What is Transactive Energy and Why is it Important to Microgrids?

June 23, 2020 By Lisa Cohn

The growing emphasis on using microgrids to generate revenue is leading to increased discussion of transactive energy…. The Monash paper, “Transactive Energy Market for Energy Management in Microgrids: The Monash Microgrid Case Study,” offers by way of example a microgrid being developed at the Australian university consisting of 20 buildings — a load of 3.5 MW — plus 1 MW of solar, a 1 MWh battery and two electric vehicle chargers.

Located on the university’s Clayton campus, the microgrid will receive and store energy from numerous renewable energy sources.

The university, Australia’s largest, also has proposed creating a Microgrid Electricity Market Operator, a third party entity that would coordinate distributed energy resources (DER) and interface with the wholesale electricity market and the ancillary services market. DER owners participating in the market would be compensated for providing grid services, such as frequency and voltage control.

Defining transactive energy

A microgrid market operator would help enable transactive energy — “the ability to control the electrical grid, the flow of power in the electrical grid using economic or market-based constructs,” as defined by Kay Aikin, CEO and co-founder of Dynamic Grid, an affiliate of Introspective Systems. Aikin spoke at the Microgrid Knowledge virtual conference June 3 in the session, “How Microgrids Make Money.”

In their paper, Monash University researchers say transactive energy encourages “dynamic demand-side energy activities based on economic incentives and ensures that the economic signals are in line with operational goals to ensure system reliability.”

The paper noted that transactive energy benefits both DER operators and the central grid. DER operators are able to tap into new revenue streams by selling services to the grid; the grid gains greater stablization from the services.

Aikin also said that employing transactive energy helps with two major challenges to microgrid development: capital and operating costs.

“One way we can actually make microgrids lower their operations cost and increase value streams is use this idea of transactive energy, and that is making loads integrate into the microgrid and actually contribute to the operation of the grid,” she said.

Creating pricing signals is an important part of this process, the Monash University researchers said.

Monash University plan

Monash University’s plan is to integrate distributed energy resources and actively manage them, predicting their demand and flexibility. Customers will be rewarded for providing services.

The university microgrid will be capable of controlling when and how to use its energy, and that can lower demand and strain during peak periods. It will also help stabilize the grid by providing resilience that will benefit the larger community, especially during severe weather.

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The project will examine a number of scenarios, including peak demand events. The electricity retailer might ask the university to decrease load in return for financial incentives, creating a market event. In this scenario, potential flexible resources would be identified — distributed energy resources such as electric vehiecles, solar and storage. They could reduce their demand or provide resources for the grid. After an event, the microgrid operator would log transactions for billing purposes.

Microgrid assets will be monitored in real time, which will help provide efficient and reliable supply. With a transactive market in place, each building will be able to buy and sell electricity, and also respond to pricing signals.

The university engaged AZZO, an Australia-based company, to build a medium voltage SCADA distribution management system and power quality monitoring solution for the three medium voltage rings on the Clayton campus in preparation for the microgrid automation. AZZO deploys EcoStruxure products by Schneider Electric for metering, monitoring and control of electrical distribution systems, microgrids, utility scale solar photovolatics and battery energy storage systems.

Smart buildings plus microgrids

In her presentation, Aikin cited a possible scenario in which a university with a microgrid on campus might include solar and storage. Numerous buildings within the microgrid would work together to balance the microgrid. The microgrid would sell services to the larger grid. The microgrid would balance variable generation — from solar energy, for example — and provide peak load reduction. In doing so, it could decrease costs for the entire grid

“Smart buildings integrated with microgrids provide advantages to the entire system,” she said. “You can provide multiple services to both the building owner and also to the microgrid operator.”

In this example, balancing the microgrid would require load — such as appliances and heat pumps — to provide flexibility by reducing or increasing energy use as needed. Benefits would be shared among all the microgrid users.

To balance the microgrid when power availability from the main grid is dropping — on a cloudy day, for example — the building owners would lower consumption, and more energy from the battery would be used. On sunny days, when power is available from solar, the buildings would consume more energy, providing balance by using available solar that might otherwise be wasted, Aikin said.


By Introspective Systems, for “How Microgrids Make Money,” Microgrid Knowledge Virtual Conference

“The idea of transactive energy is when power is scarce, for instance, there’s a cloudy day, consumption will go down and production will go up from the battery,” said Aikin. “And when power is abundant and you have a very sunny day, consumption will actually go up to help balance the grid, and production will go down.”

Under this scenario, the buildings inside a campus are each their own value center. The buildings could supply services to the microgrid so the microgrid could provide expanded services to the outside grid.

The buildings might have heat pumps, for example, that help contribute to this balancing act. The heat pumps would reduce their demand when power availability is low and use grid power when power availability is high.

“In this case, the buildings that have the heat pumps are receiving value for services they’re providing and helping to balance the grid using power when it’s very abundant, and when power is not abundant, they lower their loads. So they provide value to the grid,” Aikin said.

Overall, using transactive energy, microgrids can yield more value and income by working along both sides of the “fence,” she said. They provide services to consumers at the lower end of the grid, and benefits to the larger grid.

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University Microgrids Give Campuses Intelligent Control of Energy Assets and Use

June 25, 2020 By Microgrid Knowledge Editors1 Comment

Get the full report.

A recent survey of 2,000 U.S. voters by the Civil Society Institute found that most had never heard of the term microgrid, or they had heard of it but had the wrong impression. But when microgrids were explained to them, they showed a strong predisposition to the concept.

