In a transactive energy model, generation, storage and loads enabled by intelligent communications capabilities allow generators, customers, utilities and third parties to buy and sell between themselves based on mutual economic benefits, write Mark Knight and Tom Sloan


In our last article (Issue 2, pp 31-34) we discussed the changes in the energy industry and how mandated increases in renewable generation are creating not only opportunities for generators, but also challenges for utilities. Transactive energy systems (TES) offer a solution for both generators and utilities, as well as for customers and third parties, to take advantage of the increasing ubiquity of communications, the digital transformation of our lifestyles, and the proliferation of intelligent devices in order to co-ordinate local supply and demand not only for the purpose of power delivery but also for regulation services.

Operationalizing transactive energy system concepts

The interplay between devices in a transactive energy system is analogous to a living organism (or market, which is what it effectively is) in which signals between parties are exchanged by defining and valuing needs (e.g., energy, balancing) over the timeline in which the needs are required. It does this by co-ordinating its capabilities of meeting those needs with a price from each party for each component. A mutual decision is then possible based on whether the needs of the respective parties can be met in whole or in part by itself or the other party, and at what price.

The framework described above permits the integration of capabilities such as distributed generation, storage and intelligent loads, as well as side transactions between customers to meet overall objectives. This optimization of interests may include generation (e.g., a mall anchor tenant with self-generation capabilities could meet the energy needs of other tenants), demand management (e.g., several businesses within a complex shedding load to forestall another business needing to do so), or providing ancillary services (e.g., a commercial organization with significant energy storage capabilities providing frequency regulation to the grid). The key element is the ability to monetize one’s capabilities and respond to system and/or customer/utility needs at an acceptable price and in a manner that maintains the ‘structural’ integrity of the whole.

The rise of distributed generation capabilities, demand management capabilities, and instantaneous communications capabilities means that the pieces are in place today for transactive energy systems to exist and thrive. The key is ensuring that the policy, regulatory and utility business models all permit the maximization of grid reliability while recognizing the flexibility and opportunities independently controlled by ‘customers’, utilities and third parties.

Regulatory and policy impediments may slow TES development, but will not prevent it because they can occur outside the purview of regulators and, in the case of customer-to-customer transactions and microgrids, of the utility. If transactions are outside the regulatory model, then enforcement of contract terms is a civil matter under the jurisdiction of the state’s judicial system rather than the public utility commission, but public safety and societal interests will require that the interests of energy customers unable or unwilling to participate in the transactive energy system market be protected, while permitting those customers with generation or demand management, or those capable of providing ancillary services, to monetize those capabilities within the utility’s grid operations.

This leads us to a look at the third and fourth ways of classifying transactive energy systems. In the previous article we discussed the Layers and Attributes. Next, we discuss the Guiding Architectural Principles and (foundational) Principles. As we move from the discussion of what transactive energy systems can offer, the following sections describe ways to look at how they should be designed – but without prescribing the specifics, which will necessarily vary from system to system.

Guiding Architectural Principles

Just as transition elements in the periodic table are widely used to create chemical compounds, the Guiding Architectural Principles were intended to help guide the creation of transactive energy systems. The Guiding Architectural Principles are:

ST The inherent structure of the energy systems and the existing control structures for involved energy systems should be considered when developing the structure of the transactive energy architecture;

SS Self-similarity or an approximation may be evident in the relevant structures and should be considered as a means to obtain scalability and organizational regularity (as a means of dealing with complexity) but recognize that differing goals may apply at different levels in the recursion;

LA Layering for optimization decomposition may be considered as a mathematical foundation for structure of the control and co-ordination portions of the architecture;

AG The architecture should be agnostic to the general physical layer: specific sensors and controls, energy types, should not be specified nor eliminated by the architecture;

NL The ability of the TES to operate should not be limited to any specific type of communications network or specific technology;

OS The architecture should accommodate open international standards and should not restrict implementations to proprietary interfaces, algorithms, communication protocols, or application message formats;

CH To the extent possible, the architecture should be adaptable to changes in underlying energy systems in terms of structure, capabilities, business models, and innovation in value creation and realization; and

CN The architecture should include plans for convergence of network types over time: physical networks (energy system infrastructures), information and communication networks, financial networks, and social networks.


The Principles on the left of the diagram on page 20 reflect foundational concepts for transactive energy systems. Because each situation may be unique, the Principles need to be at a high enough level that they can be applied uniformly. The Principles are:

SO TES should implement some form of highly co-ordinated self-optimization. Interactions need to be self-optimized (making decisions based on selfish goals) and highly co-ordinated (optimized goals by co-ordinating actions between participating devices) or else the system as a whole will not be optimized;

RC TES should maintain system reliability and control while enabling optimal integration of renewables and distributed energy resources (DER). A key driver of change in the electricity delivery system is the introduction of distributed energy resources and a significant benefit of TES is the flexibility it provides. While not every TES will interact with DER, it is important that integration of DER is a consideration of any TES where this interaction is a possibility;

ND TES should provide for nondiscriminatory participation by qualified participants. If the TES is open to participation and not a closed system (e.g., within a facility), then there should be criteria that make the qualifications for participation clear and unambiguous, and any qualified participant should be allowed to participate;

