PNNL-XXXXX 

Prepared for the U.S. Department of Energy 

under Contract DE-AC05-76RL01830 

 

 

 

 

 

Transaction-Based Building Controls 

Framework, Volume 1: Reference Guide 

DRAFT 

S Somasundaram 

RG Pratt 

BA Akyol 

N Fernandez 

N Foster 

S Katipamula 

ET Mayhorn 

A Somani 

A Steckley 

ZT Taylor 

August 2014 

 

 

 

 

 

 

 

 

PNNL-XXXXX
 

Transaction-Based Building Controls Framework, 

Volume 1: Reference Guide 

S Somasundaram 

RG Pratt 

BA Akyol 

N Fernandez 

N Foster 

S Katipamula 

ET Mayhorn 

A Somani 

A Steckley 

ZT Taylor 

August 2014 

Prepared for 

the U.S. Department of Energy 

under Contract DE-AC05-76RL01830 

Pacific Northwest National Laboratory 

Richland, Washington 99352 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Summary 

Buildings consume over 40% of the total energy in the U.S. and over 70% of the nation’s total 

electricity today. Since the mid-1970s, more concerted efforts to increase energy efficiency in commercial 

and residential buildings have led to substantial reductions in energy use per square foot. Yet while new 

buildings offer opportunities to builders and operators to take advantage of state-of-the-art energy 

efficient technologies and know-how, the existing building stock would require comprehensive, “deep” 

retrofits to achieve similar savings. 

A new building diagnostic and controls revolution is underway within the buildings sector, primarily 

in the commercial buildings sector. In it, application-based systems are presenting an opportunity to 

implement strategies in which highly “optimized” control capable of constantly increasing efficiency 

levels while improving resource allocation (both local and global) is an inherent attribute of the strategy 

rather than an explicitly programmed feature. These building controls and algorithms can also be part of 

deep retrofits in existing buildings that result in energy savings not just today, but also ensure persistent 

energy savings over the life of the buildings through improved operation and maintenance. At the same 

time, the introduction of sensors and controls, as well as information technology and communication 

protocols between the buildings and the electric grid, has led to digitized sensing, metering, 

communication and controls. This “smart grid” revolution is adding intelligence to the energy ecosystem, 

allowing power generators and grid operators to see the system at unprecedented levels of granularity. 

Added to these developments is the proliferation of photovoltaic cells, small-scale natural gas generators, 

as well as other distributed generation sources; giving building owners additional opportunities to reduce 

their energy costs and increase the reliability of their supply. 

Using these technological advances and careful coordination, buildings could provide valuable 

comfort and productivity services to building owners and occupants, such as automatically and 

continuously improving building operations and maintenance, while at the same time reducing energy 

costs. Ultimately, buildings could even act as dispatchable assets, providing services to the power system, 

such as absorbing the fluctuations of intermittent renewable energy. 

This document proposes a framework concept to achieve the objectives of raising buildings’ 

efficiency and energy savings potential benefitting building owners and operators. We call it a 

transaction-based framework, wherein mutually-beneficial and cost-effective market-based transactions 

can be enabled between multiple players across different domains. Transaction-based building controls 

are one part of the transactional energy framework. While these controls realize benefits by enabling 

automatic, market-based intra-building efficiency optimizations, the transactional energy framework 

provides similar benefits using the same market-based structure, yet on a larger scale and beyond just 

buildings, to the electricity market and the society at large. 

The premise of transaction-based control is that interactions between various components in a 

complex energy system can be controlled by negotiating immediate and contingent contracts on a regular 

basis in lieu of or in addition to the conventional command and control pattern. In the buildings arena, 

transaction-based controls would bring an array of changes. Existing buildings would be retrofit with 

transaction-based automatic fault detection and diagnostics and controls technologies on various types of 

commercial equipment. They would provide insights into current and projected energy use, comfort 

preferences of tenants or owners, and generation capacity from distributed resources. The added 

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technology base would fulfill two main purposes. Owners and tenants could benefit from the diagnostics, 

commissioning and retuning capabilities in several ways. The sensing and metering technology could, for 

example, provide building-specific advice to owners, outlining return on investments and timescales for 

efficiency upgrades, such as new equipment or motors, or calculate and point to the amount of energy 

wasted per year. Transaction-based controls could also provide specific advice for occupants willing to 

trade their comfort and convenience levels against a monetary gain by, for example, adjusting their 

thermostat settings to let the temperature fluctuate within a pre-determined band and getting compensated 

for the potential change to their comfort level. In addition, with more efficient variable speed equipment, 

the building owner could allow their equipment to respond to market financial incentives by reducing 

motor speed for certain time periods without any occupant comfort impacts. Unlocking the vast resource 

of trading comfort or performance levels at a certain cost or price is one of the many value propositions 

the transaction-based energy system engenders. 

In general, using a transactional framework to coordinate currently disparate entities has the potential 

to provide substantial energy savings and new cash flow opportunities to buildings, effectively turning 

currently disparate and passive assets into coordinated engines of efficiency and productivity. The 

framework offers the opportunity to extract services out of loads and assets that previously did not exist; 

delivering targeted benefits to building owners while enabling ancillary benefits, such as performance 

assurance related services, reduced energy costs, energy use and related emissions to society as a whole. 

This document discusses a non-exhaustive, but representative set of exchangeable products, services, 

and rights in the context of four major types of transactional interactions: 1) end-user services, 2) energy 

market services, 3) grid services, and 4) societal services. End-user services include building diagnostics 

and valuations, which support the operations and maintenance of end-use assets while managing overall 

customer comfort and convenience. Energy market services support the efficient utilization of resources 

and assets by helping customers modify their energy consumption behavior through mechanisms such as 

time-of-use and real-time pricing. Grid services could include ancillary or regulatory services, such as 

equipment power quality related performance modification that buildings could provide using transactive 

mechanisms, with compensation through new contracts or tariffs. Lastly, societal services could include 

participation in energy efficiency or emissions cap-and-trade markets using transactive mechanisms. 

The document then describes the services nodal network that will help researchers and private 

vendors develop solutions that can be deployed at a large scale across the various participating domains, 

and ensure that such solutions are compatible and interoperable. A general framework and set of 

communication protocols that support interoperability are outlined. Listing real-world examples, this 

reference guide describes the network topology of participating logical and physical nodes and the 

communication interfaces between them. 

The document is complemented by four chapters corresponding to each of the four service categories 

described above. Each of the four chapters contain separate groups of comprehensive use cases of 

transactive energy, including the timescales of transactions, the needed equipment and technology, the 

benefits for buildings, the grid, efficiency gains and renewable energy integration, and outlines contracts 

and regulations and current examples of these transactions. 

Across this document, we have added textboxes with questions that should stimulate discussion and 

elicit answers from the public and stakeholders reviewing this document. 

iv DRAFT 
 

Acknowledgements 

The document was prepared with able assistance from Dennis Stiles, Mike Brambley, Jim Dirks, 

Jason Fuller, Karanjit Kalsi, Kris Subbarao and Scott Whalen. The authors would like to express their 

gratitude to Joe Hagerman and George Hernandez for their guidance and inspiration. 

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Terms and Definitions
 

Advanced Metering Infrastructure (AMI): typically refers to the full measurement and collection 

system that includes meters at the customer site, communication networks between the customer and a 

service provider, such as an electric, gas, or water utility, and data reception and management systems 

that make the information available to the service provider. Advanced metering systems are comprised of 

state-of-the-art electronic/digital hardware and software, which combine interval data measurement with 

continuously available remote communications. These systems enable measurement of detailed, timebased information and frequent collection and transmittal of such information to various parties. 

Ancillary Services: Ancillary services are services necessary to support the reliable transmission of 

capacity and energy from generation resources to customers, while maintaining the reliable operation of a 

transmission system. Ancillary services can include: synchronized reserves, regulation and operating 

reserve, energy imbalance (using market-based pricing), and the cost-based services of scheduling, 

system control and dispatch, voltage control and black start. 

Applications: Implementation of one or more use cases (enabling a transaction) and services (shared 

resources and functions among applications (e.g., libraries, drivers, etc.)) 

Architecture: Provides a conceptual structure describing the overall organization and inter-relation of 

significant components and systems for a particular problem space. The architecture embodies the 

higher-level principles and requirements that designs of applications and systems must satisfy. 

Building Automation System (BAS): A distributed supervisory and control systems installed in 

commercial and industrial buildings that support optimal facility operation and performance. BASs are 

hard and software based and connect individual monitors, meters and sensors within the facility in one 

central location. 

Building Energy Management Systems (BEMS): Similar to BAS, BEMS monitor and control services 

such as heating, ventilation and air-conditioning (HVAC) within commercial and industrial facilities. 

BEMS balance energy use, and operating and environmental conditions to increase a facility’s efficiency. 

Demand Response (DR): Changes in electric usage by end-use customers (including automatic 

responses) from their normal consumption patterns in response to changes in the price of electricity over 

time, or to incentive payments designed to induce lower electricity use at times of high wholesale market 

prices or when system reliability is jeopardized.1 

Dispatchable Load: A power user (device, appliance, motor) whose power consumption can be accessed 

and controlled by a systems operator, utility, or control mechanism and turned off or told to reduce use of 

power. 

Distributed Energy Resource (DER): DERs are small, modular power-generators placed close to the 

point of energy consumption. DERs include wind turbines, photovoltaic (PV) solar installations, or gas 

1 Per Federal Energy Regulatory Commission (FERC) definition. 

vii DRAFT 
 

 

 

 

 

turbines, among others, and can support local electricity supply and reliability and local energy autonomy 

(e.g., a microgrid, energy storage, and electric vehicles). 

Exchange: A structured or unstructured market that enables the allocation of value among all parties 

involved (i.e. a settlement) 

Framework: The description of a system at a broad, conceptual level, which can provide a context for 

more detailed technical aspects of the subject matter, including models and architectures that can guide 

the design of implemented solutions. 

Interoperability: The capability of two or more networks, systems, devices, applications, or components 

to exchange and readily use information—securely, effectively, and with little or no effort by the user. 

That is, different systems will be able to exchange meaningful, actionable information. The systems will 

share a common meaning of the exchanged information, and this information will elicit agreed-upon 

types of response. The reliability, fidelity, and security of information exchanges between and among the 

energy ecosystems must achieve requisite performance levels. 

Independent System Operator (ISO): ISO that originated out of FERC order 888/889 to help existing 

tight power pools satisfy the requirement of providing non-discriminatory access to transmission. ISOs 

are predecessors to Regional Transmission Organizations, voluntary formations of electric transmission 

grid operators within a multi-state system (including Canada). 

Market: An area of economic activity in which buyers and sellers come together and the forces of supply 

and demand affect prices. 

Market Participation/Access: The market participation/access refers to a qualitative characterization 

that considers: 

• Ease of entry/exit into the market 

• Size of transaction costs relative to the expected value of a transaction 

• Number of buyers and sellers seeking to maximize their value. 

Market Price: A price actually given in current market dealings. 

Node: A communication or connection point able to send and receive information. Nodes could be 

physical, such as a modem, switch or other networked device, or virtual, such as ones based in the Cloud. 

Reference Model (per above described architecture): A set of views (diagrams) and descriptions that 

are the basis for discussing the characteristics, uses, behavior, interfaces, requirements, and standards of 

the energy ecosystem. This model does not represent the final architecture of the energy ecosystem; 

rather it is a tool for describing, discussing, and developing that architecture. 

Requirement: 1) A condition or capability needed by a user to solve a problem or achieve an objective. 

2) A condition or capability that must be met or possessed by a system or system component to satisfy a 

contract, standard, specification, or other formally imposed documents. 

viii DRAFT 
 

 

 

 

 

 

 

 

 

 

Sensors and Controls: Mechanical and/or electric devices sensitive to light, temperature, humidity, etc. 

that transmit a signal to a measuring or control instrument, which can act independently, based on set 

parameters and the information available. 

Services: Shared resources and functions among applications (e.g., libraries, drivers) 

Standards: Specifications that establish the explicit set of requirements for a product for a particular use, 

its function and performance. Standards are key facilitators of compatibility and interoperability. They 

define specifications for languages, communication protocols, data formats, linkages within and across 

systems, interfaces between software applications and between hardware devices, and much more. 

Standards must be robust so that they can be extended to accommodate future applications and 

technologies. An assortment of organizations develops voluntary standards and specifications, which are 

the results of processes that vary on the basis of the type of standards setting-organization and its purpose. 

Government regulations may incorporate or reference voluntary and required standards. 

Transactional Energy Ecosystem: A construct that integrates the concepts of transaction-based energy 

and transaction-based control (described below), with a settlement (market) platform 

•	 Transaction: The negotiated exchange of products, services and rights within a structured or 

unstructured market that enables allocation of value among all parties involved (known as 

settlement) 

•	 Transaction-based control: A means of executing transactions through automatic control of the 

operating state of building equipment and other energy systems in response to data and value 

streams. 

•	 Transaction-based control applications: A type of application that has a set of capabilities, 

such as discovery, self-organization, agent mobility, secure communications, short and long 

lifetimes, autonomy and self-organization. Furthermore, these applications have characteristics, 

such as: 

o	 Belief propagation based on local data (which has a convergence concept associated with 

it) 

o	 Decentralization but no coordination 

o	 Dynamic and possibly short-lived associations of agent subsets 

o	 Flocking behavior (think stock market flash crash) 

o	 Self-relocation 

o	 Possible emergent behavior. 

•	 Transaction-based energy: A structure that combines information, data and energy
 

infrastructure to enable energy-based transactions.
 

•	 Transaction-based energy services: Transaction-based energy services for energy providers 

and customers balance all parties’ energy needs against available resources, thereby making at 

least one individual better off without making any other individuals worse off. 

Transaction-based Framework: The transaction-based framework describes the digital infrastructure, 

hardware and communications network that enables the trade of goods and services between participating 

parties, leading to a better use of available resources and a more efficient power system. 

ix	 DRAFT 
Value: The monetary worth of goods, services or rights, specifically capacity, energy, ancillary services, 

and O&M services. 

x DRAFT 
 

Contents
 

1.0	 Unlocking the True Potential of Buildings: Transaction-Based Building Controls
 

Framework..................................................................................................................................1
 

1.1 Present State .......................................................................................................................1
 

1.2 The Smart Buildings Revolution........................................................................................2
 

1.3 Transactional Energy Framework ......................................................................................6
 

1.4 The Future State .................................................................................................................8
 

1.5 Examples of Implementation .............................................................................................9
 

1.5.1 Olympic Peninsula Demonstration Project..........................................................10
 

1.5.2 The Transactional Network Project .....................................................................10
 

1.6 Description of the Building Controls Framework............................................................13
 

2.0 Exchangeable Services .............................................................................................................15
 

2.1 Introduction......................................................................................................................15
 

2.2 End-User Services............................................................................................................16
 

2.2.1 M&V for Energy Performance Verification: Energy Charting and Metrics Tool17 

2.2.2 Data Centers Trade Computation Priority ...........................................................17
 

2.3 Energy Market Services ...................................................................................................22
 

2.4 Grid Services....................................................................................................................25
 

2.4.1 Capacity ...............................................................................................................25
 

2.4.2 Ancillary Services................................................................................................28
 

2.5 Societal Services ..............................................................................................................32
 

3.0 Transaction-Based Energy Networks .......................................................................................35
 

3.1 Transaction as the Framework for Node Interoperability ................................................35
 

3.2 Concept of a Transactional Node .....................................................................................38
 

3.3 Physical and Logical Transactional Networks .................................................................40
 

3.3.1 Intra-Building Networks ......................................................................................40
 

3.3.2 Customer to Third-Party Energy and Service Networks......................................43
 

3.3.3 Building-to-Grid Networks..................................................................................48
 

3.4 Demonstration of Buildings-to-Grid Transaction Networks............................................51
 

4.0 End-User Services ....................................................................................................................55
 

4.1 Third-Party Energy Provider............................................................................................56
 

4.2 Efficiency Shared Savings ...............................................................................................59
 

4.3 Tenant Contracts with Building Owner for Energy .........................................................62
 

4.4 Transactive Control for Large Commercial Building HVAC Systems............................66
 

4.5 Diagnostic and Automated Commissioning Services ......................................................71
 

4.6 Data Centers Trade Computation Jobs.............................................................................74
 

4.7 Microgrid Coordinating Demand Response, Distributed Generation and Storage ..........77
 

4.8 Trading Positions in an Electric Vehicle Charging Queue...............................................82
 

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5.0 Energy Market Services............................................................................................................85
 

