Profiling Economic Actors for Transactive Energy

This post is part of the continuing Paths to Transactive Energy series. You can find them all listed by clicking on the matching metatag at the bottom of each post. These posts were written because the GridWise Architectural Council's Transactive Energy Conference begins tomorrow.

p>The communications defined in the common transactive services (CTS) can be used by every actor in transactive energy.

The needs of particular environments may require an actor to use different communications profiles. Security needs will be different for different environments. Security standards will change over time. Actors that participate only in small non-critical negotiations where both parties share a common owner may opt for lighter-weight standards to record transactions. These communications requirements will be expressed as profiles. These communications profiles will change over time without changing the fundamental information exchange between each actor.

There is profiling along a different dimension, profiling systems as economic actors, which can assist the system developer, the system integrator, and the system owner. These profiles describe the type of ends the actor has for participating in the market. They help system owner to understand how a new actor will affect the resource market.

Basic business interactions start with knowing who is a supplier, and who is a buyer. A similar distinction might distinguish the wholesaler from the retailer. A buyer approaches the farmer’s market and the supermarket chain differently, even when the goal is fresh produce either way. One is intermittently available in certain locations, one is available on a wide schedule and in many locations. It is useful to the seller to know which he is when designing his business. It is useful for the buyer to know whether transactions will be in cash or by card, and how to find the market location. Although the economic interaction is the same, these economic actor profiles help each market participants to meet his needs.

The purpose of the agents in the home (or in the office) is to enable meta-drivers to reduce complexity. I run windows. And when I plug in a device, and watch closely, I can see a human interface device arriving, being replaced by a pointing device, being replaced by the mouse I am using. My computer quickly drills down past the general to the specific, with specific devices offering specific functions. In the same way, a transactive energy capable device registers with the brain. In my model, it then describes what kind of abstract device it is. In this analogy, it goes as far as the “pointing device” but need not go all the way to device and control specificity. 

Money and Markets: digital currency, security, and resilience

This post is part of the continuing Paths to Transactive Energy series. You can find them all listed by clicking on the matching metatag at the bottom of each post.

When we start a conversation about Transactive Energy, most thoughts go immediately to government-backed currency, such as Dollars or Euros. The second thought may be digital currencies for which there are wide exchanges that can be immediately converted to a government backed currency. I name transactions made using these currencies as bankable transactions, because the proceeds of a sale can be deposited directly into a bank. Large transactive energy markets, such as those for the bulk power market operated in North America by the ISOs and RTOs, have to use bankable transactions.

At the other end of the scale, in a transactive market operating a home microgrid, perhaps entirely off the grid, do not need to ever be bankable. A non-bankable currency is merely an abstract representation of value. My refrigerator is unlikely to be able to buy itself a new water filter based on its day-trading with the air conditioner. I, as the owner, may use nominal dollars to allocate priorities, but that is to make it easier for me to think about priorities, and not to give the paper shredder an allowance. When the currency does not need to be bankable, there is no advantage to using a digital currency that relies on an off-premises cloud.

The real purpose of cryptocurrencies in transactive energy is not to be bankable, but to manage information flows in markets. I use the term cryptocurrency to distance this conversation from blockchain which, while the best known and most well established technology, is not the only one, and whose limitations are right where transactive energy at small scale needs strength.

A cryptocurrency is first of all a distributed database. This database protects its information from meddling by distributing information across multiple systems to create a consensus ledger. Database systems relying on consensus transactions inherently can embrace “lazy commits” and “eventual truth”. (These features are why blockchain in logistics management is a hot topic right now). With the right technology, a cryptocurrency can be support high-performance transactions performed with very small CPUs. Some well-known cryptocurrencies, such as bitcoin, require expensive computations so as to limit counterfeiting and “mining”. If a home were operated using a cryptocurrency market, many transactions would be for less than a penny, and the IoT requires lightweight hardware.

The functions of a cryptocurrency database are identity, contract, transaction, and payment.

Parties must first identify themselves. In Credit Card transactions, a party uses a government supplied ID to establish a banking relationship. A government-issued ID is often required to prove identity for all but the most trivial transactions. The IoT cannot bear such overhead. A cryptocurrency supports establishing a local identity for each party.

Agreements are not enforceable in the world of normal commerce without a contract. A contract may require registration at the court house to be enforceable. Many bitcoin-reliant markets require extensive authentications surrounding an agreement, even within their veil of anonymity. There is no courthouse for the Internet of Things, but a distributed consensus database can provide the next best thing.

Transactions represent the moment that a thing of value is actually exchanged for a promise of payment. This may be in fulfillment of a pre-existing contract, or it may be as a result of actions on the fly. In essence, their needs to be a consensus about meter readings.

Payments, the exchange of coin, must be recorded in the database because being virtual, they have no existence unless recorded.

In the simplest ownership scenarios, there may be no need for the security benefits of a consensus database. In my house, all transfers are from my pocket to my other pocket, and I may not require validation. I may still want a standards-based micromarket to give me access to a wider market of systems, i.e., a community battery system for use in my house, for wider integration options.

Transactive Energy in Deep and Shallow Markets

This post is part of the continuing Paths to Transactive Energy series. You can find them all listed by clicking on the matching metatag at the bottom of each post.

One of the most contentious areas of the CTS is how much information market participants and market makers should have about one another. The premises pit functionality vs. scalability, echo the arguments of stateless vs stateful communications, and have ramifications for personal fulfillment and personal privacy.