“Once people understand microgrids, they see the importance of them in their community,” said Andrea Camp, senior project manager at the institute, a nonprofit public policy think tank.

Although microgrids have existed since the electric grid emerged over a century ago, the technology started regaining traction following Superstorm Sandy in 2012. Today, microgrids are viewed as a key component of the emerging smart grid, as well as the “smart campus” vision as defined by Siemens in their new Campus of the Future report. Navigant Research, a Guidehouse company, forecasts 10-fold growth for the microgrid industry from 2019-2028.

So, what is a microgrid, and why is this technology becoming an important part of the U.S. energy landscape?

A microgrid is a self-sufficient energy system that runs 24/7/365 and serves a discrete footprint, such as a college campus, hospital complex, business center or neighborhood. In a sense, a microgrid is the electric grid in a compact form because it generally contains the same basic elements: generators to produce energy, a means to distribute the energy, a means to control the energy supply and demand, and customers who use the power. Contemporary microgrids also often include energy storage systems, typically batteries, to help balance and optimize supply and load while providing backup supply capacity. And, microgrids have begun to incorporate electric vehicle charging stations, thus connecting the distributed electricity supply grid to a cleaner transportation fleet.

Intelligent control of your energy assets and use

But a microgrid is more than a mere grouping of energy assets. What sets a microgrid apart is its microgrid controller, the brain of the operation. This is a relatively inexpensive software-driven system that gives the microgrid the ability to undertake various beneficial functions, among them islanding from the central grid. If a power outage occurs on the grid, the controller signals the microgrid to separate from the grid to avoid the disruption. Its generation and storage systems ramp up as needed to become sole providers of power to the buildings the microgrid serves. Islanding can be designed to occur so seamlessly that those within the building are unaware that they are no longer on grid power but are being served by the microgrid controller and associated local generation assets.

Microgrids as protection from outages

This ability to island produces the hallmark benefits of a microgrid: reliability, grid independence, and resilience. University microgrids are able to keep the power flowing on campuses, at least to critical loads, even when their neighbors are in the dark. This is important as campuses often serve as community shelters during an emergency.

The ability of a microgrid to operate independently from the electric grid is especially important in North America because the magnitude of the grid and its interconnectedness make it particularly vulnerable to power outages. The U.S. grid encompasses hundreds of thousands of miles of high-voltage electricity transmission lines and millions of miles of lower voltage distribution lines that deliver power from thousands of generating plants to hundreds of millions of electricity customers. Because all of these elements are interconnected, a single tree falling on a power line can cause a cascading failure that knocks out power in several states, a lesson the U.S. learned during the Northeast Blackout of 2003.

University microgrids can be designed to capture market opportunities associated with grid integration such as renewables balancing, demand response and spinning reserves.

Microgrids to optimize renewable energy

While islanding may be the most notable characteristic of a microgrid, it is but one of several valuable functions made possible because of the intelligence of the microgrid controller. The controller can optimize for various outcomes. It might be programmed to maximize renewable energy or minimize cost or carbon output. The microgrid’s intelligence also can be leveraged to manage building electrical loads efficiently—when electricity prices are high, it can reduce energy flow to buildings or operations that are not essential, such as classrooms not in use at that time. Microgrids can also be designed to capture market opportunities associated with grid integration such as renewables balancing, demand response and spinning reserves.

University Microgrids
Microgrid misconceptions

Microgrids are often confused with backup generators; in fact, they are much more. Backup generation, typically fueled by diesel or natural gas, is deployed (by definition) only when needed and typically using simple control systems. Backup generators alone do not enable independent operation from the grid during an outage and are typically limited to supplying short-term emergency power. In contrast, a microgrid combines localized distributed generation assets. As we described earlier, these assets may consist of a combination of reciprocating engines, solar PV, fuel cells, cogeneration, energy storage and other forms of energy supply. They serve a set of interconnected loads by way of a sophisticated controller that enables automated grid islanding and various levels of system optimization.

As a result, a robust microgrid has many layers of redundancy. If one asset is too expensive or does not operate—perhaps it’s a cloudy day and the solar panels are not producing energy—then another form of generation, imported power and/ or energy storage supply comes into play. This redundancy also proves beneficial when certain fuels become scarce. For example, after Hurricane Maria, Puerto Rico found itself short on the diesel required to run many of its backup generators.

But that’s not the only reliability advantage of a microgrid over a backup generator. Because most microgrids operate 24/7/365, performance is constantly monitored. Need for repairs or maintenance becomes evident and should be quickly resolved. The same is not true of backup or emergency generators. Since they typically are only run when needed, they sit idle except for periodic required testing. Too often, any malfunction only becomes apparent to a facility manager during a power outage when the backup generator is suddenly called upon to perform. When this happened at a New York hospital during Superstorm Sandy, hospital staff were forced to evacuate patients, and, in some cases, carry them down several flights of darkened staircases.

More on university microgrids

The full report provides further case studies, including outlining a recent Princeton microgrid project.

Catch up on the first article in this series on campus microgrids.

In the coming weeks this special report series will explore the following topics surrounding campus microgrids: 

  • Why Microgrids Make Financial Sense
  • How Microgrids Boost Decarbonization Efforts
  • Microgrids Acting as Teaching Tools and Community Partners

Download the full report, “The Genius of Microgrids in Higher Education,” courtesy of Siemens, to further explore the potential of university microgrids.