5.1 Dynamic Rates .................................................................................................................85
 

5.2 Optimize Electric Vehicle Charging for Dynamic Rate...................................................89
 

5.3 End-Use Differentiated Dynamic Rates...........................................................................92
 

5.4 Transactive Energy Market Exchange .............................................................................96
 

5.5 Trading Efficiency to Relieve Congestion .....................................................................100
 

5.6 Differentiated Reliability Service...................................................................................101
 

6.0 Grid Services ..........................................................................................................................105
 

6.1 Interruptible Service or Direct Load Control .................................................................106
 

6.2 Transactive Retail Energy Market..................................................................................109
 

6.3 Trading Allocated Capacity Rights ................................................................................113
 

6.4 Ancillary Services via Aggregator .................................................................................116
 

6.5 Transactive Acquisition of Ancillary Services...............................................................120
 

6.6 Rate Dependent Priority for Cold Load Pickup .............................................................124
 

7.0 Societal Services.....................................................................................................................127
 

7.1 Emergency Power Rationing..........................................................................................128
 

7.2 Efficiency Incentive Payment ........................................................................................132
 

7.3 Air Shed Management....................................................................................................135
 

8.0 Use Case Template .................................................................................................................139
 

9.0 References ..............................................................................................................................141
 

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Figures
 

Figure 1.1. Illustration of Transaction-Based Controls in a Small Commercial Building..................2
 

Figure 1.2. Conceptual Overview of Transaction-Based Building Control System ...........................3
 

Figure 1.3. Merging of Markets and Control ......................................................................................6
 

Figure 1.4. Conceptual Overview of Future Energy Ecosystem.........................................................8
 

Figure 1.5 Olympic Peninsula Grid Wise Demonstration Project ....................................................10
 

Figure 2.1. Example M&V Visualization: Energy Intensity as a Function of Time of Day and
 

Day of the Year.........................................................................................................................17
 

Figure 2.2. Example M&V Visualization: Aggregate Load Profiles...............................................17
 

Figure 2.3. Illustration of Data Centers Trading Computation Tasks...............................................18
 

Figure 2.4. Schematic of a Building’s Transactive Network Used to Provide Third-Party O&M 

Services.....................................................................................................................................19
 

Figure 2.5. Conceptual Overview of Ancillary Services Transaction..............................................28
 

Figure 2.6. Conceptual Overview of Intra-Building Reaction to Request for Ancillary Services...29
 

Figure 2.7. Emergency Power Rationing Agreement - Part 1...........................................................32
 

Figure 2.8. Emergency Power Rationing Agreement - Part 2...........................................................33
 

Figure 3.1. Conceptual Diagram of a Transactional Node................................................................39
 

Figure 3.2. Physical Representation of an Intra-Building Network.................................................41
 

Figure 3.3. Logical Representation of an Intra-Building Network ..................................................42
 

Figure 3.4. Physical Representation of Customer and Third-Party Networks.................................45
 

Figure 3.5. Logical Representation of Customer and Third-Party Networks ..................................46
 

Figure 3.6. Physical Representation of a Buildings-to-Grid Transactional Network ......................48
 

Figure 3.7. Logical Representation of a Buildings-to-Grid Transactional Network........................50
 

Figure 3.8. Representation of Transactional Grid Control Node in the PNWSGD Project............51
 

Figure 3.9. Physical Network of Transmission Zones in the PNWSGD .........................................52
 

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Tables
 

Table 2.1. General Characteristics of End-User Services................................................................20
 

Table 2.2. Typical Exchange Parameters for Operation and Maintenance Services Transactions...21
 

Table 2.3. Typical Participants in O&M Service Transactions .......................................................21
 

Table 2.4. Typical Exchange Parameters for Energy Market Services.............................................23
 

Table 2.5. Typical Participants and Roles in Energy Market Services Transactions.......................24
 

Table 2.6. Major Categories of Exchangeable Products, Services, and Rights ...............................25
 

Table 2.7. Typical Exchange Parameters for Capacity Transactions...............................................27
 

Table 2.8. Typical Participants and Roles in Capacity Transactions...............................................27
 

Table 2.9. General Characteristics of Ancillary Services ................................................................30
 

Table 2.10. Typical Exchange Parameters for Ancillary Services Transactions .............................30
 

Table 2.11. Typical Participants in Ancillary Services Transactions ..............................................31
 

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1.0 Unlocking the True Potential of Buildings: Transaction-Based 

Building Controls Framework 

This document provides a contextual framework and the specifications of a descriptive model of 

nodes in a transactive network that would enable buildings and other assets to deliver services to building 

owners and occupants, as well as other participants in the energy ecosystem. Its purpose is to define the 

concept of the transactional building controls framework, including the transactional network model, 

illustrate the future transaction-based energy ecosystem, give examples of potential implementations, and 

outline the benefits of transactional energy to stakeholders in the energy ecosystem. While it is not 

intended to prescribe specific technology solutions, the document contains an extensive list of “use cases” 

describing a range of possible applications of transaction-based energy services, technical requirements to 

fulfill these, as well as a qualitative description of benefits to participating stakeholders. These use cases 

are envisioned to define essential components that would enable transactions in the energy and energyrelated domains and give practical examples to the broader community of electric power and buildings 

technology organizations, researchers, manufacturers, standards- and codes-developing organizations, and 

system and technology vendors. 

1.1 Present State 

Buildings consume over 40% of the total energy in the U.S. and over 70% of the nation’s total 

electricity today. Residential buildings, by themselves, account for about half of the electricity use 

(37%), and require 291GW of peak electric generation capacity. Since the mid-1970s, more concerted 

efforts to increase energy efficiency (EE) in commercial and residential buildings have led to substantial 

reductions in energy use per square foot. Driven by building codes, prescriptive measures, energy audits, 

advances in efficient lighting, HVAC and energy management systems, the residential and commercial 

building sectors have lowered their energy intensity by over 30% [Nadel 2011]. Existing building codes 

apply only to new construction and major renovations of existing buildings in the U.S. and can lead to 

additional savings of between 10 and 20% compared to previous standard levels. 

Yet while new buildings offer opportunities to builders and operators to take advantage of state-ofthe-art EE technologies and know-how, the existing building stock would require comprehensive, “deep” 

retrofits to achieve similar savings. Burdened by badly performing equipment, appliances, walls and 

windows, the existing building stock faces cost barriers and several other obstacles to increased EE. 

Residential buildings, for example, overwhelmingly lack central control, have analog electricity meters, 

manual lighting, plug loads and appliances, and are thus not set up for efficient management of energy 

use. 

In the case of commercial buildings, even as buildings are made more energy efficient through codes, 

standards and beyond-code design processes, over $30 billion worth of consumed energy is wasted by the 

lack of controls or the inability to use existing building automation systems (BASs) properly. Over 90% 

of the commercial buildings are either small-sized (<5,000 sf) or medium-sized (between 5,000 sf and 

50,000 sf), and most if not all these buildings lack the sensors and information systems needed to create 

the “self-awareness” required to continually tune and operate them at optimal efficiency with proper 

tradeoffs between cost and occupant service requirements (e.g., comfort) [Katipamula 2013]. 

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The preferences, desires and flexibility of building occupants are also hardly ever considered in EE 

decision making. While building occupants could offer a large and tradable resource of exchanging 

comfort levels for energy savings (in exchange for some monetary gain, for example), the current state is 

leaving them out of the equation. The large expense of deep retrofits (and with it long payback times), as 

well as the lack of broad access to sensing and measuring technologies, and the current disregard for 

occupants willingness to trade some comfort for savings are a few reasons why the outlook for greater 

gains in EE for the existing building stock is substantially less positive than in new buildings. 

1.2 The Smart Buildings Revolution 

A new revolution is underway within the buildings sector (primarily the commercial buildings 

sector), where application-based systems are presenting an opportunity to implement strategies in which 

highly “optimized” control, capable of constantly increasing efficiency levels while improving resource 

allocation (both local and global) is an inherent attribute of the strategy rather than an explicitly 

programmed feature. The premise of transaction-based control is that interactions between various 

components in a complex energy system can be controlled by negotiating immediate and contingent 

contracts on a regular basis in lieu of or in addition to the conventional command and control. Figure 1.1 

illustrates the connections between sensors, devices and controls in a small commercial building. 

Figure 1.1. Illustration of Transaction-Based Controls in a Small Commercial Building 

Each device is given the ability to negotiate deals with its peers, suppliers and customers to maximize 

revenues while minimizing costs. This is best illustrated by an example. A typical commercial building 

might have several chillers that supply a number of air-handling units (AHU) or air handlers with chilled 

water on demand. If several air handlers require the full output of one chiller, and another air handler 

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suddenly also requires cooling, traditional building control algorithms simply start up a second chiller to 

meet the demand and the building’s electrical load ratchets upward accordingly. A transaction–based 

building control system behaves differently. Figure 1.2 illustrates the impacted building components. 

Instead of honoring an absolute demand for more chilled water, the air handler requests such service in 

the form of a bid (expressed in dollars), increasing its bid in proportion to its “need” (divergence of the 

zone or supply air temperature from its set point) [Katipamula et al 2006]. The chiller controls, with 

knowledge of the electric rate structure, can easily express the cost of service as the cost of the kWh to 

run the additional chiller plus the incremental kW demand charge (if it applies). If the zone served by this 

air handler just began to require cooling, its “need” is not very great at first, so it places a low value on its 

bid for service and the additional chiller stays off until the level of need increases. 

Figure 1.2. Conceptual Overview of Transaction-Based Building Control System 

Meanwhile, if another air handler satisfies its need for cooling, the cost of chilled water immediately 

drops below the bid price because a second chiller is no longer required, and the air handler awaiting 

service receives chilled water. Alternatively, a peer-to-peer transaction can take place in which an air 

handler with greater need for service displaces (literally outbids) another whose thermostat setting is 

nearly satisfied. 

In this way, the contract-based control system accomplishes several things. First, it limits demand by 

providing the most “cost-effective” service. In doing this, it inherently prioritizes service to the most 

important needs before serving less important ones. Second, it decreases energy demand and consumption 

by preventing the operation of an entire chiller to meet a small load (assuming that no AHU is willing to 

incur the additional cost of service to start the second chiller), where it operates inefficiently. 

Third, contract-based controls inherently propagate cost impacts up and down through successive 

hierarchical levels of the system being controlled (in this example, a chiller or a boiler that provides 

cooling or heating, air handler that provides air circulation, and the zone). The impacts on the utility bill, 

which are easily estimated for the chiller operation, are used as the basis for expressing the costs of air 

handler and zone services. Using cost as a common denominator for control makes expression of what is 

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effectively a multi-level optimization much simpler to express than an engineered solution would be. It 

allows controls to be expressed in local, modular terms while accounting for their global impact on the 

entire system. In effect, the engineering decision-making process is subsumed by a market value-based 

decision-making process that indirectly injects global information conveyed by market activity into the 

local engineering parameters that govern the behavior of individual systems over multiple time scales. 

Many HVAC systems are controlled by thermostats. The desired temperature is set by the customer 

and the thermostat uses current space temperature sensor information to control the damper position that 

controls the air flow (or turns the compressor on or off), thereby satisfying the heating and cooling needs 

of the zone. In a conventional control system, indoor temperature and indoor set point temperature are the 

only information required to control the amount of heating and cooling to the zone. However, in a 

transactive based control system, the thermostat uses price information to make control decisions. 

Although much of the discussion so far has been for thermostatically controlled HVAC systems, 

transactive-based controls can be applied to non-thermostatically controlled systems as well (such as 

distributed generation, or other load resources). 

With appropriate technology and coordination, buildings could provide valuable services to owners 

and occupants, such as automatically and continuously improving building operations. On a larger scale, 

groups of buildings could transact with each other in a capand-trade type of arrangement, where one building could 

reduce energy or increase efficiency measures more easily 

than another, and then trade energy savings or efficiency gains 

for some compensation. Ultimately, buildings could even act 

as dispatchable assets, providing services to the power system, 

such as absorbing the fluctuations of intermittent renewable 

energy. 

How could buildings be smarter? In the area of residential 

buildings, expanded penetration of smart controls scheduling 

appliances, automatically adjusting thermostat set points, 

dimming lights, and delaying water heater electric heating, are 

some of the technological changes needed. Some of these 

transaction-based controls may reduce total annual electricity 

consumption from the residential building sector (for 

example, dimming lights reduces total electricity 

consumption, rather than just shifting the load), so there is a 

potential for even greater energy cost savings. 

One of the greatest obstacles for the penetration of 

transaction-based controls at the commercial building level is 

the lack of standardized, interoperable hardware and software 

that can interconnect across multiple vendors, equipment 

types, and buildings. The installation of automation and 

control systems tends to be unique to each building and for 

each equipment manufacturer, and therefore exhibits no 

economies-of-scale for later installations. Another important 

theme during the implementation of the transaction-based 

How transactive is the power 

system currently? 

Today’s power grid is already 

characterized by myriads of 

transactions taking place. These 

transactions are, however, for the 

most part not taking place on a time 

scale that allows participants to 

quickly react to changes in the grid, 

such as sudden spikes in demand or 

supply. Currently, the state of 

“transactiveness” is limited to 

monthly electricity bills for the vast 

majority of participants, or, at best, a 

phone call 24 hours before a critical 

peak pricing event is scheduled. 

In the future state of the power system 

that we envision, transactions take 

place on a vastly more granular time 

scale, allowing customers to become 

active participants of the power 

system that, enabled by two-way 

communication and other smart grid 

technology, can buy and sell 

electricity or energy efficiency and 

other services instantaneously and 

continuously, leading to a more 

efficient and robust power system. 

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framework should be “flexibility.” Transaction-based control will be accepted better if it can be flexibly 

tailored to the needs and capabilities of each building, the building owner, and the building’s occupants. 

Enabling the demonstrations of the transaction-based controls in individual buildings and then in a 

cluster of buildings to be flexible and portable across various BASs protocols and systems, should 

significantly reduce the cost of implementation compared to conventional approaches. But for 85% of the 

commercial buildings, which lack BASs, other delivery options, including using inexpensive gateways 

have to be explored. 

Many new Internet-protocol-based controls provide a rudimentary ability to integrate individual 

appliances and assets within the building to allow the building to automatically and continuously raise its 

efficiency. For example, automated lighting controls systems ranging from simple scheduling to sensorbased systems can actuate electric lights according to occupancy or ambient light levels – incorporating a 

variety of occupant personal control options. 

Similarly, there have been several advances in the area of BASs. Their automatic programming 

strategies make them the preferred way to implement many energy efficiency strategies in commercial 

buildings. Yet the penetration of these systems into small and medium sized commercial buildings is 

low, even though they represent the largest percentage of the buildings in the US market. This is mainly 

because they are perceived as expensive and building owners are not fully aware of the benefits, lessening 

the value proposition that building owners might be looking for. The nascent transactive energy value 

proposition provides this value. 

Lastly, the introduction of information technology to the electric grid has led to digitized sensing, 

metering, communication and controls adding intelligence to the power system all the way from the point 

of generation to the final consumption of power. The new, “smart grid,” technology allows grid operators 

and planners to see the system at unprecedented levels of granularity. Phasor measurement units (PMU), 

for example, deliver GPS-based time synchronized snapshots of the bulk power system’s status over a 

wide area at time intervals as short as 60 times per second, leading to better understanding of the system 

and opportunities to more quickly react to changes, ensuring high levels of system reliability. Advance 

metering infrastructure (AMI), or “smart meters,” are supporting utilities with deep insights into the status 

of the distribution system, including detecting outages, electricity theft, and detailed (up to every 15 

minutes) use data for billing purposes and consumption inquiries, while reducing meter reading and truck 

roll costs . 

The deeper potential of AMI, however, lies in its ability to transform the energy management and 

savings potential of buildings by providing building owners and tenants with insights into energy use, 

while, by relaying the combined energy usage patterns to grid operators, delivering transparency of 

consumption that turns demand into an actual tool of grid management. AMI is a key technology that 

could advance current levels of demand response (DR) from its current state of long time scales, manual 

interactions and heterogeneous applications to a close-to-real-time, automated system that applies to the 

majority of energy consuming devices. One example of the potential economic value of advanced DR 

comes from the National Energy Technology Laboratory (NETL), which found that with only 10% 

customer participation, the potential nationwide value of DR could be several billion dollars per year in 

reduced energy costs [NETL 2011]. NETL also found that more than one-fourth of the 713 GW of U.S. 

electricity demand in 2010 could be dispatchable, offsetting new generation and transmission build for 

years – if only loads such as homes and commercial buildings could respond to that dispatch. 