In any truly transactive market, all transactions are committed. Agents that buy too much power, or power at the wrong time must find separate partners to buy or sell the difference. If your agent purchases for normal power consumption for the week you are on vacation, you pay for the power whether you use it or not. Alternately, a solar producer who commits to power sales on a rainy day must buy power on the spot market to make good on his contracts. The Star Wars character Yoda could have been describing transactive energy when he famously said “Do or Do not; there is no try.’

The minimal market information side is epitomized by TEMIX (Transactive Energy Market Information Exchange). TEMIX uses the most restrictive profile of the CTS. EMIX Agents share no information about capabilities or effects or purposes. Much as a web server can services thousands of clients because it maintains no state information, a TEMIX market can scale to high speed and high volume because of the simplicity of interaction. An idealized TEMIX market is based on peer-to-peer trading.

Many of the most fluid financial markets rely on market makers. A Market Maker may use its own portfolio to complete transactions, or assemble several purchases to enable one sale. Market Makers can maintain knowledge of market participants beyond the capabilities of a single participant. In a deep market, the most significant knowledge is where to find counterparties. Some device capabilities offer services to the Market Maker that are unique to transactive resource markets. These are touched on below.

The purpose of an end node in a transactive resource market is to support the owner or inhabitant of that end node. A commercial facility participates in resource markets to better support the business that is based in that facility. A house participates in a resource market to support the needs and interests of the homeowner. These purposes are private, as are the operation of the systems within the end node.

The systems within an end node can themselves be organized using the CTS, creating a microgrid operated by a micromarket. This market is inherently shallow. There is a limited pool of counterparties at each moment. In a trivial but concrete example, who can sell power to the smart toaster when the occupant pushes down the lever?  If a generator must be idle for twenty minutes before being tuned on again, how will the home plan? The specification that defines the CTS also describes how to communicate capabilities, or resource descriptions, using the same semantics as the CTS.

There is no universally correct answer for whether to use resource descriptions or not. Resource descriptions were developed on the models used for bidding into North American bulk power markets. The systems that run these markets are at the limit of their capabilities to handle complexity. They rely on day-ahead markets to allow pre-planning. They will not support a dynamic market with widespread deployment of distributed energy suppliers and purchasers. The deeper the market grows, the more the exchange of resource capabilities are a hindrance to dynamic balance.

A better case can be made for resource descriptions in a shallow market, that of the home and neighborhood, of the commercial building and the office park. For the near future, many systems participating in these microgrids will not natively understand transactive energy. Many systems will still be managed by direct control. Resource capabilities may enable better coordination of a limited number of market participants, i.e. systems that can buy or sell power moment to moment.

The benefits of the simpler “TEMIX” model predominate quickly as systems scale. If there are enough participants in the market, the wisdom of markets produces better results than any central planning. In an unpublished paper, Frank Wolak and Akshaya Jha show that even pure financial participants in day-ahead markets improve overall system efficiency and reduce energy costs by improving forecast quality. Financial participants do not fit into the resource description model, but can integrate seamlessly into the abstract TEMIX model.

Introducing DERA

This post is part of the continuing Paths to Transactive Energy series. You can find them all listed by clicking on the matching metatag at the bottom of each post.

Demand response (DR) is the capability of systems that consume or supply power to respond to messages from the power grid. While DR can include using more or less power, or supplying more or less power, for most practical purposes it refers to nodes on the grid reducing the power they are using when they receive a request from a grid operator who anticipates a looming shortage of electrical power.

Many DR programs originally relied on phone calls and other manual processes. Automated Demand Response (ADR) has long been a request of the utilities. A decade ago, the California Energy Commission (CEC) and others funded a project to develop OpenADR 1.0. This work was contributed to the OASIS Energy Interoperation Technical Committee for incorporation into the Energy Interoperation specification. Energy Interoperation specification also defined the common transactive services for transactive energy. The OpenADR Alliance is a trade association that developed OpenADR 2.0 based on the OASIS specification, as well as maintaining interoperability and conformance requirements to insure interoperability of systems that use OpenADR.

The common transactive services (CTS) were designed to offer sufficient communication to operate the North American bulk power markets. Because CTS concerns effects on the market (services) rather than the mechanisms of operation, systems built around CTS can incorporate any technology. Components of CTS-based systems can evolve rapidly, can have their own security, and can support their own internal purposes. At the May 2016 Transactive Energy Conference, representatives of the open-source European initiative PowerMatcher acknowledged that their published services are fundamentally compatible with CTS.

In the fall of 2016, FERC proposed a ruling granting Distributed Energy Resource Aggregates full and unprejudiced access to wholesale power markets. The Federal Energy Regulatory Commission (FERC) is the US agency charged with the safety and reliability of the grid, encouraging energy markets between the states free of manipulation, promoting safe, reliable, secure, and efficient infrastructure. Distributed Energy Resources (DER) names decentralized systems that supply or store energy, as compared to centrally owned and operated generators. Practically, DER refers to systems attached to the distribution network, that is, the power grid that works within neighborhoods.  Many DERs are too small to draw much attention, although their cumulative effect is large and growing. DER Aggregates (DERA) refer to groups of DER the can be marshalled by a common entity. This proposed FERC ruling directs the utilities commission of each state to develop rules that permit DERAs to buy and sell power.

CTS is sufficient for DERAs to communicate with grid operators and with each other to operate a power grid. Energy Interoperation specifies communications sufficient to operate DR and CTS. Power interactions are abstracted to nine (9) services with a half dozen methods apiece. These services can be used to operate resource markets, where resources are commodities whose value is determined by time of delivery. Electric Power, the grid Ancillary Services, as well as the carrying capacity of the distribution network are each resources under this definition.