IEEE Power & Energy Magazine - May/June 2016 - 53
End-to-End Power System
Operation Under the
Transactive Energy Paradigm
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THE ELECTRIC INDUSTRY LANDSCAPE IS UNDERGOING SIGNIFIcant changes due to the increased use of intermittent renewable resources at
both the bulk-power and distribution levels, the emergence of new technologies, and the increased participation of distributed and demand-side capabilities in power system operations. Two major complementary developments are
gaining momentum to help address the challenges associated with the emerging industry landscape: a new distribution system operator (DSO) construct
and the transactive energy (TE) systems framework.
The TE systems framework expands the transactive paradigm established
in the mid 1990s for wholesale markets into the retail domain, with consumers/prosumers using end-use intelligent devices and platforms as transactive agents. In this emerging construct, transactive commodities need not
be limited to energy but may also include energy derivatives, e.g., ancillary
services, as well as transport rights similar to their wholesale counterparts.
Transactions may take place among prosumers, between prosumers and distribution operations/retail market operators, through the distribution utility
to bulk-power system operation or wholesale markets, as well as among
distribution utilities and bulk-power markets. The DSO construct expands
the conventional operational domain of the distribution utility operator to
enable a full utilization of demand-side and distributed energy resources
(DERs) and to also facilitate grid-edge and prosumer transactive exchanges
while ensuring reliable distribution system operation. Depending on the
regulatory provisions, and the extent of involvement of the utility as a participant in retail market activities, the DSO may be an independent entity
(IDSO), or the distribution utility. In the latter case, firewall separation will have to exist between the utility-managed
DSO functions and the marketing arm of the utility. The utility-managed DSO construct represents a single operator of
the distribution system that is capable of incorporating customer-side resources into the distribution system planning
and operation processes, thereby providing long- and short-term price signals for prosumer investment and operation
decisions, while maintaining the reliability, safety, and integrity of the distribution system itself.
The mechanisms for accommodating retail-level transactions in the face of distribution system realities may be based on
operational and technical constraints of the distribution grid, priorities established by the DSO based on operating guidelines,
implicit economic values expressed in bids and offers from transactive parties, or a combination of these. These same mechanisms could be used to offer new options for customers to lower energy costs, increase the use of renewable energy, and better
monitor and control electricity usage.
By Farrokh Rahimi, Ali Ipakchi,
and Fred Fletcher
ieee power & energy magazine