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In general, advances in building automation, control technology and the smart grid are supporting the 

transition to smarter buildings which will benefit the entire energy system by using less energy and being 

more energy efficient; leading to reduced operational expenses for building owners, but also less stress on 

the power system for system operators, and lower emissions for society as a whole. The transition to 

smarter buildings is thus a “no regrets” approach that will make everyone better off. 

The requirements to make the building smarter are new and better use of existing communication, 

control and sensing technologies that: 

•	 make buildings capable of automatically receiving and acting upon signals from internal and 

external sensors and monitors; 

•	 can characterize the magnitude of change in demand as a result of responding to the signals; 

•	 function reliably, with a means of verifying operation through low-cost non-intrusive means; 

•	 are capable of delivering continuous, automated operational improvements; 

•	 provide smart grid related services; 

•	 are cost-effective or economical; and 

•	 are non-disruptive during operation and minimally disruptive during installation. 

To enable this to occur, however, the building owners/operators must be able to utilize and provide 

information on the buildings’ energy use and to make decisions at time scales that are largely unfamiliar 

to building operators today. While some buildings have embedded controls and some computing power, 

they lack a way of coordinating their responses to achieve the objectives listed above (at the building 

scale) and still maintain acceptable comfort and productivity to satisfy the building occupants. For this to 

happen there is a need for a transaction-based energy ecosystem to be established. 

1.3 Transactional Energy Framework 

This document proposes a framework concept to achieve 

the objectives of raising buildings’ efficiency and energy 

savings potential benefitting building owners and operators. 

We call it a transaction-based framework, wherein mutuallybeneficial and cost-effective market-based transactions can 

be enabled between multiple players across different 

domains. Figure 1.3 illustrates the concept of transactive 

energy. We define the framework as encompassing a broad, 

conceptual level and providing a context for more detailed 

technical aspects of the subject matter. Transaction-based 

building controls are one part of the transactional energy 

framework. While these controls realize benefits by enabling 

automatic, market-based intra-building efficiency 

Figure 1.3. Merging of Markets and 

Control
 

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optimizations, the transactive energy framework provides similar benefits using the same market-based 

structure, yet on a larger scale and beyond buildings. 

The U.S. Department of Energy (DOE) aims to enable and promote the development of efficient, 

secure, and reliable transaction-based energy services, markets and operations that integrate energy 

supply, demand, and related services to promote a diverse, reliable, cost effective, and sustainable 

domestic energy economy. DOE believes that the future energy model will include an open, 

interoperable transaction-based system that facilitates physical transactions of energy, energy-related 

services and rights, and the financial settlements associated with these transactions.2 The key concept 

here is a construct that takes advantage of the market’s efficient way of allocating resources, as well as 

unleashing the innovation and economic efficiencies of market participants. Figure 1.3 illustrates the 

merging of markets and control -- a central concept of the transaction-based system. 

The term “transactive energy”, defined by the GridWiseTM Architecture Council, refers to “A set of 

economic and control mechanisms that allows the dynamic balance of supply and demand across the 

entire electrical infrastructure using value as a key operational parameter” [GridWise 2013]. This 

document focuses on the application of transactive energy on intra- and inter-building applications, 

including distributed energy sources, such as PV or natural gas turbines, and new energy use in and 

around buildings (e.g. electric vehicles), all interconnected with data. 

In addition, the following definitions need to be introduced here: 

•	 Transactional Energy Ecosystem: A construct that integrates the concepts of transactional 

energy and transactional control (described below), with a settlement (market) platform 

o	 Transaction-based energy: A structure that combines information, data and energy 

infrastructure to enable energy-based transactions. 

o	 Transaction-based control: A means of executing transactions through automatic 

control of the operating state of building equipment and other energy systems in response 

to data and value streams 

o	 Transaction: The negotiated exchange of products, services and rights within a 

structured or unstructured market that enables allocation of value among all parties 

involved (known as settlement) 

•	 Exchange: A structured or unstructured market that enables the allocation of value among all 

parties involved (i.e., a settlement) 

Some additional terms and definitions are provided in the Terms and Definitions section of this 

report. 

2 See: Buildings-to-Grid Technical Opportunities: Introduction and Vision. Available at 

http://energy.gov/sites/prod/files/2014/03/f14/B2G_Tech_Opps--Intro_and_Vision.pdf 

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1.4 The Future State 

A transactional energy framework defines the basic structure of the future energy integrated 

ecosystem. It will lay out the transition from today’s static, one directional, and often times “manual” 

energy system (“current state”) to a new “future state” of energy, characterized by highly automated, twoway (or even n-way) exchanges of information, data and energy between entities in the energy system, 

leading to a flexible, resilient and automatically adjusting system. The future ecosystem will be 

characterized by a more distributed power system, blurring currently clear lines between producers and 

users of power. Utilizing distributed generation, responsive loads and automation at the distribution 

system, the future ecosystem will see an abundance of software and application-based sensors that work 

autonomously to optimize energy generation and energy use starting at the smallest application all the 

way towards the largest entity. This is made possible by the addition of smart, intelligent meters and 

sensors to all stages of the energy system, able to interconnect, exchange information, and act upon it. 

The framework enables transactions of products, rights and other services that support various micro 

and macro energy objectives. On the micro scale, these objectives include more efficient buildings. On 

the macro level, more efficient buildings will lead to reduced greenhouse gas emissions, increased grid 

reliability, an increased share of clean energy sources, and the creation of clean energy jobs. This new 

model needs to seamlessly integrate new, distributed generation as well as smart assets while adding 

value to the building owner/customer and other third parties. It needs to be able to control and connect 

assets and loads, within buildings, between buildings and, at a possible future state, between buildings, 

the grid and third-party providers, and enable participants to transact in ways that lead to economic and 

environmental benefits. The idea is to derive benefits for the customer (e.g., better managing their bills) 

for participating in new markets and interacting with the grid and third-party providers. Figure 1.4 

illustrates the future energy ecosystem, in which self-aware, automatically optimizing buildings are 

interconnected with a transactional network of distributed energy assets, variable loads, other buildings 

and the grid. 

Figure 1.4. Conceptual Overview of Future Energy Ecosystem 

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More specifically, this future state entails an array of changes in the area of buildings. Existing 

buildings would be retrofitted with transaction-based diagnostics and controls technology, providing 

insights into current and projected energy use, comfort preferences of tenants or owners, and generation 

capacity from distributed resources. The added technology would fulfill two main purposes. First, owners 

and tenants could benefit from the diagnostics, commissioning and retuning capabilities in several ways. 

The sensing and metering technology could, for example, provide building specific advice to owners, 

outlining return on investments and timescales for efficiency upgrades, such as new equipment or motors, 

or calculate and point to the amount of energy wasted per year. Second, transaction-based controls could 

also provide specific advice for occupants willing to trade their comfort levels or equipment performance 

capabilities against a monetary gain by, for example, adjusting their thermostat settings to let the 

temperature fluctuate within a pre-determined band and getting compensated for the potential change to 

their comfort level. Unlocking the vast resource of trading comfort levels is one of many value 

propositions the transaction-based energy system engenders. 

Focusing on the building loads within the ecosystem, packaged air-conditioners and heat pumps or 

rooftop units (RTUs) installed in 69% of the commercial building floor space, contribute to roughly 571 

trillion Btu of site electricity consumption and 1.8 quads of source energy annually. Use of advanced 

controls and automated fault detection and diagnostics on existing RTUs will result in significant energy 

and cost savings and also enhanced maintenance by introducing condition-based maintenance practices 

and targeting maintenance when needed. The technical potential energy savings based on average 

savings per RTU of 30% are roughly 171 trillion Btu of site electricity and 531 trillion Btu of source 

energy annually. In addition to improving efficiency and maintenance of the RTUs, this effort will also 

make the RTUs more grid-responsive, so they can interact with the grid and provide demand response and 

ancillary services benefiting both the building owner/customer and the utility. Although it is difficult to 

predict market uptake of the resulting RTU equipment, engaging utilities, deployment partners and 

manufacturing partners early in the effort will help post-effort deployment activities. Also, if the results 

from the field tests and demonstrations show significant savings and grid responsive features, utilities that 

can benefit from this may provide financial incentives to promote the product(s) which would offset some 

of the installation cost. 

1.5 Examples of Implementation 

Past and ongoing demonstration projects have tested how a transactional energy framework can be 

employed to fulfill a range of objectives, from peak load management in the GridWise Olympic Peninsula 

Test Bed Demonstration to the intra-building coordination and control of multiple RTUs in the 

Transactional Network Project. In each case, the transaction-based approach promises to be a more 

economically efficient method of managing the complex power system as well as achieving within-thebuilding automation of RTU control to optimize occupant comfort. Controlling end uses with 

connectivity is less expensive and faster to deploy than investments in new transmission capacity and 

traditional direct load solutions through distributed assets (or other ancillary service solutions). 

Additionally, these demonstration projects have successfully engaged a wide range of assets in residential 

and commercial buildings and/or facilities, further highlighting the potential of a transactional energy 

framework. A series of use cases illustrating potential applications of transaction-based energy framework 

and its envisioned benefits to the energy ecosystem are described in Chapters 4, 5, 6 and 7. 

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1.5.1 Olympic Peninsula Demonstration Project 

The purpose of the Olympic Peninsula (OlyPen) Project (2006-2007) was to create and observe a 

futuristic energy-pricing system using transaction-based controls. Specifically, this project tested whether 

automated two-way communication between the grid and distributed resources could enable resources to 

be dispatched based on the energy and demand price signals that they received. In this manner, 

conventionally passive loads and idle distributed generators can be transformed into elements of a diverse 

system of integrated grid resources that provide near real-time active grid control and a broad range of 

economic benefits. 

The project was designed to test transactive control with responsive assets, such as residential 

thermostats, water heaters, clothes dryers, and commercial HVAC systems in 112 residential households, 

two industrial facilities and one commercial building. The project engaged customers via in-home energy 

portals that allowed participants to see and manage their energy use. While this portal allowed 

researchers to observe different customer responses, this is not a required component of program 

implementation. Figure 1.5 shows the simplified tool customers used to adjust their energy use. 

Figure 1.5 Olympic Peninsula Grid Wise Demonstration Project 

More comfort on the transactive cooling thermostat slider (see figure above) meant that thermostats 

would not react to price incentives; whereas, more savings translated in thermostats participating in the 

market-based transactions, thus delivering energy and cost savings to customers. The value propositions 

for the utility at scale were to lower wholesale prices and reduce distribution capacity requirements 

through load shifting, while for the customer, it was to get a lower electricity bill. The result of this 

demonstration project was the ability to engage customers in energy use choice via transactive control 

that led to a reduction of 15% in peak demand (with reductions up to 50%, at times) and an average 

customer energy cost savings of 10%. 

1.5.2 The Transactional Network Project 

The Transactional Network (TN) Project is intended to support energy, operational and financial 

transactions between networked entities (equipment, organizations, buildings, grid, etc.) [Katipamula et 

al. 2013] The underlying platform of the TN consists of the PNNL developed VOLTTRON LiteTM (VL) 

application execution software and a number of applications that perform specific functions (fault 

detection, demand response, weather service, logging service, etc.) VL serves as a single point of contact 

for interfacing with devices (building equipment, power meters, etc.), external resources, and platform 

services such as data retrieval and archive. In the initial phase, due to their significant energy use and 

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thus energy savings opportunity, the focus is on RTUs for small commercial buildings. More details on 

the platform can be found in the PNNL report on VL [Haack et al. 2013]. 

The TN platform is designed to facilitate “transactive energy” systems and markets. Transactive 

energy as used here refers to techniques for managing the generation, consumption, or flow of electric 

power within an electric power system through the use of economic or market-based constructs while 

considering grid reliability constraints. The TN project, being conducted by three national laboratories 

[Pacific Northwest National Laboratory (PNNL), Lawrence Berkeley National Laboratory (LBNL) and 

Oak Ridge National Laboratory (ORNL)], examines the role transactive networks could play in 

optimizing commercial building RTUs. RTUs are used in about 58% of all cooled commercial buildings 

and serve about 69% of the cooled commercial building floor space within the U.S.3 The purpose of this 

project is to demonstrate and propagate an open source, open architecture platform that enables a variety 

of site/equipment specific applications to be applied in a cost effective and scalable way. This will lower 

the cost of entry for both existing and new service providers as the data transport or information exchange 

typically required for operational and energy related products and services will be ubiquitous and 

interoperable. 

The objective of the project is to use advanced controls and energy services to enable energy saving 

retrofit solutions and mitigate reliability issues from distributed renewable energy sources. Three 

transaction-based control applications (applications) were developed by PNNL to demonstrate the 

transactional network concept with RTUs: 1) automated fault detection and diagnostic (AFDD) 

application; 2) a DR application, and 3) smart monitoring and diagnostic system (SMDS) application. The 

current concept uses an open-source, application-based platform that runs local and remote applications, 

enabling the RTU network and transactions. 

The applications should have the following characteristics: 

•	 Advanced controls for variable-speed drive RTUs 

•	 AFDD of equipment and schedule 

•	 Wireless sensor interoperability 

•	 Demand response (event driven, baseline load shape, measurement and verification - M&V, cost 

savings) 

•	 Local energy network balancing (e.g., match consumption to peak PV output) 

•	 Optimize consumption across multiple RTUs 

•	 Reduce energy use and peak demand (e.g., supermarket refrigeration). 

Even though the current effort involves RTU control automation, it is not transactive beyond a simple 

demand response concept. However, the future concepts involve two other use cases under consideration: 

3 EIA 2003 

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1.	 Trading capacity rights within a facility/building: the building (or facility) commits to limiting 

peak load (capacity), where a share of capacity limit assigned to each RTU is based on its 

diversified share of peak load. The RTUs, in turn, exchange capacity rights with other RTUs in 

the building in real time to optimize comfort while meeting the constraints. 

2.	 Diagnostic services: the building (or facility) transacts with a third-party provider for monitoring 

and diagnostic analyses, conducted remotely over the network, where the fees may be based on 

either continual services over a subscription period, or a “fee-for-fault” based on number and/or 

magnitude of faults detected or fixed. This is an example of a contract for building energy 

services (unrelated to the grid) that is promoted by network capability, and can be considered 

transactional in the sense that there are real-time fees for service (the fee-for-fault case). 

The above concept of managing capacity limits by granting tradable capacity rights can be extended 

to include transactions between two or more buildings, or even clusters of buildings. The extent of the 

diagnostic services is purely defined by the geographic range of the energy service providers’ target 

market, which could be local or national in scope. 

LBNL developed new software to operate with the VL platform that demonstrated the capability of 

both the LBNL and PNNL transactive applications at a building at LBNL [Piette et al. 2013]. LBNL 

designed, prototyped and tested components of this platform related to measuring system response to 

various planned modifications to the building operations. These modifications include energy efficient 

control strategies and automated demand response events. LBNL’s VL applications in the TN focus on 

characterizing the energy savings associated with short- or long-term operational changes in a building. 

A DR event would be an example of a short-term change whereas an EE measure would be a long-term 

change. Demand response is a change from normal patterns of electric energy consumption by end-use 

customers in response to changes in electricity price or incentive payments designed to induce lower 

electricity use when wholesale market prices are high or when the supply system reliability is jeopardized. 

The energy and power savings associated with these actions can be quantified and measured against the 

electric load that might reasonably be anticipated in the absence of those changes. These changes can be 

translated into economic terms based on an electricity tariff associated with a particular site. Specifically, 

LBNL developed four different applications to: 1) conduct a baseline electric load shape; 2) conduct 

measurement and verification of energy and demand savings; 3) estimate the cost savings from 

participating in DR events or long-term EE interventions; and 4) convey DR events using a DR event 

scheduler. 

