Profitable Energy Transaction in a Smart Distribution Network Through Transactive Energy Systems

Introduction

The complexity of managing power distribution networks is on the rise as energy consumption increases and decentralized energy sources, especially renewable energy resources (RER), are being widely adopted. In recent decades, the capacity of RER has experienced rapid growth due to the global shift towards decarbonization. Numerous nations are advocating for the utilization of renewable energy sources by implementing diverse regulatory frameworks. Even though RER bring about environmental advantages in generating power, they also bring forth a set of challenges in terms of technology, society, and policy. Advancements in technology have prompted a shift from traditional, centralized power distribution systems to the more versatile smart grids. These cutting-edge systems are capable of efficiently managing unexpected surges in decentralized energy production and the intermittent nature of RER.

Smart grids are a revolution in electrical networks, amplifying the capabilities of conventional power systems in terms of adaptability, reliability, sustainability, and performance (Arun 2018). This is achieved through the seamless combination of automation and integration. In the smart grid, Demand Side Management (DSM) and Demand Response (DR) programs play a crucial role in attaining equilibrium between net power demand and generation. The main focal point of many DR programs lies in altering the energy consumption patterns of end users. These programs aim to enhance grid flexibility by encouraging consumers to adapt their energy usage through attractive incentives. On the other hand, this method might not completely exploit the capabilities of smart grids, since it primarily manages the consumer side which is affected by the production rate.

In order to tackle this issue, numerous utilities have implemented Feed-in Tariff (FIT) programs. These programs are specifically created to encourage the uptake of residential RER by providing financial rewards to users who produce and distribute electricity back to the grid. FIT (Feed-in Tariff) is a system that offers a set pricing structure for renewable energy generation over a specified timeframe. An alternative choice could be Net Energy Metering (NEM), which offers compensation based on the net quantity of produced energy at the retail cost. On the flip side, there is a shared constraint between FIT and NEM: prosumers, who take part in both energy production and consumption, find themselves with limited power over determining the price at which they sell and the quantity of energy they can offer (Hyun Joong Kim 2023).

As renewable energy penetration goals are reached and RER investment costs decrease, regulatory support for RER generation is being scaled back in certain instances. The impact on prosumers' earnings and their role in the power system can be substantial. There is a growing interest in researching Transactive Energy Systems (TES) as a viable management solution for prosumers with RER in distribution networks. The TES system empowers prosumers to directly trade their surplus energy with other prosumers or consumers, effectively circumventing the need for conventional energy suppliers. The agreement allows producers to sell their energy at a higher price than wholesale or reduced FIT prices (S L Arun 2023). At the same time, consumers can buy energy for less than the retail price, resulting in a situation where buyers save money and sellers earn more.

Figure 1.

TES based smart power distribution network