OA TES should be observable and auditable at interfaces. This will require a public electronic billboard in which parties’ needs are displayed with timelines for such needs to be met, and in which price negotiations can be conducted. Such a board or process would be similar to the New York Stock Exchange or other ‘futures’ markets in which bids are offered, accepted or rejected;

XT TES should be scalable, adaptable, and extensible across a number of devices, participants and geographic regions. The development of instantaneous communications about energy needs, management and operations means that an individual customer can participate with a utility or a corporate manager can commit resources from multiple units no matter where they are physically sitting or how many devices are participating in transactions;

Classification groupings for transactive energy systems

Source: GWAC

AC Transacting parties should be accountable for standards of performance. Having agreed to a transaction, it is the responsibility of the parties involved to deliver on their responsibilities. Digitization will enable the marketplace to reward responsible performance and punish those who fail to perform (e.g., ban such parties from the marketplace) to ensure that transactive energy systems function effectively because willing buyers and sellers of services will want to participate.

Chemical reactions and TES scenarios

Just as you can combine different chemical elements to make alloys, salts, acids etc, so too can we take different elements of the Transactive Energy Framework (TEF) and create new policy and technological elements.

And, as it is useful to look at the various characteristics of transactive energy systems as groups of related characteristics, it is also interesting to pick examples from each of the different areas and ‘combine’ them. This is quite useful since we have already described the groupings by typical uses and audiences, but for a transactive energy system to be consistent with the TEF it would need to work for all areas.

By way of an illustration, we have created an example where we picked one of the Layers, one of the Guiding Architectural Principles, one of the Attributes and one of the Principles to provide a set of characteristics that can be mapped to a possible TES scenario. For any scenario thus created, it should address the following four questions by selecting at least one component from each group:

• What is your challenge?

• How do you want to solve it?

• How do you want it to work?

• Did you get it right?

Example: building a microgrid

The entity or entities investing in the microgrid have a vested interest in having more say in how their power network, and the services it provides, operates. This means that the supply and demand sides need to be tightly integrated and flexible to adjust their behaviour and to avoid loss of revenue from an outage – and thus the overall impact to the facility or to businesses within the microgrid. Business models that utilize transactive energy approaches have the potential to extend greater control of customer assets to the customers themselves, while providing the necessary value streams to all participants. Distributed energy resources represent corresponding opportunities for service providers and utilities alike to create multi-sided platforms, using transactive principles, which allow multiple stakeholders to realize value from their participation.


For those trying to understand more about transactive energy systems, the Transactive Energy Framework developed by GWAC uses four ways to characterize or describe them. They are:

• Principles are, in effect, statements of high-level requirements. They describe how a TE system should work and can be applied before designing a system, during design, or after as validation that the key principles have been adhered to;

• Guiding Architectural Principles are starting points for the architectural foundation and describe how to build a TE system. This makes these a good checklist for people assessing existing systems or designing TE systems;

• Attributes represent qualities or characteristics that describe significant dimensions of TE and assist in understanding the boundaries of TE systems and as such they focus more on what to build;

• Layers emphasize the pragmatic aspects of interoperation and apply across the areas of cyber-physical architecture, conceptual architecture, business models & value realization, and policy and market designs. Layers do not always interact, but interaction is very important since policy and operation need to be fully aligned. Interaction within and between transactive energy systems is dependent on interoperability, but so is interaction between the layers, and for this to be effective there are a number of interoperability cross-cutting issues.

Final thoughts

While we have taken an unusual look at GWAC’s Transactive Energy Framework in this series, a concern of all parties – utilities, customers, generators, shareholders, regulators, vendors – must be the health of the grid. Utilities will continue to have the largest role as providers of last resort for energy and ancillary services, including the de facto role as provider of energy storage over the wires which make it possible for DG owners to have the benefits of self-generation without the massive investment necessary to guarantee reliability or power quality. Those able to generate energy and services and interact with their customers in the new transactive energy system marketplace most efficiently will thrive. This truism applies to investor-owned installations, rural electric co-operatives and municipal utilities alike, but especially to providers of services and electricity such as distributed generators.

Knowing what distributed resources, including electric vehicles, and projected loads will be on each distribution line will influence investments. Similarly, customer policy preferences regarding generation type will influence investments in transmission lines and generation units.

Transparency will be of paramount importance as multiple parties participate in the energy marketplace that will encompass short-term, mid-term, and long-term contracts. Short-term may be anything from a standby storage device (e.g., flywheel) for frequency regulation to lithium-ion or other storage technologies that provide energy for minutes to an hour. In each case, needs, offers, and prices must be transparent so that all qualified parties may participate and the electric grid continues to function reliably, at affordable prices and with enhanced resiliency.

Mark Knight is Director of Consulting in the Utilities Solutions group at CGI and Chairman Emeritus of the GridWise Architecture Council. Tom Sloan is a member of the Kansas House of Representatives, a member of the GridWise Architecture Council, and a former member of the US Department of Energy’s Energy Advisory Committee This article is available on-line. Please visit