ORNL has been working on two applications of the TN technology that enable low-cost retrofits of 

small and medium commercial buildings for the purposes of improving their energy usage profile. The 

first application is based on a network of air conditioning thermostats and a centralized computer that 

coordinates their operation to achieve substantive reductions in peak energy use. A prototype of this new 

control system was built and deployed in a large gymnasium to coordinate the four rooftop air 

conditioning units. Based on data collected while operating this prototype, the cost savings achieved by 

reducing peak power consumption are sufficient to pay back the cost of the prototype within 1 year 

[Kuruganti et al. 2013]. Moreover, it is possible to reduce the cost of this system by a factor of at least 

six, creating a system that can pay for itself within 2 months of operation. This remarkably short payoff 

period suggests a significant commercial potential for the proposed control technology. 

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The second application is a system for forecasting the average output of a photovoltaic (PV) array for 

the following hour of operation. A significant feature of this system is its use of publicly available data, 

which is obtained through a transactional network, to generate forecasts that are accurate enough to guide 

control applications with a time constant on the order of 1 hour. If the forecasting interval can be made 

more precise, then there would be significant potential to use this type of technology to coordinate the 

availability of building PV arrays with energy intensive building functions; in particular, the air 

conditioning control in the first application could take advantage of such forecasts to improve peak 

reductions and reduce overall energy usage. The TN Project scope is currently being expanded by ORNL 

to include supermarket refrigeration, but it is expected that as the platform matures, its applicability will 

include the residential building and light industrial building markets as well. 

1.6 Description of the Building Controls Framework 

The next two chapters lay out the considerable work that needs to be done to realize this future state 

of the transactional energy framework. They explain four categories of exchangeable services that the 

framework needs to support. These include: end-user services, energy market services, grid services, and 

societal services. These services range from building O&M services, grid capacity trade-offs and ancillary 

services to energy efficiency certificates. These services provide the main functionality of the framework 

and list the benefits for all participants in the transaction. Chapter 2 of this report describes these services 

in greater detail. 

The framework that enables these services will provide the market structure to facilitate the different 

transactions to occur. It will also require the development and deployment of new networks, devices and 

controls to support real-time, two-way communications between the participating players/actors. It will 

further require new and intelligent applications at numerous nodes throughout the network to facilitate 

and automate the wide variety of transactions, and to manage and activate control and monitoring systems 

that are involved in the delivery of transactional energy services. 

The purpose of this document is to enable researchers and private vendors to develop the 

technological solutions that can be deployed at a large scale across the various participating domains 

(customer to the grid and back), and to ensure that such solutions are compatible and interoperable. 

Chapter 3 of this report describes such a framework in terms of the network topology of participating 

nodes, the communication interfaces between them, and a platform architecture that can be implemented 

at these nodes. 

Chapters 4-7 contain an extensive list of “use cases” describing possible applications of transactionbased services, technical requirements to fulfill these, as well as benefits to participating stakeholders. 

These use cases are envisioned to define essential components that would enable transactions in the 

energy and energy-related domain and give practical examples to the broader community of electric 

power and buildings technology organizations, researchers, manufacturers, standards- and codesdeveloping organizations and vendors. 

13 DRAFT
 
 

Questions for Chapter 1: 

What do you think of the Transactive Energy future state described here?
 

Are there other or better ways to make buildings smarter?
 

How smart do buildings need to be and why?
 

Are there other examples of Transactive Energy implementation that should be included?
 

Please provide details, reports and studies that you might be aware of documenting the results 

of such implementations.
 

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2.0 Exchangeable Services
 

2.1 Introduction
 

A transactional framework must support transactions that exchange products, rights and other services 

that are valued by the parties to the transactions. The range of these “exchangeable services” is virtually 

unlimited in theory, but some are expected to be more common than others. Products can include 

quantities such as energy and electric capacity; services include building-oriented maintenance and 

control operations as well as grid-oriented ancillary services; rights can include such things as a position 

in an electric vehicle charging queue or a license to consume electricity at a stated level and price for a 

defined period of time. 

A transaction is defined by the sequence of events that result in an exchange of products, rights, or 

services, and the associated financial settlement, between two (or more) entities, and is considered valid 

only if completed in its entirety based on the included terms and conditions. A transaction involves the 

exchange of products, services and rights, agreed upon by the transacting parties. A transaction may 

involve delivery of: 

•	 a physical product, such as energy or electric power 

•	 a physical service, such as a building retrofit or operations and maintenance 

•	 information, such as diagnostics, advice, a control strategy or a software application 

•	 a right such as a limit on the use of a share of capacity or throughput by another party 

•	 a financial product, such as a futures contract (advance purchase of energy). 

Underlying most financial products is also a physical commodity, and a financial product is used as a 

hedge to manage price/quantity volatility associated with the physical commodity, for instance, futures 

contracts for energy, etc. The participants in a transaction envisioned for the kind of framework discussed 

here have a broad range of needs, interests, and constraints. Depending on the participants and the 

exchangeable services involved, there are different bits of information (“parameters”) that must be 

exchanged and various time frames during which the products, services, or rights must be delivered. This 

chapter discusses a non-exhaustive, but representative set of four major categories of exchangeable 

services. While each party to any given transaction has their own motivation for the exchange, the four 

categories are distinguished by the primary motivation from which the value is derived: 

1.	 End-User Services – energy and energy-related products, services, and rights that the end 

user purchases to balance and co-optimize their overall energy costs, comfort and 

convenience. 

2.	 Energy Market Services – energy and energy-related products, services, and rights that the 

electric power grid offers to reflect the costs of production and delivery of power and energy 

to customers in everyday operations. 

3.	 Grid Services – energy and energy-related products, services, and rights that the electric 

power grid purchases or incentivizes because they are required for its reliable operation. 

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4.	 Societal Services –energy and energy-related products, services, and rights that have a value 

agreed upon and acknowledged by society, monetized by a governing entity, with benefits 

provided to all involved or affected parties. 

The first two of these, end-user services and energy market services, are likely the least common and 

least understood categories because they represent the types of transactions that are just getting underway, 

primarily in the commercial buildings sector. They can offer trade-offs between the different electric enduses within a building or cost-effective building operation and maintenance services from third-party 

service providers, can save building owners money by lowering utility bills, and possibly benefit both the 

building owners and the electric grid and third-party energy service providers through sharing of capital 

costs to equip buildings with the necessary equipment to support such transactions. Development and 

widespread implementation of a transactional framework for buildings is unlikely without the value 

proposition of end-user and energy market services. However, the existence of such a framework will 

support additional interactions between buildings (as when two data centers coordinate their data 

processing runs to limit overall building peak loads), between buildings and third parties (e.g., contract 

maintenance firms), both of which have the potential to increase the economic viability of installing a 

transactional framework. It will also enable societal services that serve broader social goals to engage 

directly with buildings and their associated loads, to the benefit of both. 

Along these dimensions—type of exchangeable services and type of interaction—there exist a nearcontinuum of options, and there are many similarities between exchangeable services and interactions. 

For example, some intra-building interactions consist of building managers acting as his/her own 

aggregator (e.g., coordinating tenants and departments of the same company to meet overall energy and 

capacity constraints), while many building-to-grid interactions can involve a building owner as one party 

and an aggregator or utility of some sort as the other party. 

2.2 End-User Services 

End-user services refer to energy and energy-related products, services, and rights that the end user 

purchases to balance and co-optimize their overall energy costs, comfort and convenience. The rendering 

of these services is the result of origination of need and value at the customer premises, and hence, may 

be labeled as behind the meter services. The net result of providing such a service is that buildings and 

the equipment within the buildings are more efficient, predictable, controllable, and provide required 

services at lower cost. This may involve a wide range of transactions such as buying energy from a thirdparty on-site generator or storage system, purchase of diagnostics and valuation services from a third 

party that supports the operations and maintenance of end-use assets, purchase of energy services by 

tenants from the building owner, and hierarchical “purchases” of energy by one building subsystem from 

another (e.g., by an air-handling unit in the form of chilled water from a bank of chillers) that may 

facilitate advanced control paradigms. 

An example of the end-user services is operation and maintenance (O&M) service that is of interest to 

buildings and third-party service providers, where such a service is used to maintain, repair, replace 

and/or operate buildings and equipment within buildings, leading to enhancements in overall customer 

comfort and convenience. Below are more examples illustrating the End-User Services category. 

Chapter 4 of this report lists some examples of use cases that describe possible transaction-based 

mechanisms that could be used to provide such end-user services. 

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2.2.1 M&V for Energy Performance Verification: Energy Charting and Metrics Tool 

The Energy Charting and Metrics (ECAM) is a tool developed by PNNL for charting energy 

performance from the building automation system (BAS). ECAM is used for M&V for building retuning. In this scenario, the building O&M service provider installs ECAM on the building’s BAS, and 

uses the ECAM interface to set up trending, monitoring, and visualization of energy use in the building. 

Figure 2.1 and Figure 2.2 show examples of M&V visualization from ECAM1 that can help building 

managers understand how energy is being used and how the energy use is changing over time. Figure 2.1 

shows energy intensity as a function of the time of day and the day of the year, while Figure 2.2 shows 

aggregate load profiles before and after an energy efficiency intervention. 

Figure 2.1. Example M&V Visualization: Energy Intensity 

as a Function of Time of Day and Day of the Year 

Figure 2.2. Example M&V Visualization: Aggregate Load Profiles 

for before and after Efficiency Interventions 

2.2.2 Data Centers Trade Computation Priority 

In this use case, a data center (server farm or high-performance computing center) shifts computing 

jobs to another such service provider to save electricity. The data center located where electricity costs 

are currently high (e.g., during periods of peak demand) shifts jobs to a contemporary where costs are 

currently lower, and vice versa. Both centers keep a tally (weekly or monthly) on computer jobs shifted 

and electricity costs saved and regularly post their idle capacity and their electricity costs associated with 

17 DRAFT
 
 

 

computing (including CPU, data storage, and associated air conditioning). Presumably net jobs shifted 

over an agreed upon period of a week, month, or year are kept near zero to maintain overall asset 

utilization balance. Each data center benefits from reduced utility bills while grid operators benefit from 

reduced peak demand and a lower need for capital investment for generation, transmission, and 

distribution capacity. See Section 4.6 of this report for a more detailed explanation of this example, 

Figure 2.3 illustrates the transactions. 

Figure 2.3. Illustration of Data Centers Trading Computation Tasks 

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Example of Conditioned-Based Maintenance (CBM): Smart Monitoring and Diagnostic System 

The Smart Monitoring and Diagnostic System (SMDS) is a CBM diagnostic tool for small- and 

medium-sized commercial buildings that used packaged HVAC equipment. It can be installed on new 

or existing units. A controller is mounted in a small box on the side of the packaged air conditioner or 

heat pump and provides continuous remote monitoring and diagnostics for the unit. The SMDS works 

by constantly collecting data from sensors installed on the equipment to measure its performance and 

detect and diagnose problems with its operation. The unit then sends the results wirelessly, directly 

from each packaged unit to a network operations center run by a third-party CBM contractor. In the 

case of SMDS demonstrations on Washington State commercial buildings, NorthWrite has served as 

the CBM contractor. NorthWrite securely stored data and information on the condition of packaged 

units and made them available on the web. Participating buildings could view their results at any time 

using an internet browser. Only users enrolled in the service with the correct authorization can see the 

results for their packaged units. See Section 4.5 for a more detailed explanation of this example. 

While SMDS was developed as a standalone tool, a similar package could be developed with a BAS 

(rather than a web) interface, and sold as a component of a broader package of tools for building-grid 

transactions, site energy monitoring and energy performance optimization. In an analogy, the new 

BAS would be much like a smart phone, while each of the additional services, including CBM were 

‘apps’ that could be downloaded or would come pre-packaged with the BAS. An interoperability 

framework is one essential element to making transactional energy networks viable. This derives 

from the need to support a vibrant and growing ecosystem of vendor products and services that 

interoperate as a network on a common basis and that readily enable secure machine-to-machine 

connections to be established with minimal effort when installing them. There are two parts to the 

framework proposed here. First, a general framework and common basis is required for how nodes in 

such networks will interact. Section 3.0 illustrates the network these diagnostic tools would use. 

Figure 2.4. Schematic of a Building’s Transactive Network
 

Used to Provide Third-Party O&M Services
 

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Third Party Receives Payment for Energy Services 

This use case illustrates how customers, such as commercial building owners, contract with vendors that 

install, operate, and maintain equipment, such as a building-cooling-heating-power (BCHP) system, thermal or 

battery storage system, or a conventional generator. The customer desires to obtain a lower energy bill without 

the capital expenditure for the equipment and systems or the need to operate and maintain them while the service 

provider desires to earn a return on its investment in the equipment and systems. The service provider installs, 

operates, and maintains the equipment and systems at its expense and also pays for the electricity and fuel it 

consumes. On a regular basis, the customer is billed for the electrical and/or thermal energy delivered to the 

building based on the contract terms, and/or its share of the customer’s savings for demand response, ancillary 

services, etc. In addition to the benefits to customer and service provider, the provided demand management and 

efficiency from end uses contribute to peak load reduction and thus help grid operators with less need for capital 

investment for generation, transmission, and distribution capacity. See Section 4.1 for a more detailed 

explanation. 

Descriptions and time scales of different types of O&M services that can be transacted within the 

buildings-centered transactional framework are presented in Table 2.1. Table 2.2 shows the information 

that must be exchanged with O&M services for buildings related transactions, while Table 2.3 shows the 

types of participants that may be involved in O&M services for buildings-related transactions, by type of 

interaction. 

Table 2.1. General Characteristics of End-User Services 

Service Description Time Scales 

Condition 

Monitoring 

Service provided to allow monitoring of 

equipment for degradation in performance or 

faulty behavior. Could be telemetry-based 

trend analysis or event response/asset 

utilization optimization. 

Information is updated in real time for 

event response/asset utilization 

optimization and every few minutes to 

hours for telemetry-based trend analysis 

Condition-Based 

Maintenance (CBM) 

Service provided to repair or replace building 

equipment based on a process of monitoring 

the equipment for degradation in performance 

or faulty behavior. 

Responding and fixing faulty equipment 

would involve a process of physical 

(manual) response that would take hours 

to days, unless remote reset capability 

exists. 

Energy Efficiency 

Performance 

Enhancement 

Service provided to enhance operations (i.e., 

energy efficiency) of buildings through 

coordination and control of building 

equipment. Service providers can set up and 

configure energy conservation measures and/or 

implement advanced control strategies by 

leveraging BASs. 

Efficiency measures could be set up and 

configured monthly to yearly and the 

control strategies for BAS can be 

implemented by building owners/ 

operators in real time (minutes; or even 

seconds). 

Measurement and 

Verification Service 

(M&V) for Energy 

Savings 

A system to track energy consumption by 

building systems or for the building as a 

whole, as already used by some commercial 

users. This can include simple trending of 

systems; typically used to verify schedules and 

device functionality. It can also include more 

rigorous tracking of energy consumption 

patterns within a building that can be used to 

verify energy savings from efficiency measure 

implementation. 

M&V can be configured to provide 

feedback on energy consumption in real 

time (minutes); however, this time scale 

does not refer to a transaction between 

multiple entities. 

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Service Description	 Time Scales 

Table 2.2. Typical Exchange Parameters for Operation and Maintenance Services Transactions 

Information	 Description 

Operational condition	 Information on recent operational efficiency compared to long-term efficiency, or 

other agreed upon metrics of operational efficiency 

Contractual agreement	 Monthly O&M subscription fees for service programs and/or maintenance service 

rates paid for by building owners. For example, subscription fees could include 

continuous remote monitoring of the building, and an hourly rate for service visits 

may be charged to repair or replace faulty equipment 

Verification	 For services involving building operations enhancement, the total building energy 

savings should be monitored and verified. Savings should be compared to a 

previous year’s baseline in energy terms (kWh, etc.), dollar terms, or percentage 

terms. 

Table 2.3. Typical Participants in O&M Service Transactions 

Transaction Type Actor/Stakeholder and Role Exchange Benefits Time Scale 

Building to Other 

Sign up, installation 

and setup can occur 

once or yearly, 

subscription to service 

program occurs 

monthly, response 

time for irregular 

maintenance service 

occurs within hours to 

days, BASs should 

operate in real time 

(minutes) 

Actor 1 – O&M service 

provider installs, sets up and 

may provide necessary 

equipment, as well as, provide 

O&M services based on 

contractual agreement 

Creates a revenue stream to 

provide O&M services 

Actor 2 – customer (i.e., 

building owner) may 

subscribe to receive O&M 

services and may need to 

purchase additional hardware 

and software 

• Building owners are able to 

reduce energy 

consumption, save money, 

extend the lifetime of 

equipment, and avoid 

catastrophic equipment 

failure. 

