Transactive Energy Systems: The Market-Based Coordination of Distributed Energy Resources

Due to pressing environmental concerns, there is a global consensus to commit to a sustainable energy future. Germany has embraced Energiewende, a bold sustainable energy policy of no operational nuclear plants by 2022. California has set an ambitious goal that mandates 50% renewable penetration by 2025, 60% by 2030, and 100% by 2045 [1]. The vast integration of renewable energy into the power grid imposes daunting challenges on the conventional supply-side control paradigm. First, renewable energy is intermittent and uncertain. Integrating renewable energy will reduce the system inertia, inject undesirable variability, and substantially increase the need for system reserves. These reserves are typically provided by conventional generators. However, conventional generators have limited capacity and ramping rate, and they produce carbon emissions that defeat the carbon benefit of renewable integration. On the other hand, the increasing penetration of renewable energy also squeezes the response time needed to balance the power grid. That is, the time required to make critical operating decisions is decreasing from minutes to seconds and, in some cases, even subseconds due to the increasing variability of supply and demand. The shorter response time for decision making places significant challenges on the conventional power grid, which requires human interaction.