Transactive Energy Management and Energy Trading in Smart Energy Systems

Introduction

Currently, the traditional approach in the electric power grid is shifting toward a more intelligent known as the smart power grid. This transition aims to effectively manage the unexpected surges in local energy production and the unpredictability associated with renewable sources. Further, it enhances the flexibility, reliability, sustainability, and efficiency of conventional power systems. This transformation is achieved by making the grid more controllable, automated, and fully integrated (Fadaeenejad et al., 2014).

In recent times, the management of electric power distribution systems has grown increasingly challenging, primarily due to the surge in power demand and the extensive adoption of renewable power generation technologies. The adoption of renewable energy for electricity generation is projected to increase significantly, reaching approximately 38% by 2027 (IEA, 2022) and possibly up to 60% by 2050. While renewable energy sources (RES) and distributed energy resources (DERs) offer environmental benefits by reducing concerns related to conventional energy production, they also bring about various technological, social, and policy-related challenges. RES and DERs are related concepts but refer to different aspects of the energy landscape. Renewable energy sources are natural resources that can be replenished naturally and are considered environmentally sustainable. They provide a continuous and virtually unlimited supply of energy. Examples are solar power, wind power, hydropower, geothermal energy, and biomass. On the other hand, distributed energy resources refer to various small-scale, decentralized energy technologies that can be used to generate, store, and manage energy locally. Unlike large centralized power plants, these resources are often located close to the point of use or within the distribution system. Examples include rooftop solar panels, small-scale wind turbines, energy storage systems like batteries, combined heat and power (CHP) systems, and demand response technologies. There is a growing demand for new management strategies to efficiently and safely integrate the high penetration level of DERs and RES into the distribution grid. These strategies are essential for harnessing the full potential of responsive resources within the grid (Avramidis et al., 2018; Strezoski et al., 2019).

With the emergence of DERs and the presence of prosumers in distribution networks, there has been a transformation from the traditional centralized operation structure to a decentralized operation and transaction framework, commonly referred to as the transactive energy market. In the transactive energy market, a “prosumer” is an active participant engaged in both energy consumption and production. This term is derived from combining “producer” and “consumer,” emphasizing the dual role that individuals or entities play in the energy ecosystem. This concept emphasizes the evolving role of consumers who, with the integration of renewable sources and advanced technologies, are not only recipients but also contributors to the energy grid. In this dynamic environment, prosumers actively participate in buying and selling electricity, leveraging technologies like smart meters and blockchain for more efficient and decentralized energy transactions. The emergence of prosumers reflects a broader shift towards decentralized, sustainable, and consumer-involved energy systems. This shift involves negotiating contracts among various system components alongside or in addition to conventional control methods.

Within this evolving paradigm, there is significant discussion and research regarding transactive energy management and energy trading in smart energy systems. These discussions are geared towards achieving a balance in the network in terms of energy consumption and generation, ensuring that the power grid can adapt to the challenges posed by the increasing penetration of renewables and the shifting dynamics of energy production and consumption(Guerrero et al., 2020; Gupta et al., 2022; Yang & Wang, 2021).