• Reduced cost for O&M 

Building to Other 

Actor 3 – buyer (i.e., building
 

owner)
 

Actor 4 – seller (i.e., building
 

owner)
 

Actor 5 – establishes market or
 

rules for exchange (i.e.,
 

aggregator, RTO/ISO, load
 

serving entity)
 

Ability to lower monthly bills by 

buying additional energy needed in a 

competitive market or by transacting 

with other customers with excess 

energy available 

Creates revenue streams for selling 

excess capacity rights 

Ability to manage energy in real 

time to reduce need for investment 

in additional infrastructure for 

increasing overall generation 

capacity 

Auctions or 

agreements for 

energy exchanges 

can be made 

minutes to day 

ahead in advance 

Actor 1 – building subsystem Ability to operate more efficiently Priorities for Intra-Building components energy exchanges 

21	 DRAFT
 
Building Services Respond Intelligently 

to Economic Signals

In this use case, individual units of 

equipment in a building (e.g., a rooftop 

HVAC unit, or a chiller) respond to 

building level requests for services (heat, 

cool, etc.) based on current price signals, 

current environmental conditions, 

contracted capacity constraints, etc. See 

Sections 3.2.1 and 5.4 for more details.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction Type Actor/Stakeholder and Role Exchange Benefits Time Scale 

can be made 

minutes in advance 

2.3 Energy Market Services 

Energy is typically a product and denotes the quantity of electricity, heat or gas generated and used 

over a period of time. It may be delivered by the grid to a building, or generated by the building (e.g., 

using solar panels or small turbines) and either fed back to the grid, used to offset purchases from the 

grid, or stored in a battery or thermal storage system. Energy market services refer to energy and energyrelated services that help support the efficient utilization of the energy generation and delivery assets. 

The primary need, and hence, value for energy market services originates outside the meter, i.e., within 

the power grid or the natural gas delivery infrastructure. In a region with a wholesale power market, these 

services may reflect those costs. In other regions they may reflect power production and delivery costs 

for a vertically-integrated utility, for example. 

Although the value may be derived from the grid benefits, the overall economic benefits for such 

transactions accrue to both parties involved in the transaction. Energy market services may include 

mechanisms, such as, time-of-use and real-time pricing, etc., to help manage constrained resources, such 

as electricity or water delivery pinch points.

4 Energy market services primarily help customers derive 

economic gain by offering cost savings opportunities, such as 

incentives or lower prices for modifying their consumption 

patterns, providing capacity deferral and other benefits to 

utilities. Chapter 5 of this report lists some example use 

cases describing transactive mechanisms that help in the 

provisioning of energy market services. It is important to note 

that some of these use cases may fall into multiple service ­

domains because the need and value for these services may 

originate in those domains concurrently. Today’s energy 

markets are evolving to provide new services beyond just 

electricity to customers. Traditionally, the wholesale energy 

market consists of a day-ahead and a real-time balancing 

market to balance generation with demand in a short-term timeframe. Participants in the wholesale 

market consist of load serving entities, aggregators, and generators. Deregulated retail energy markets5 

allow the customers, for example, to choose an electricity supplier from competing retailers who purchase 

wholesale energy on their behalf. Following are two use cases that illustrate energy market services 

within a building and between a building and a service provider. Table 2.4 shows the information that 

must be exchanged to support energy market services transactions. 

4 While not covered in this document, there are several different applications envisioned for energy market services,
 

such as managing urban or agricultural water supply.

5 Retail restructuring in Texas allows customers to switch between competing load serving entities on a short time
 

scale. However, no retail markets, except for in a few pilot/demonstration projects, exist today that allow retail 

customers to buy/sell electricity in- or near real time, as was enabled at the wholesale level as a result of wholesale
 

markets restructuring.
 

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Table 2.4. Typical Exchange Parameters for Energy Market Services 

Information Description 

Price Payments and penalties as a result of exchange 

Quantity Energy is generally measured and expressed in kWh. 

Contractual agreement The terms and conditions of how penalties and payments are attained should be 

outlined in the contractual agreement. Additional information may be exchanged in a 

transaction to support verification of response or delivery. 

Verification Energy usage should be verified. 

Dynamic Rate 

In this use case, a customer (building owner or tenant) changes their constant, flat rate contract with the 

utility or retail service provider to a plan with varying electricity rates. The new plan could be governed by a 

time of use (TOU) system, in which the unit price for electricity is higher during peak hours and lower during 

off-peak hours, e.g., by a factor of ~2×, or a critical peak pricing (CPP) plan, in which the utility can declare a 

very high unit price (~10-20×) in cases of grid emergencies, with 24-hour notice to customers, or a 

combination of TOU and CPP, in which a TOU rate applies on most days, and CPP rates come on during 

critical peak hours on critical peak days. Another option would be a real-time price (RTP) rate that varies 

continuously, depending on grid conditions. 

This use case illustrates electricity pricing models that help customers lower their bill, if they respond, by 

shifting some of their load from high-price periods to low-price periods. Depending on the plan, the utility 

correspondingly obtains daily load shifting by customers that corresponds to electricity production costs 

(TOU), demand response for peak-load or peak-price management on a limited number of days per year 

(CPP), or continuously available demand response resource (RTP). A more detailed explanation of this use 

case can be found in Section 5.1 of this report. 

Optimize Electric Vehicle Charging for Dynamic Rate 

This use case lays out transactions furthering the integration of electric vehicles (EV) benefiting 

consumers with lower charging rates and utilities or retail service providers with more predictable load 

curves. Participating EV owners sign up with a retail utility or a retail service provider to receive a dynamic 

(time-varying) rate contract specifically targeting EV charging. To optimize charging of EVs, the customers 

can use computer aided tools, such as energy management systems (EMS) or building automation systems 

relaying forecasts in dynamic rates, time limits specified for fully charging EVs, and specified charging levels 

for emergency use of EVs, etc. 

By participating in the dedicated EV charging rate, EV owners can benefit from lower charging rates, 

thus lowering their electricity bills. The utility or retail service provider obtains daily load shifting by 

customers that reflects the needs of the grid, such as load reduction during peaks or load increases when there 

is excess wind generation. A more detailed explanation of this use case can be found in Section 5.2 of this 

report. 

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Table 2.5 shows the types of participants that may be involved in an energy transaction, by type of 

interaction. 

Table 2.5. Typical Participants and Roles in Energy Market Services Transactions 

Transaction 

Type Actor/Stakeholder and Role Exchange Benefits Timescale 

Building to Grid 

Actor 1 – establishes market or 

rules for exchange (i.e., aggregator, 

RTO/ISO, load serving entity); sets 

up time-of-use electricity rates, or 

mechanisms to establish real- time 

prices (such as double-action based 

retail markets) 

• Enables short-term balancing 

of energy supply and demand 

• Manages intermittency of 

renewables and load demand 

variations 

• Manages high cost of 

marginal generation 

Auctions or 

agreements for 

energy exchanges 

are typically 

made minutes to 

day ahead in 

advance. Longterm power 

purchase 

agreements can 

also be signed 

based on bilateral 

negotiations. 

Actor 2 – buyer/customer (i.e., 

building owner, load serving entity) 

subscribes to utility rate programs 

• Ability to manage energy use 

in real time and, in turn, 

reduce cost of electricity 

• Reduced rates as a result of 

reducing the need for 

additional capacity 

investments and fuel costs 

Actor 3 – seller (i.e., generator 

resource owners and/or investors, 

load serving entity, building owner) 

• Creates revenue streams for 

generating and/or delivering 

energy 

• Potential to reduce need for 

capacity investments. 

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2.4 Grid Services 

Grid services are defined as energy, and energy-related products, services, and rights that help support 

enhanced grid planning, operations and metering within both centralized and decentralized structures of 

asset location and ownership. The need, and hence, value for grid services originate outside the meter, 

i.e., outside the customer premises. Grid services, such as peak-load shifting and ancillary services help 

maintain grid reliability and resiliency, as well as aid in renewables integration by providing flexibility to 

the system. Solutions that help in delivery of grid services may borrow from similar concepts developed 

for integration of energy storage and other demand-side resources into the power system. These concepts 

must also be cognizant of – and preferably providing solutions for – known problems, such as, 

measurement and verification, net-metering, voltage instability caused by two-way power flows, etc. 

Chapter 6 of this report contains some examples of transactive mechanisms that may be used to provision 

different grid services, while providing commensurate incentives to the providers of these services. 

It is expected that two broad categories of grid services will dominate the design and operation of a 

buildings centered transactional framework. These two categories are summarized in Table 2.6. Each of 

these exchangeable services is discussed in more detail in the following subsections. 

Table 2.6. Major Categories of Exchangeable Products, Services, and Rights 

Exchangeable Classification Description 

Capacity Right, product From the perspective of a building owner, this is 

a right to consume power up to a specified limit, 

possibly to the level of installed capacity of 

equipment in the building. From the grid 

perspective, capacity is a level of power 

delivered by a provider, which may be limited 

by the availability of generation or the promise 

of load reduction. 

Ancillary Services Service This includes a range of measures used to 

maintain reliable operation of the power grid, 

such as regulation, spinning reserve, and 

flexibility/ramping. Ancillary services are 

primarily of interest to the grid, but buildings 

can theoretically supply such services by 

manipulating either loads or local generation. 

2.4.1 Capacity 

Capacity refers to the requirement for adequate resource availability to ensure demand can be met at 

all times. Capacity can be supplied and/or limited by generation resources, transmission and distribution 

power infrastructure, dispatchable demand response, and energy efficiency measures (i.e., installing and 

implementing more efficient devices and/or processes relative to building standards and codes). Capacity 

resources can be acquired through owning and operating generation capacity, purchasing capacity rights 

from others through bilateral markets, and/or by obtaining capacity through capacity market auctions or 

purchases of DR. Investors in capacity need sufficiently long-term incentives (i.e., price) to encourage 

25 DRAFT
 
 

 

 

 

 

 

 

 

 

 

 

development and maintenance of generation, transmission and/or demand side resources. Typically, 

utilities, retail service providers, and/or aggregators are responsible for acquiring the resources and/or 

capacity rights necessary to meet their customers’ demand. However, capacity rights can also be acquired 

and sold directly by customers, which allows service providers to better manage capacity investments. 

When capacity rights are being exchanged, the following information, highlighted in Table 2.7, is 

typically exchanged between transaction participants. Table 2.8 shows the types of participants that may 

be involved in a capacity transaction, by type of interaction. 

Trade of Allocated Capacity Rights 

In this use case, customers purchase a “capacity rights” plan (similar to a customer purchasing a rate plan 

from a mobile service provider) from a utility, retail service provider, third-party distributed asset owner or 

third-party aggregator or are allocated a share of system capacity from a load serving entity. The “capacity 

rights” plan establishes a limit on the power that can be used by each consumer. A forward market is setup to 

allow the consumers and third-party distributed asset owners to buy and sell the capacity rights. 

The transactions involve an exchange of a portion of a customer’s capacity rights. The initial capacity rights 

owned by customers are assumed to have been purchased from, or allocated by, a utility, a retail service 

provider, an aggregator or third-party distributed asset owner. There are currently no examples of this use 

case today. See Section 6.3 for more details. 

Transactive Retail Energy Market 

In this use case, customers sign up for a transactive control and coordination program with a retail utility or a
 

retail service provider. This involves a real-time price (RTP) determined by customer bids for electricity
 

demand and a short-term (~5-minute) retail price-discovery process, such as a market. Participating
 

customers change their constant, flat rate contract with their utility or retail service provider to a RTP that 

varies over time at short intervals (e.g., 5 minutes). Customers need to have interval metering such as with an 

Advanced Metering Infrastructure (AMI), as well as responsive assets, to engage.
 

Customers can take advantage of the RTP by shifting some of their load from high-price periods to low-price 

periods, thereby lowering their bills. The utility or retail service provider correspondingly obtains daily load
 

shifting by customers that corresponds to wholesale electricity costs, as well as continuously available 

demand response/net load reduction resources for use in an emergency, and precise control of demand and net
 

load to automatically manage capacity constraints, of generation, transmission and distribution systems, on a
 

continuous basis. The first test of the transactive retail energy market was the 2006-2007 Olympic Peninsula
 

Smart Grid Demonstration. Currently, this model is also being tested in the American Recovery and
 

Reinvestment (ARRA) co-funded AEP’s gridSMARTTM Demonstration, and the Pacific Northwest Smart 

Grid Demonstration. See Section 6.2 for more details.
 

Cooperative Tenants in a Building or Campus 

In this use case, customers within a large building or group of buildings sign up collectively for a transactive
 

control and coordination program with a retail utility or a retail service provider. Individual tenants within a 

building or buildings within a campus, trade shares of the overall capacity/energy rights by time shifting
 

operations, etc. This is similar to the use case described in Section 6.3.
 

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Table 2.7. Typical Exchange Parameters for Capacity Transactions 

Information	 Description 

Price	 Payments and penalties resulting from exchange. 

Quantity of capacity	 The capacity resource provider commits to providing a specified quantity in kW, 

as a market participant. In a building-oriented transaction, a building manager 

commits to limiting load to a specified level and/or to reducing load by a 

specified amount, by time shifting building functions or operation of local 

generation assets. 

Contractual agreement	 The terms and conditions of how penalties and payments are attained should be 

outlined in a contractual agreement. There may be a need to exchange 

information supporting verification of response in a transaction, for example. 

Verification	 There must be a means to confirm that agreed upon actions were taken, which 

could be a measurement of total load, evidence that generating assets were 

dispatched, etc. 

Table 2.8. Typical Participants and Roles in Capacity Transactions 

Transaction 

Type 

Actor/Stakeholder 

and Role 

Benefit of Exchange Timescale 

Actor 1 – establishes 

market or rules for 

exchange (i.e., 

aggregator, RTO/ISO, 

load serving entity) 

• Ability to ensure reliable delivery of 

electricity to customers 

• Ability to sell into wholesale markets 

Building to 

Grid 

agreements for 

capacity rights are 

typically made 

months to years in 

advance 

• Auctions or 

Actor 2 – buyer (i.e., 

building owner, load 

serving entity) 

• To a load serving entity, the ability to manage 

capacity in real time to reduce need for 

investments (which raises rates) in additional 

infrastructure for generation capacity 

• To a building owner, reductions in future 

utility bills and/or new revenue streams, and 

predictable access to short-term capacity 

rights for unexpected business needs. 

Actor 3 – seller (i.e., 

generator resource 

owners and/or investors, 

load serving entity, 

building owner) 

• Create revenue streams for maintaining and 

operating current and future investments 

• Less need for investment in additional 

generation, spinning reserves, etc. 

Actor 1 – buyer (i.e., 

building owner) 

Ability to lower monthly bills by buying 

additional capacity needed in a competitive 

market or by transacting with other consumers 

with excess energy needs 

Building to 

Other 

Actor 2 – seller (i.e., 

building owner) 

Actor 3 – establishes 

Creates revenue streams for selling short-term 

excess capacity rights 

Ability to manage capacity in real time to reduce 

Capacity rights can be 

exchanged hours to 

years in advance 

market or rules for need for investment in additional infrastructure 

exchange (i.e., to support generation capacity 

aggregator, RTO/ISO, 

load serving entity) 

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2.4.2 Ancillary Services 

Ancillary services procurement is about 6% of peak load, and the need for ancillary services is 

expected to increase with increased penetration of renewables [MacDonald et al. 2012]. Figure 2.5 and 

Figure 2.6 illustrate a conceptual overview of ancillary services. Detailed examples of transactions related 

to ancillary services are given in Chapter 6 of this report. Other examples include the PJM ancillary 

service markets.6 

Figure 2.5. Conceptual Overview of Ancillary Services Transaction 

6 See: http://www.pjm.com/markets-and-operations/ancillary-services.aspx. 

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Figure 2.6. Conceptual Overview of Intra-Building Reaction to Request for Ancillary Services 

Although there are variations in the implementation in terms of technical, procurement, market 

structure and settlement points of view, some general characteristics of ancillary services are given in 

Table 2.9. Note that these must be aggregated across many buildings to offer utility scale value. 

Currently no explicit market for flexibility/ramping generally exists, but it is getting increased attention as 

an ancillary service in its own right. Table 2.10 shows the information that must be exchanged for 

ancillary service related transactions. Table 2.11 shows the types of participants that may be involved in 

an ancillary service related transaction, by type of interaction. 

