry attention will focus on transactive energy, which conceptualizes the impacts of widely distributed energy resources on utility business models, technologies/services, markets, and consumers.  Organized as peer-based energy grids, this concept would revolutionize the electricity grid by enabling massive integration of renewable energy sources into the grid, and “democratizing” the energy marketplace by allowing prosumers producing relatively small amounts of kilowatts or negawatts (via demand response) to participate in the market.  The GridWise® Architecture Council is already at work on the metaconcept.
  2. Forward-thinking regulators will consider how to influence utilities to act as distribution grid load controllers to accommodate new sources of kilowatts or negawatts without detriments to grid reliability and resiliency.  Managers of wholesale energy markets will continue to plan and experiment with programs that incorporate distribution grid participants into the bulk power grid.  PJM has made the most progress in expanding market participation, but CAISO is also actively engaged here.
  3. The energy/water nexus will become a more dominant part of project and technology conversations.  While the extremely synergistic relationship between energy and water has been publicized by many organizations, it hasn’t achieved critical mass in the minds of policy makers or the general public.  But that’s changing in the USA and around the globe.  Large water projects for desalinization and water transport often use significant amounts of energy to support pumps and treatment.  These infrastructure projects will be weighed not only on their overall public costs versus benefits, but also from the perspectives of how their energy loads impact local grids.  Funded projects and selected technologies may be the ones that are the most energy-frugal.  Natural gas fracking technologies will come under greater scrutiny in terms of the impacts of drilling fluids and practices to the purity of ground and underground water supplies.
  4. In a rare show of bipartisanship, Congress will allow Master Limited Partnerships (MLPs) for renewable energy, which are currently limited to oil and gas investments.  MLPs are taxed like partnerships, but owned like stock.  This financing mechanism has been quite successfully used to organize funding of large infrastructure projects with lower costs and reduced risks for investors.  It also allows for a greater range of participation in investments.  This website provides an excellent description of how MLPs work.  Leveling the playing field for renewables via MLPs will accelerate projects across the many states that have Renewable Portfolio Standards (RPS), despite efforts by fossil fuel industry groups to weaken or eliminate these standards.

Policy changes won’t happen overnight, but these trends are worth watching to understand the evolution of the Smart Grid across the entire value chain from generation to consumption.