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Bonneville Power Launches Pilot Project for Transactive Energy Christine Hertzog GreenBiz.com, September 17, 2013

Many ongoing smart grid pilots in the U.S. were initiated courtesy of funding from the American Recovery and Reinvestment Act of 2009 (ARRA) program.

But a few originated from utilities before the economic meltdown. These utilities realized that like other business sectors, it's imperative to reinvest in the business through R&D activities.

Bonneville Power Administration (BPA) is one of those far-sighted utilities. This federal nonprofit agency self-funds its operations and R&D through sales of wholesale power and transmission services. It is based in the Pacific Northwest territory, which includes Idaho, Oregon, Washington and western Montana, with customers in eastern Montana, California, Nevada, Utah and Wyoming.

BPA has been an active proponent of a concept called transactive energy. BPA participates in a regionwide pilot called the Pacific Northwest Smart Grid Demonstration Project. It's a key pilot that enhances overall industry knowledge about transactive energy, according to Terry Oliver, BPA's chief technology innovation officer.

The Smart Grid Dictionary defines transactive energy as "a software-defined grid managed through market-based incentives to ensure grid reliability and resiliency. This is done with software applications that use economic signals and operational information to coordinate and manage devices' production and/or consumption of electricity in the grid. Transactive energy describes the convergence of technologies, policies and financial drivers in an active prosumer market where prosumers are buildings, EVs, microgrids, VPPs or other assets."

BPA's pilot scope is "a vertical slice of the grid because it covers generation, transmission, distribution and consumption," he said. "What makes this pilot so integral to transactive energy is that it explores the interactions and coordination of variable generation and variable loads -- in other words -- manage these to play nicely with each other."

That's an important aspect to transactive energy because it envisions a grid with a much greater percentage of intermittent renewables, and a much greater role for demand response and dynamic pricing to influence loads.

The pilot was launched in October 2012, and incorporates activities among 11 utilities, including BPA. The pilot will gather data to help the regional grid deliver an abundance of wind-generated electricity that supplements plentiful hydro power, avoid transmission congestion, and learn how energy storage devices and smart appliances play roles in building reliability and resiliency at local and regional levels.

Transactive energy is more than technology investments and upgrades. It also presumes that markets and business models -- for utilities, consumers and other stakeholders -- will transform.

There are four main drivers in the U.S. for transactive energy transformations, noted Paul De Martini, managing director of Newport Consulting and a visiting scholar at Caltech's Resnick Sustainability Institute.

First, an evolution in customer expectations and behaviors as they transform into prosumers of electricity. Second, federal, state and even local policies are placing greater emphasis on renewable sources of electricity generation that are affecting our local utilities' distribution grids. Similar policy impacts on energy efficiency standards and building codes are the third reason, and finally, innovative technologies in generation and information and communications technologies offer new alternatives to existing means of managing electric grids.

There are significant challenges to completing this transformation of the electric grid. The current business model hinders much-needed value creation for bi-directional transactions of electricity sales.

"Changing this business model is essential to create opportunities for new classes of market participants," De Martini said. "It requires transparent pricing and rules-based monetization structures. For instance, demand response programs to reduce peak demand and services to balance realtime system operations could have very different values. The right market and business models can accommodate those distinctions in value."

Enacting these changes also will require regulatory changes to eliminate barriers to technology investments, markets access and greater consumer engagement.