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Table 2.9. General Characteristics of Ancillary Services 

Service Description Timescales 

Regulation 

Generation is matched with very short-term changes 

in load by moving the output of selected resources 

up and down via an automatic control signal. 

Another component is maintaining import/export 

targets for balancing areas. 

Regulation signal sent every few seconds. 

Capacity for regulation is reserved every 

few minutes to 1 hour 

Flexibility/ 

Ramping 

Increasing the output of generators to meet demand 

that is rising or reducing the output of generators as 

demand drops. Because of differences between 

forecast and the actual load, power plants must be 

available to rapidly adjust for these differences, and 

are paid a premium for their flexibility, largely 

driven by the scale deployment of intermittent 

renewable energy 

Dispatch signal every 5 minutes to 1 hour 

Spinning 

Reserve 

The ability of a generator that is online and 

synchronized to system frequency, with some spare 

capacity to increase its output within a certain, short 

amount of time. Demand-side resources can also be 

used. Loads as a resource to act on the intermittent 

variability of renewables can also be considered in 

this service. 

Spinning reserve must reach full power 

within about 10 minutes. Capacity for 

spinning reserve is reserved every 15 

minutes to 1 hour 

Non-spinning 

Reserve 

Same as spinning reserve, but need not respond 

immediately; therefore, units can be offline but still 

must be capable of reaching full output within the 

required amount of time. 

Can be brought online to reach full power 

within about 20 minutes 

Replacement 

Reserve 

Same as non-spinning reserve, but with a 30-minute 

response time 

Can be brought online to reach full power 

within about 30 minutes 

Table 2.10. Typical Exchange Parameters for Ancillary Services Transactions 

Parameter	 Description 

Quantity Capacity in MW for regulation, ramping/flexibility and operating reserves. In 

some markets, also MWh for regulation 

Price Payments for regulation, ramping and operating reserves. Payments if reserves 

are dispatched. Penalties for not being able to respond to dispatch signals. 

Contractual agreement	 The terms and conditions of how penalties and payments are attained should be 

outlined in the contractual agreement. 

Verification	 Length of response and response times should be within requirements as 

defined in the contract. 

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Table 2.11. Typical Participants in Ancillary Services Transactions 

Transaction Type 

Party 1 

Actor/Stakeholder and Role Exchange Benefits Timescale 

Actor 1 – establishes market or rules 

for exchange (i.e., aggregator, 

RTO/ISO, load serving entity) 

• Ability to ensure reliable 

delivery of electricity to 

customers 

Building to Grid 

• Reduced need for 

overall generation 

capacity as a result of 

less capacity held out of 

markets to meet 

ancillary service 

requirements, which 

also leads to reduced 

rates for all end use 

customers. 

Capacity for 

ancillary services 

are reserved 

every few 

minutes/hour to 

day ahead and 

control/dispatch 

signals are sent 

every few 

seconds to 

minutes 

depending on the 

type of service 

being provided 

Actor 2 – buyer (load serving entity) • Lower utility revenue 

requirements and market 

prices for ancillary 

services 

Actor 3 – seller (i.e., generator 

resource owners and/or investors, 

load serving entities, building owners) 

• Revenue streams for 

providing ancillary 

services needed to 

maintain grid reliability 

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2.5 Societal Services 

Societal services refer to energy and energy-related services that have a value agreed upon and 

acknowledged by society, and provided to all involved or affected parties, and whereby settlements may 

be made by the larger governing entity. The responsibility of monetizing the societal value, in most 

cases, would be performed by the said governing entity, as well. Examples of societal services may 

include participation by utilities and third parties in providing results into emissions cap-trade markets 

etc., using energy efficiency certificates (white tags), acquired from customers (buildings) using 

transactive mechanisms. The value (monetary or other) gained from providing societal services would be 

shared between the involved parties. Chapter 7 of this report provides examples of use cases with details 

on the transactive mechanisms that could be employed for the provisioning of societal services. 

Figure 2.7 and Figure 2.8 show an illustrated example of customers signing up with a retail service 

provider to receive power rationing services under global emergency conditions (i.e. blackouts).7 

Figure 2.7. Emergency Power Rationing Agreement - Part 1 

7 See Section 7.1 for a more detailed explanation of this example. 

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Figure 2.8. Emergency Power Rationing Agreement - Part 2 

Three more examples of societal services the transactional energy framework could support are 

shown below. 

Air Shed Management 

In this use case, an air quality management surcharge incentivizes building owners to reduce 

power consumption. During “smog alerts,” an air shed management authority raises electricity and/or 

natural gas rates above regular rates to encourage load curtailments, particularly for customer 

segments and end uses that have high contributions of local pollutants, as well to shift electricity 

generation to cleaner and extra-regional sources, including curtailment of distributed generation and 

combined cooling-heating-power systems in the air shed district. The surcharges are sent out with 

hourly granularity, a 48-hour look-ahead, and are updated on a regular (e.g., daily or hourly) basis and 

are applied to existing utility rates, whether flat or time-varying dynamic rates, via the utility billing 

infrastructure. 

The air shed management authority’s goal would be to reflect the costs of shifting electricity 

generation to cleaner and extra-regional sources, and thereby encourage curtailment of end-use loads 

(gas, electric, and other fuels), and of fuel-powered distributed generation and combined coolingheating-power systems in the district, in proportion to the benefit that doing so provides to air quality. 

Customers would receive a lower energy bill if they respond to the surcharges by curtailing 

consumption during surcharge periods or shifting their consumption to lower surcharge periods. See 

Section 7.3 for more details of how this use case may be transacted. 

33 DRAFT
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Example of societal service provided by India’s Perform, Achieve and Trade (PAT) scheme 

One of the other examples of a societal service is India’s development of an energy efficiency 

scheme to govern large energy consumers. They recognized the tremendous potential to improve 

efficiency in energy-intensive industries and the electricity sector, which together were responsible for 

about 60% of India’s greenhouse gas emissions in 2007. The Perform, Achieve and Trade (PAT) 

scheme aims to tap into this potential. 

The PAT scheme originated in the 2001 Energy Conservation Act, which empowers the Indian 

Government to identify energy-intensive industries as designated consumers and set mandatory energy 

conservation standards for them. Under the Act, the Ministry of Power’s Bureau of Energy Efficiency 

(BEE) identified designated consumers from 15 sectors, including the 8 industrial sectors targeted in 

the PAT scheme: aluminum, chlor-alkali, textile, pulp and paper, iron and steel, fertilizer, cement and 

thermal power plants. The scheme covers 478 facilities. Each facility under the PAT scheme has been 

assigned a specific energy consumption (SEC) reduction target compared to its baseline SEC, to be 

achieved by March 2015. SEC is energy consumed per unit of production, expressed in ton of oil 

equivalent. The designated consumers receive tradable, certified energy savings credits if they 

achieve efficiency gains beyond their target. If they fall short of the target, they can buy energy 

savings credits to make up the difference. Energy savings credits will be issued to eligible facilities 

annually after the first year of the compliance period (2012). BEE has not set a minimum price for 

trading of energy savings credits; the market will determine the price. 

Example of societal service provided by Japan’s Efficiency Benchmarking scheme 

A similar mandatory program to the one described above was introduced in Japan that established 

benchmarks for all businesses in the industrial sector. The benchmarks require 1 percent 

improvements in annual energy efficiency. Designated sub-sectors of the economy had energy 

efficiency targets set according to the best-performing companies in each sub-sector. Targets are set 

for both mid-term (2015) and long-term (2020). Industries that take early action and achieve their 

targets can become exempt from the 1 percent annual improvement target by helping small and 

medium-sized enterprises increase energy efficiency. Individual sector benchmarks are based on 

internal studies and are negotiated between the government and that particular sub-sector. The 

legislation also includes a number of financial incentives and has been expanded over the years to 

increase energy management requirements. Fourteen thousand factories – representing 90 percent of 

Japanese industry – are required to appoint certified energy managers. Class 1, the high-energy users, 

must develop shorter-term and long-term energy efficiency plans. 

Questions for Chapter 2: 

Are these four categories of exchangeable services comprehensive enough? If not, should 

they be expanded in scope? Or, should additional categories be defined? 

What are some other reports/studies that cover/support/illustrate these topics of services and 

service categories? 

34 DRAFT
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.0 Transaction-Based Energy Networks 

Enabling the various exchangeable energy and energy-related services discussed in Chapter 2 will 

require the enhancement of existing and development and deployment of new networks, devices and 

controls to support real-time two-way communications between participating parties. It will also require 

new and intelligent applications at numerous nodes throughout the network to facilitate and automate the 

wide variety of transactions, and to manage and activate control and monitoring systems that are involved 

in the delivery of transactional energy services. 

It is not the intent of this report to prescribe any specific technological solution for implementing 

transactional energy services. However, to enable researchers and private vendors to develop solutions 

that can be deployed at a large scale across the various participating domains, and to ensure that such 

solutions are compatible and interoperable, a general framework and a set of communication protocols 

that support interoperability are required. 

This chapter describes a general framework for interoperability applicable for all these types of 

transactional networks. This framework is built upon the foundation of a transaction as the primary 

machine-readable unit of communication and a common basis for interaction between the nodes at all 

scales in the three types of networks described below. We then explain such a framework in terms of the 

network topology of participating nodes and the communication interfaces between them. First, we 

describe the basic concept of a node in such a network. Then we illustrate how the logical nodes in a 

transactional network are related to the nodes of corresponding physical network, in three general 

domains: 

1.	 Intra-building networks consisting of customer devices, systems, and owners and tenants, within 

buildings or facilities. 

2.	 Inter-building networks connecting customer devices, O&M professionals, buildings, and 

facilities to other external third-party energy and service providers. 

3.	 Buildings-to-grid networks consisting of customer buildings, distribution systems, transmission, 

electric power generation, and system operators. 

Lastly, we describe two real-world examples, developed as part of two transactional grid control 

demonstrations that, taken together, implement a building-to-grid network much as illustrated in the 

following section. 

3.1 Transaction as the Framework for Node Interoperability 

An interoperability framework is one essential element to making transactional energy networks 

viable. This derives from the need to support a vibrant and growing ecosystem of vendor products and 

services that interoperate cost effectively as a network on a common basis and that readily enable secure 

machine-to-machine connections to be established with minimal effort. There are two parts to the 

framework proposed here. First, a general framework and common basis for how nodes will interact is 

required. In Section 3.1 we describe how a transactional node can be defined to accomplish this. The 

35	 DRAFT
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

second is a basic interoperability framework for the information exchanged electronically between such 

nodes. 

Here, we propose that the basic construct for the information exchange is the contract defining the 

transaction, because it explicitly addresses the business context, the business procedure, tactics, and 

strategy, and to some extent the economic and regulatory policies supporting the transaction. 

The basic properties that define a transaction include the following: 

a.	 Exchangeable products, services and rights: The basic transaction must be clearly and 

formally defined in terms of: 

i.	 Quantity and quality: For example, an energy product might define the kWh, Btu, or 

quantity of fuel involved; an electric energy product sold by a utility might further 

define voltage, power factor, and harmonic content limits involved. A thermal 

energy product might define the type of fluid (e.g., air, water, and steam), 

temperature, pressure, flow rate and maximum pressure drop. 

ii.	 Time, place, and means of delivery: The stipulated time and duration of the delivery, 

optionally including future time intervals, the location point of delivery, and the 

means of delivery (physical energy flow, physical service, electronic information, 

certification of a right or financial product) all must be articulated. In the case of 

financial products time of delivery refers to maturation of a contract, which is settled 

at the contracted date and time. 

iii.	 Price or value: the price or value of an exchangeable product or service. This must 

specifically include its status – informative only (non-binding), binding (tender), 

offer, bid, accepted, cleared, ex post facto, etc. 

b.	 Transacting parties: A transaction unambiguously identifies two or more willing participants 

that settle on the terms and conditions of a contract. 

c.	 Monitoring/regulating entity: A transaction may define a monitoring/regulating entity that 

authorizes the rights of a market maker to operate an exchange, ensures that terms and 

conditions have been satisfactorily met, and/or provides arbitration in case disputes arise. 

d.	 Process for agreeing on a transaction: The participants may either directly negotiate to reach 

a consensus, or may use the services of an arbitrator to do so. A commodities exchange (e.g., 

a corn futures market) is an example of the latter, where participants do not directly engage in 

negotiations, but rather are matched by an explicit auctioneer. 

i.	 Negotiation: A transaction may be completed either through bilateral or multi-lateral 

negotiations between willing participants. In such instances, the transacting parties 

may write up contract terms and conditions specific to a transaction, which may not 

necessarily be the same for a similar contract between a different set of transacting 

parties. 

36	 DRAFT
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ii.	 Auction: An auction is a market mechanism to match a willing buyer with a willing 

seller without any direct negotiations between the parties. The participants submit 

their bids and offers, to buy and sell products/services, and an “auctioneer” clears the 

market to determine the settlement price and quantity. 

e.	 Contract of terms and conditions: A transaction involves a legally binding set of contract, 

terms and conditions, which may include the following (not an exhaustive list): 

i.	 Measurement and verification/validation: Contracts may also contain terms and 

conditions related to measurement and verification of a delivered product/service, 

where fulfillment results in a successfully completed transaction. 

ii.	 Financial settlements and means of payment: A transaction will most likely include 

terms of financial settlement, as well as a payment mechanism, in return for products 

or services provided by the involved parties. 

iii.	 Financial penalties: A contract may also include terms and conditions that list the 

financial penalty that may be levied on either party for not fulfilling their respective 

obligations to complete a transaction. 

iv.	 Default terms and conditions: A contract may also include default terms and 

conditions that may be applied in case of emergencies, technical outage, etc. For 

instance, a contract may include provisions to revert to default prices, in case of a 

communication system failure leading to devices not receiving real-time price 

signals. 

v.	 Repudiation: Contracts may also include formal methods of repudiation in case of 

unsatisfactory provision of products and services. The terms and conditions may also 

specify methods for settling such disputes. 

vi.	 Acknowledgement: For a transaction to have been completed successfully, a formal 

method of acknowledgement of delivery of products/services in exchange for a 

financial settlement may also be stipulated in the contract terms and conditions. 

As with any other interoperability approach, the formulation proposed here of 1) a transactional node, 

and 2) the use of the transaction as the basis for information exchanged by such nodes in a transactional 

network, must be adopted by a community of users to reach maturity and become viable. We are not 

suggesting that such an effort be undertaken from scratch; many useful standards for smart grid 

information exchanges have been proposed, adopted, or are under construction. These should be utilized 

wherever relevant and useful. What is being proposed here is the development and adoption of an 

enhanced, higher level standard for general energy-related transactions in the context of the general 

principles under which commercial business is conducted. 

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3.2 Concept of a Transactional Node
 

A logical node is used in a transactional energy network to represent the interests of the party at that 

physical location in exchanging a product or service with another party in the network. Applications 

hosted by a node implement transactions automatically as applications on behalf of the owner or steward 

of the node, subject to approval by the party owning or represented by the node, according to their 

expressed needs for energy, services, profit, or cost management. Examples of where logical nodes are 

used include where energy is: 

•	 produced or transformed (e.g., a generator, a transformer, or an air conditioner) 

•	 sold (e.g., an independent system operator’s energy market for electricity) 

•	 purchased (e.g., by a customer, a retail utility, or a load serving entity) 

•	 transformed in value (e.g., wholesale to retail) 

•	 managed (e.g., a building, a tenant, a transmission line, a substation, or a distribution feeder) 

•	 used (e.g., by a building energy system or device, a battery, a thermal energy storage system, or 

an electric vehicle). 

Other examples include where exchangeable services or rights are bought or sold, rather than energy 

itself, including 

•	 a cap-and-trade market for capacity rights, carbon and air shed emissions, etc. 

•	 diagnostic and O&M services 

•	 energy information, advice, and retrofit services. 

In this fashion, non-traditional parties such as service providers or governmental organizations become 

engaged in transactional energy networks. 

A node’s application may also reflect such exchanges by exerting control over local physical assets, 

again acting as applications implementing the owner’s pre- determined needs and wishes. Often such 

local control reflects physical constraints in the throughput of energy through the physical systems or 

equipment at the node’s location. To achieve the desired responses, local control may be combined with 

an increase in the price of energy supplied by the node to other nodes. In other cases, local comfort or 

service constraints may be reflected, such as indoor air temperature or lighting levels in a building space. 

