Our Coming Transactive Energy Economy

While scanning through the building automation and energy industry news recently I came across a term I hadn’t heard before. The term, Transactive Energy, piqued my interest and upon reading further I found this article from The Energy Collective website to be excellent in succinctly describing where I believe our electricity market is headed; and the implications its evolution will have on the building automation space. As I’ve touched on in a previous blog, the utility industry’s business model is shifting, albeit slowly, given the level of investment the industry has made in the current infrastructure/model, and this shift will have an increasingly dramatic effect on almost all industries (everybody needs energy, right?). Given the fact that commercial buildings consume upwards of 40% of all energy produced in the U.S., building automation has played and will continue to play a critical role in this massive market transformation.

Transactive Energy is a newly coined term, so new in fact that at the time of this writing Wikipedia didn’t even have an entry for it. To help give you a better idea of what it is, I’ll lean on the definition Christine Hertzog, author of the aforementioned article, gives. “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.” I find this coming reality of smart meters, distributed energy generation and automated demand response (ADR) fascinating to think about in general, but especially in the places where it intersects with the building automation industry.

Following Hertzog’s thread, I believe we are headed toward a very different energy market in the coming decades than what we see today. I envision a more democratized and efficient energy ecosystem made up of distributed prosumer (a portmanteau made up of producer and consumer) nodes that allows market forces (i.e., financial incentives) to direct the flow of energy to where it is most valued (i.e., where the highest price will be paid) for either consumption or storage purposes. For example, a commercial or industrial building owner/operator with onsite combined wind and solar power (i.e., kilowatt generation) coupled with energy storage capability in the form of battery banks or fly-wheels and the ability to quickly shed load (i.e., negawatt generation) in the case of a Demand Response (DR) event via its Building Energy Management System (BEMS) with sophisticated, automated demand limiting capabilities will look to maximize the return on investment from their collective energy production/consumption system in conjunction with the value they could create via their core business (e.g., manufacturing) by automatically buying energy, selling energy (either what they produced in real-time or previously produced and stored or bought off the grid and stored) from or to the grid in which is operates or shedding load at any given time based on the given rate/kWh at that point in time.

Where I think this is vitally important when considering the future of our industry is the fact that one of the key enablers of this reality will be the integration of the BEMS with both onsite, distributed generation and the smart grid. Buildings will not only cease being islands unto themselves with respect to energy consumption but will also play an active and critical role in the energy ecosystem as both energy producing and consuming (i.e., prosumers) entities. I believe our building automation systems will quickly evolve to be the brains necessary for a building or network of buildings that manage all aspects of its energy system allowing them to become active participants within the broader energy ecosystem I refer to above.

What are your thoughts on where the utility markets are heading and what implications do you see this having on the building automation industry? Do you foresee an expanded role of the traditional BMS similar to the one I allude to or is this science fiction? Please share your thoughts on this or any other related topic. I’d love to hear your thoughts on what I see as a fascinating future for building automation.

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