For example, these may tradeoff a degree of comfort or service with respect to the cost of the energy 

required to supply it. 

Thus, even within the boundaries of a system with a single owner, such as a building or a utility, it 

may be convenient to define additional transactional nodes to reflect the dynamic value of transactions 

occurring with the rest of the network. This adopts a convenient means for tapping into the selforganizing property of a well-formed transactional network to serve as a plug-and-play, distributed 

control system that continually attempts to optimize the multitude of tradeoffs between cost and 

performance in increasingly complex energy systems and a dynamic pricing environment. 

38	 DRAFT
 
 

 

 

 

 

 

 

Figure 3.1 provides a conceptual illustration of a generic transactional node that is generally 

applicable to all the nodes in such energy networks. Inputs to the node are shown in light colored arrows, 

outputs in dark arrows; the shading of the two-headed arrows indicates two-way data flows are possible. 

Figure 3.1. Conceptual Diagram of a Transactional Node 

The logical node buys services it needs from adjacent nodes and sells services required by adjacent 

nodes. It does this based on the offers it receives from sellers and the bids it receives from buyers, 

informed by local data from sensors on the systems and assets for which it is responsible and remote data 

such as weather information from the internet “Cloud.” It then balances supply and demand for services 

with its own local needs and objectives (defined by the node’s owner), and exerts control over local 

assets, to assure those objectives are met, including any energy products it is contracted to deliver via the 

physical assets it manages. In other cases, delivery may involve a manual physical element such as an 

installation of equipment or involve an electronic transfer of information, such as diagnostic reports for 

equipment or systems. It must supply all data required by the terms of the contract to complete the 

transaction and/or verify delivery. Finally, it may be required to execute its part of a financial settlement 

process as defined by the transaction’s contract. These interchanges between nodes can occur at any 

interval, regular, or irregular, and in any sequence, as defined in the contract. 

39 DRAFT
 
 

 

 

 

 

 

 

 

3.3 Physical and Logical Transactional Networks 

3.3.1 Intra-Building Networks 

Figure 3.2 shows a physical representation of a built-up HVAC system in a large, multi-tenant 

commercial building. It is heated and cooled with a system of cooling towers, chillers, boilers, a hot and 

chilled water distribution system, and air handling unites (AHUs) with variable-air volume (VAV) boxes 

and reheat coils for delivering conditioned air to individual zones on each floor. For purposes of 

illustration, we have assumed each floor is occupied by a different tenant. Not shown is the natural gas or 

electrical systems in the building; the former powering the boilers and the latter powering the rest of the 

HVAC equipment, as well as the lights and plug circuits on each floor. 

Figure 3.3 shows a representation of a logical network within the same building. The boxes with 

dashed blue lines indicate three domains within the building: the HVAC system (thermal), and the gas 

and electric distribution systems, which are now shown explicitly. In the context of a transaction-based 

system, the building node purchases electricity and natural gas from the utilities, and is responsible for 

overall minimization of energy costs for the building. 

Extending the transaction-based approach inside the building allows the possibility of tenants actually 

purchasing their electrical and thermal HVAC energy from the building owner/operator. This can be used 

to engage tenants in both energy efficiency and demand response, whereby they are encouraged to trade 

off a degree of comfort or quality of service in exchange for lower energy bills. Such tradeoffs might 

encourage adjustments to thermostat settings as a function of cost, within occupant specified limits, for 

example. The same approach can, in principle, be applied to business divisions even if the building is 

occupied by a single enterprise. 

40 DRAFT
 
Boilers 

Cooling 

Towers 

Chillers 

Zone / 

VAV 

Boxes 

Air 

Handling 

Units 

Figure 3.2. Physical Representation of an Intra-Building Network 

41 DRAFT
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Engaging occupants in 

Figure 3.3. Logical Representation of an Intra-Building Network 

Tenant N 

Tenant 2 

HVAC 

System 

Electric 

System 

Tenant 1 

Zone N 

C. Towers 

Elec. 

Building 

Gas 

Chillers 

Boilers 

Floor 1 AHU 

Gas 

System 

Zone 2 

Zone 1 

VAV Tstat. 

Lights 

Plugs 

systematically and automatically 

considering these tradeoffs and 

embedding them in the control system 

to achieve higher levels of efficiency 

and flexibility in the use of energy is a 

fundamental goal of applying a 

transaction-based approach within 

buildings. In the case of demand 

response, dynamic prices or 

incentives for electricity inherently 

penetrate the enterprise boundary at 

the meter and cascade down within 

the building systems to the occupants. 

Although actual financial 

transactions may not be taking place 

between nodes inside the building, 

another reason the transaction-based 

approach might be extended inside the 

building is to leverage the inherently 

modular nature of such an 

application-based approach, 

simplifying the addition of new types 

of equipment and sources of energy. 

Foremost may be to leverage the 

economically-driven transactional 

approach to automatically reflect 

tradeoffs among flow rates and supply 

temperature set points and in the 

dispatch of banks of boilers and chillers in complex, built-up HVAC systems. Additionally, analyzing 

equipment on a continuous basis allows adjusting control and replacement strategies; alerting building 

managers of opportunities to install new equipment that could provide more flexibility or value in a 

transaction-based Intra-Building Network. 

We now describe the intra-building network as an extension of the transaction-based network outside 

the building boundary. During cooling periods, the chillers “purchase” electricity from the building to 

create chilled water. They also obtain cooling water from the cooling towers, which similarly must obtain 

the electricity consumed for their pumps and fans from the building. If these purchases of electricity are 

expressed with the common denominator of the effect on the chillers’ efficiencies of 

• less pumping and fan power required for slower liquid flow rates, 

• higher supply temperatures (cooling water or chilled water supply), 

42
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

then the tradeoff between these and with the chiller efficiencies can be made explicit and inherent by the 

transaction-based approach. A simpler, but similar, tradeoff exists between the hot water supply 

temperature, and flow rate. 

Similarly, the AHUs obtain chilled water from the chillers and hot water from the boilers to produce 

conditioned air from a mixture of fresh outside air and air returning from the zones. In turn, the 

conditioned air is purchased by each VAV box, adding reheat energy as necessary, to provide the thermal 

comfort required by each zone on each floor. A similar tradeoff between air flow rate and air supply 

temperature is another opportunity to try to optimize the overall cost, terminating in the final tradeoff 

between thermal comfort in the zone and its need for conditioned air. The transactional approach to this 

optimization problem uses nodes to define the hierarchical nature of the system. It will assign them 

responsibility for expressing the current effect of available tradeoffs from the nodes that supply them with 

energy, so that better decisions can be made about the potential global effect of these tradeoffs. (See Use 

Case Transactive Control for Large Commercial Building HVAC Systems in Section 4.4 of this report for 

more details). 

A likely requirement for such a system to function is the need to measure the thermal energy flows 

involved. Critical to this is measurement of flow rates, or estimating them from fan or pump curves and 

pressure drops, so that the energy flows can be computed with reasonable accuracy. More accurate 

results may also result from measurement of temperature differences in flows, rather than individual 

supply and return temperatures. 

To make the transaction-based system comprehensive across the entire consumption model in the 

building, end-use metering of electricity for lighting and plug loads would also be needed. This will likely 

evolve once the value propositions are developed that support this. 

3.3.2 Customer to Third-Party Energy and Service Networks 

Figure 3.4 illustrates a set of customer’s devices, buildings, and facilities managing their electricity 

and natural gas energy costs by interacting with third-party energy providers, service providers, and each 

other. Shown on the left are a small/medium sized commercial building heated and cooled with RTUs 

and a large commercial building heated and cooled with a built-up system of chillers, boilers and a water 

distribution system. One building also provides charging power to electric vehicles (EVs) in its parking 

lot. Shown at right is a facility consisting of two buildings with RTUs, under single management. The 

facility also serves EVs. In addition to interacting with the electric power and natural gas system as 

described in the previous section, these customer elements (circled by red dotted lines) are depicted as 

interacting for various purposes via the internet with third-party service providers located “in the Cloud.” 

Also shown in Figure 3.4 are two forms of third-party energy providers designed to illustrate the 

range of many possible such interactions. At the lower left, such a provider has constructed a buildingcooling-heating-and-power (BCHP) system consisting of a natural gas genset, a heat recovery system, and 

heat-driven absorption chiller and associated cooling tower. This system generates electricity and 

produces hot and/or chilled water via the heat recovery system, and provides them to the building. Its 

owner finances, installs, and maintains such systems. We have chosen to also equip this facility with a 

43
 
 

 

 

 

 

 

 

 

 

thermal energy storage tank, to illustrate a second such third-party opportunity that could be offered in 

combination, or as a standalone proposition. It should be noted that such systems can be owned by and 

embedded in a building or facility itself. Although the business arrangements are different, the 

advantages and complexities of adding such systems to building operations are the same. 

At the upper right is another type of third-party energy system consisting of a distributed generator (in 

this case, a PV solar system), complete with inverters, switchgear, and other necessary equipment. It is 

owned and operated to provide electricity to the distribution network for use by other customers. It could 

just as easily supply electricity directly to a building or facility, rather than indirectly via the distribution 

network. It also could be owned and operated by the building or facility itself. To illustrate a second, 

related opportunity, we have equipped it with a battery storage system as well. The battery could be 

offered in combination with the distributed generator or as a separate proposition. 

The corresponding logical network is shown in Figure 3.5. It shows four examples of customers 

interacting with third parties via transaction-based networks. Clockwise from the upper left, first is a 

network of third-party energy service providers operating BCHP, thermal energy storage (TES), 

distributed generation (DG), and distributed storage (DS) systems and selling energy (electric or thermal) 

as a product to buildings and facilities directly or via electricity distribution or district heating/cooling 

utility systems. Depending on the nature of their contract with the provider, the customers can purchase 

energy from the provider when it is cheaper than from traditional electric and gas utilities. Note that there 

may be new regulatory requirements for this to occur. Alternatively, the provider might sell back to the 

utilities for resale to customers, or rent or lease use of their physical distribution systems to wheel the 

energy to its customers. 

44
 
3rd-Party 

Service 

Provider 

3rd-Party DG & Battery 

Multi-Bldg. 

Facility 

3rd-Party BCHP 

System & TES 

+ ▬

Bldgs. 

RTUs 

EVs 

Figure 3.4. Physical Representation of Customer and Third-Party Networks 

45
 
3rd-Party Customer 

Networks Networks 

RTU 

to Grid 

Nodes 

to Gas 

Nodes 

Elec. RTU RTU RTU RTU 

HVAC 

Gas 

Bldg. 

EV RTU RTU RTU 

Facility 

Bldg. BCHP 

/ TES Bldg. EV EV Bldg. DG / 

DS 

Device EV 

Networks Networks 

Figure 3.5. Logical Representation of Customer and Third-Party Networks 

46
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

The second example shows a customer network consisting of buildings and facilities that may interact 

with each other, or third-party service providers, to limit energy costs. Such a network could, for 

example, be used to: 

•	 Trade peak demand capacity rights issued by a utility (see Use Case Trading Allocated 

Capacity Rights in Section 6.3 of this report). 

•	 Trade excess electricity or thermal energy generated by a building or facility with another 

who needs it. 

•	 Arrange for third-party financing of energy retrofits (see Use Case Efficiency Shared 

Savings in Section 4.2 of this report). 

•	 Arrange for and send data to a service provider who provides diagnostic services on enduse systems, devices, equipment, and appliances for a fee, perhaps on a per-problem 

detected or corrected basis (see Use Case Diagnostics and Automated Commissioning 

Services in Section 4.5 of this report). 

•	 Allow a customer or a diagnostics service provider to arrange for O&M services to correct 

problems found, perhaps from an “eBay style” marketplace of offers to provide and bids to 

buy such services. 

•	 Allow an O&M service provider to optimize dispatch of repair trucks so that smaller 

problems in the vicinity can be fixed cost-effectively, perhaps from bids for repair services 

posted in a marketplace. 

•	 Connect customers with third-party aggregators of demand response, who in turn trade the 

resulting savings into grid energy, capacity, and ancillary services markets (see Use Cases 

Dynamic Rate in Section 5.1, and Interruptible Service or Direct Load Control, and 

Ancillary Services via Aggregator in Sections 6.1 and 6.4, respectively, of this report). 

•	 Trade measured and verified energy efficiency with renewable portfolio standards, carbon 

or air shed markets (see Use Case Efficiency Incentive Payment in Section 7.2 of this 

report). 

At the bottom of Figure 3.5, the third and fourth networks both consist of customer devices directly 

interacting with each other or third parties. Two such networks are illustrated: one consisting of RTUs 

and one of EVs. EVs are a particularly interesting case because they are mobile with respect to the 

physical supply system. Such networks could, for example, be used to: 

•	 Purchase power for EV charging from a third-party provider at prices independent of which 

utility serves the charging station. 

•	 Allow RTUs and EVs, separately or together, to interact to limit peak load as part of a 

capacity trading network. 

•	 Support devices such as RTUs and EVs interacting with facilities or buildings to manage 

energy or peak demand charges. 

•	 Allow buildings or facilities to charge customers and/or employees for EV charging energy. 

47
 
 

 

 

 

•	 Support trading of positions in an EV charging queue (see Use Case Trading Positions in 

an Electric Vehicle Charging Queue in Section 4.8 of this report). 

3.3.3 Building-to-Grid Networks 

Figure 3.6 illustrates the primary nodes in a traditional electrical power grid. A fleet of large, central 

generators are connected at various points of a high-voltage transmission network. Power is delivered by 

the network to a set of substations and transformed to distribution voltages for delivery to customers. 

Generally the transmission system is a true mesh network, with power potentially flowing in either 

direction on any given line and through multiple paths between any two given points (i.e., nodes), 

depending on the levels of power being injected or withdrawn at the various nodes. 

. . . 

Generators 

Transmission 

ISO/RTO* 

Distribution Substation 

Distribution Feeders 

Buildings/Customers 

. . . 

* Or a vertically integrated utility. Not a 

physical node in terms of power flow. 

Figure 3.6. Physical Representation of a Buildings-to-Grid Transactional Network 

48
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

These and other example nodes in the power system are circled by the dotted red lines. Not shown 

are details such as transmission substations that convert power to and from parts of the network with 

lower transmission voltages. 

Also shown as a node, albeit not a physical one, is an entity such as a balancing authority, a 

vertically-integrated utility, an independent system operator (ISO), or a Regional Transmission Operator 

(RTO) that dispatches the available generation to meet the load as it varies, while avoiding overloading 

the transmission lines and supplying the necessary ancillary services needed to keep the grid stable and 

reliable. Each substation typically provides power to multiple feeders in the distribution network it 

serves. These networks are typically operated as radial (one path from substation to customer) rather than 

as mesh networks (sometimes used in high-density urban areas, for example). Each feeder, typically 

branches out to deliver power to customers, unless it is dedicated to a single customer. We have indicated 

each feeder and each customer as nodes. Not shown are customer transformers that step down the 

distribution voltage to service-level voltages. These typically serve 1 to 10 customers, and can also be 

considered system nodes in the distribution network. Also not shown are other controllable elements of 

the distribution network, such as capacitor banks and voltage regulators. 

Note that the topology of radial distribution networks can change if they are connected to lines from 

adjacent feeders with normally-open switches (not shown). In the event of a short circuit that can be 

located and isolated, these switches can be closed to temporarily power intact parts of the damaged feeder 

via other paths. Thus customers in effect can be “moved” by the distribution utility between feeders and 

substations, in a topological sense. Similarly, transmission lines are put in and out of service by 

operators, so any specific representation of a power grid network may be best thought of as a snapshot in 

time. 

Figure 3.7 presents a logical buildings-to-grid network from the viewpoint of communications and 

control. The nodes in the logical network correspond to those in the physical network shown in Figure 

3.6. As noted previously, additional nodes may be defined to represent other physical elements of the 

system. When considered as a transaction-based network operated by an ISO or RTO, the generators (G) 

offer to sell power to the ISO/RTO’s energy market, which determines the least-cost feasible solution to 

generate the power required by each distribution substation, and the price of energy at that point (the 

locational marginal price, or LMP). When the transmission network is entirely unconstrained, the LMP is 

the market clearing price for the system as a whole. When it is constrained by transmission line capacity 

or stability considerations, a somewhat more expensive but more readily available set of power plants 

must be dispatched, and the clearing price at transmission nodes (T) associated with the constraint will 

rise to reflect the higher cost of power delivered at that location. 

49
 
 

 

 

 

 

 

 

 

 

 

Figure 3.7. Logical Representation of a Buildings-to-Grid 

Transactional Network 

D 

ISO/RTO 

D 

T T 

T 

T 

G 

G 

G 

D 

F F F 

B B B 

. . . 

. . . 

From a transactional point of view, 

this network can be viewed as the 

ISO/RTO buying power from 

generators, and determining the price at 

which to offer it at each transmission 

node. The load serving entity 

represented by the distribution 

substation (D), in effect, buys it from 

the transmission node serving it and 

converts its price from wholesale to 

retail and delivers it to customers. In 

effect, the ISO/RTO is using the nodal 

price of power as an indirect means of 

controlling the dispatch of the 

generators. This is the essence of a 

transactional energy network. 

The distribution substation can be 

considered to “sell” to each feeder (F), 

which in turn “sells” to each building or 

customer (B). Today, this is typically 

done as a single, blended price, with a 

fixed energy cost for a given customer 

class (residential, commercial or 

industrial) and, in some cases, a fixed 

peak demand charge during peak 

demand periods (e.g., for large 

commercial buildings and/or industrial 

customers). There is no locational or time-differentiated price as there is in the transmission network. 

The transaction-based control paradigm used for the transmission system can be extended to the 

distribution system. Then a substation or feeder, when its throughput is limited by its physical capacity, 

can increase its selling price to reduce the load it serves to match its capacity, for example. This assumes 

that there are customers (or other third parties, as discussed in Section 3.2.2) who are able to reduce their 

load either by reducing demand or dispatching distributed generation or storage devices. Such rates may 

remain fully regulated by public utility commissions via utility rate cases. This transactional system 

allows customer price to reflect the actual cost of providing those customers with service. It also assumes 

that customers have agreed to such dynamic rates, and that they have been crafted to be equitable and 

provide proper incentives for customers to respond appropriately. 

The extension of the wholesale transactional approach to the distribution network described above 

represents just one of the use cases, which describes several other approaches. A number of others can be 

envisioned. We provide a description of actual projects demonstrating this approach in Section 3.3. 

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3.4 Demonstration of Buildings-to-Grid Transaction Networks 

Two demonstrations of transactional building-to-grid networks are currently on-going as part of the 

Department of Energy’s Office of Electricity Smart Grid Investment Grant and Demonstration Program.1 

Taken together, these two demonstrations illustrate an actual transactional network illustrated in Figure 

3.6 in physical form and in its logical representation in Figure 3.7. The largest of these, the Pacific 

Northwest Smart Grid Demonstration (PNWSGD) project, is a $178M, 5-year project, led by Battelle 

Memorial Institute, spanning 5 states, engaging 11 municipal, cooperative, and investor-owned utilities 

across in collaboration with the Bonneville Power Administration, 2 universities, and 5 vendor partners. 

Among the project’s primary goals is to develop a regional communications and control 

infrastructure that uses transactive incentive signals to engage a wide variety of responsive assets, 

quantify smart grid costs and benefits, contribute to development of interoperability standards for 

transaction-based control of power grids, and, in particular, facilitate the integration of wind and other 

renewable resources that are rapidly penetrating the region’s power system. It is by far the largest project 

of its kind in the world, and unique in its goal of facilitating wind integration at the regional scale. 

The PNWSGD has established a transactional representation of a grid control node as shown in 

Figure 3.8, which can be viewed as a more specific version of that proposed earlier in Figure 3.1 that is 

more narrowly suited to the purposes of implementing control. The incentive signals and load estimates 

used by the demonstration essentially are examples of the general concept of bids and offers in Figure 3.1, 

and the local control and data signals are literally the same. 

Figure 3.8. Representation of Transactional Grid Control Node in the
 

PNWSGD Project
 

1 Funded as part of the economic stimulus by the American Recovery and Reconstruction Act of 2009. 

51
 
 

 

 

 

 

 

 

 

 

 

 

The PNWSGD has implemented a regional network of such transactional nodes at the transmission 

level and at the points of delivery to the 11 distribution utilities. Figure 3.9 shows the set of transmission 

zones in the Pacific Northwest, defined by the major cut planes (shown as red lines) where the 

Cut Plane 

Flowgate 

Figure 3.9. Physical Network of Transmission Zones in the PNWSGD 

significant transmission constraints lie, superimposed on a disjointed map of the region (Washington, 

Oregon, western Idaho, and parts of Montana and Wyoming). Because transmission within each zone is 

relatively unconstrained, the cost of electricity within each zone is considered uniform. Each zone is 

represented as a transmission node. The goal of adjacent transmission nodes in the network is to manage 

power flow across the constrained pathways (blue arrows) at or below their limits. They do this by 

essentially negotiating the cost of energy in their zone as the sum of the cost of that produced by 

generators in the zone, including renewables, and the cost of energy imported from adjacent transmission 

nodes. Together these must equal the cost of energy delivered to the distribution utilities within the zone. 

This simultaneous negotiation between all adjacent nodes, both transmission peers and distribution 

delivery points, occurs in iterative fashion until convergence is reached. This is done every 5 minutes. 

Look-ahead prices and loads for a 48-hour period are also negotiated as an informative process, although 

strict convergence for them is not required. 

The distribution utility nodes in this process are negotiating their demand from the transmission 

system as a function of their willingness to dispatch a wide variety of local, distributed assets under their 

control. These range from dispatch of a wide variety of distributed assets totaling over 50 MW, ranging 

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from battery storage, to volt-VAR control systems1 that affect consumption, to demand response from 

various types of commercial and residential buildings. 

Although the transactional approach is not (yet) carried down to these distributed assets, that is 

exactly what is being done in the ARRA co-funded AEP gridSmartTM Demonstration program, another 

such large project. In this project AEP (the utility) receives power from PJM (the ISO) at the price of the 

wholesale market clearing prices at its delivery point near Columbus, Ohio (i.e., the locational marginal 

price). The PJM 5-minute real-time wholesale price is transformed into a real-time 5-minute retail price 

via a ratemaking process approved by the Ohio Public Utility Commission (PUC). The retail rate is 

designed to be revenue neutral. That is, it neither rewards nor penalizes the average customer for simply 

signing up – if they do not shift load whatsoever, the sum of their annual utility bills would remain the 

same. This is true even to the extent of adjusting it for fluctuations in wholesale prices from year to year 

caused by weather or economic conditions (i.e., the wholesale market price risk is managed by AEP and 

the PUC as part of the ratemaking process, as usual, rather than being thrust upon retail consumers). 

About 240 customers signed up for this real-time rate, and were given a home energy management 

system and a smart thermostat that automatically would respond to price fluctuations to save them money 

on their energy bills by shifting some of their air conditioning load to lower-price periods. This only 

occurred to whatever extent each customer allowed their thermostat to vary around their normal setting. 

They could also respond to displayed prices by manually delaying use of other appliances. 

A double auction clearing mechanism was used for the customers on each distribution feeder to clear 

at a higher retail price when loads would otherwise exceed maximum capacity of the system, providing 

further opportunity for customers to save energy costs. Excess revenue collected by the utility plus a 

reward for actual response during such times was provided to the customer as a lump-sum payment at the 

end of each monthly billing period based on time-series load data from their AMI meter and their bidding 

history in the marketplace. 

In this fashion, the transactive real-time price signal was delivered directly to the customers’ home 

energy management nodes, which, in turn, managed their smart thermostats accordingly. Between the 

PNWSGD and AEP’s gridSMART project, a broad range of buildings-to-grid transactions and associated 

value streams have been demonstrated in the field from generation to transmission, distribution, and 

customer nodes. 

Questions for Chapter 3: 

Are there other important networks that need to be illustrated? 

Are there other demonstration examples to be included? Are there other important
 

categories of transactions?
 

1 Volt-VAR control (VVC) is a fundamental operating requirement of all electric distribution systems. The prime 

purpose of VVC is to maintain acceptable voltage at all points along the distribution feeder under all loading 

conditions. See: http://cialab.ee.washington.edu/nwess/2012/talks/uluski.pdf 

53
 
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4.0 End-User Services
 

This chapter describes a non-exhaustive, but representative set of use cases illustrating the end-user 

services, defined in Chapter 2 of this report.1 

Chapter 2 describes end-user services as energy and energy-related products, services, and rights that 

the end user purchases to balance and co-optimize their overall energy costs, comfort and convenience. 

The rendering of these services originates with a need and value at the customer premises, and hence, 

may be labeled as behind the meter services. The net result of providing such a service is that buildings 

and the equipment within the buildings are more efficient, predictable, controllable, and provide required 

services at lower cost. This may involve a wide range of transactions such as buying energy from a third 

party on-site generator or storage system, purchase of diagnostics and valuation services from a third 

party that supports the operations and maintenance of end-use assets, purchase of energy services by 

tenants from the building owner, and hierarchical “purchases” of energy by one building subsystem from 

another (e.g., by an air-handling unit in the form of chilled water from a bank of chillers) that may 

facilitate advanced control paradigms. 

Example use cases of end-user services described here are: 

• Third-party energy provider 

• Efficiency shared savings 

• Tenant contracts with building owner for energy 

• Transactive control for large commercial building HVAC systems 

• Diagnostic and automated commissioning services 

• Data centers trade computation jobs 

• Microgrid coordinating demand response, distributed generation and storage 

• Trading positions in an electric vehicle charging queue 

Each of these use cases is described further, below. 

1 The use cases are described in a format inspired, in part, by the National Institute of Standards (NIST) Smart Grid 

Interoperability Panel’s template (see IKBUseCaseTemplateV1_0.doc, 7/9/2013). Headers reflecting the number 

and title of each use case are supplied to ease navigation of the use cases by the reader. A table of contents appears 

at the beginning of each category for that purpose, as well. 

The authors include these use cases for illustration purposes only. They are far from an exhaustive set; we expect 

many more will be forthcoming in the future as transactive approaches are embraced. Engendering such creative 

invention is part of the purpose of this reference document. The use cases are not completely described or 

conceptualized here. Further, a number of them, particularly those for energy market services and grid services, 

may be mutually exclusive or compete with each other. Regardless, these use cases have not yet been assembled 

into a coherent, integrated schema for grid operations. A few of the uses cases (e.g., 5.1 Dynamic Rate and 6.1 

Interruptible Service or Direct Load Control) are more representative of current practices that we expect will 

eventually be overtaken by more advanced, transactive approaches. The presence of any of the use cases here 

should not be interpreted as an endorsement for it. 

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4.1 Third-Party Energy Provider 

Type of Transaction: Building to Other (Service Provider) 

Brief Description 

Customer (typically a commercial building owner) contracts with a vendor that installs, operates, 

and maintains equipment at its expense, such as a building-cooling-heating-power (BCHP) system, 

thermal or battery storage system, or a conventional generator. It then bills the customer for the energy 

services provided to the building and/or shares in the proceeds from value provided to the electric power 

grid (e.g., net reduction in demand, ancillary services, etc.). 

Narrative 

What is being transacted? 

•	 Two forms for this transaction are envisioned: 

1.	 Customer agrees to purchase energy from the service provider’s system when it is advantageous 

to do so. This may be in the form of thermal and/or electrical energy. 

2.	 Customer agrees to share savings it receives from its electric utility for demand response, 

ancillary services, etc. 

Why is it being transacted? 

•	 Customer desires to obtain a lower energy bill or additional energy services without the capital 

expenditure for the equipment and systems or the need to operate and maintain them.
 

•	 Service provider desires to earn a return on its investment in the equipment and systems. 

How is it being transacted? 

•	 Customer signs contract with service provider. 

•	 Service provider installs, operates, and maintains equipment and systems at their expense. 

•	 Service provider pays for the electricity and fuel it consumes. 

•	 Service provider measures and bills for (1) the electrical and/or thermal energy delivered to the 

building based on the contract terms, and/or (2) its share of the customer’s savings for demand 

response, ancillary services, etc.
 

•	 Customer pays bill with credit card transaction or automatic bill-pay arrangement. 

What is the time scale of the transaction? 

•	 One-time contract between customer and service provider. 

•	 Periodic (monthly) bills from service provider to consumer for its share of the monthly energy
 

savings based on an agreed upon formula for the energy savings and the current rates for gas and
 

electricity.
 

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Actor/Stakeholder Roles 

Who is transacting? 

A.	 Consumer (building owner). 

B.	 Service provider, who most commonly may be a third-party vendor but who could also be a utility, 

or a retail electricity service provider. 

Who is the market maker? 

•	 (B). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 The utility or load serving entity may need to be notified. 

Are there other transactions associated with this? 

•	 See other related building-to-grid use cases: 5.1 Dynamic Rate, 6.4 Ancillary Services via
 

Aggregator, 6.2 Transactive Retail Energy Market, and 6.5 Transactive Acquisition of Ancillary
 

Services.
 

•	 An electric utility or aggregator may choose to be a financial participant in the contract (see use cases: 

7.2 Efficiency Incentive Payment and 5.5 Trading Efficiency to Relieve Congestion). 

•	 Business model could expand to full ownership and operation of the HVAC and lighting equipment 

in a building. 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

How is the transacted commodity measured and verified? 

•	 Electrical and/or gas sub-metering measures consumption by service provider’s system(s). 

•	 Electric energy (kWh) and thermal energy (Btu in air or water flows) delivered to the building are
 

metered.
 

•	 Savings or incentives for demand management and ancillary services are determined as in the related 

use cases (above). 

Activities/Services 

What equipment and technology is required? 

•	 Interval electric power, gas, and thermal energy metering systems. 

•	 Algorithms that determine when energy from the service provider is less expensive than from the
 

utility and associated controls that implement it.
 

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•	 Algorithms that determine the savings to the consumer when responding to utility prices and 

incentives so that they can be equitably shared with the service provider.
 

What is the benefit for the building? 

•	 Reduced utility bills (gas and electric). 

•	 Incentive payments from utility or aggregator for load reductions or ancillary services. 

What is the benefit for the grid? 

•	 Increased demand management and efficiency from end uses that contribute to peak loads reduce the 

utility peak generation costs or need for capital investment for additional generation, transmission, 

and distribution capacity. This reduces the pressure on increasing utility rates, which reduces a 

customer’s incentive to invest in less expensive energy options. 

•	 When utilities are subject to a Renewable Portfolio Standard (RPS) requirement, they can earn credit 

for efficiency where allowed, or when subject to a carbon market or tax, they can save money by 

reducing their need to purchase credits or pay taxes. On demand, on peak generation is often the least 

efficient. 

What is the benefit for renewables? 

•	 Renewable generation could be included. 

What is the benefit for energy efficiency? 

•	 Significant source-to-load energy efficiency and carbon reduction (gas plus electricity) can be
 

achieved by BCHP systems.
 

•	 Marginal energy savings may be achieved by careful optimization of the combined operation of the 

service provider’s and the customer’s systems. 

Contracts/Regulations 

•	 Normal commercial business rules would seem to apply. 

•	 Where a regulated utility is involved, PUC approval must be sought to offer such services. 

Current Examples of this Transaction 

•	 There is some third-party ownership and operation of combined-heating-power (CHP) systems. 

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4.2 Efficiency Shared Savings 

Type of Transaction: Building to Other (Service Provider) 

Brief Description 

Customer (typically a commercial building owner) signs up with an energy service company (ESCO) who 

provides energy efficiency retrofits and services in exchange for a shared savings contract. 

Narrative 

What is being transacted? 

•	 Customer agrees to split the estimated savings in energy bills (gas and electric) with an ESCO for a 

stipulated number of years, with the savings resulting from the latter’s investment in efficiency 

related retrofits and other services at the customer premise. 

•	 In a more transactional approach, the ESCO could create a market for such services and customers 

would sign up on line. 

Why is it being transacted? 

•	 Customer obtains a lower energy bill without need for the capital expenditure of an efficiency retrofit. 

•	 ESCO has lower cost of capital than (non-Federal) consumers, economies of scale opportunities, and 

significantly more experience in implementing successful projects. Profit is made when share of 

savings exceeds capital and labor investment at customer premises. 

What is the time scale of the transaction? 

•	 One time contract for customer sign-up. 

•	 ESCO bills consumer for its share of the monthly energy savings based on an agreed upon formula
 

for the energy savings and the current rates for gas and electricity.
 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Consumer (building owner), perhaps representing lease/rental tenants (occupants) collectively. 

ESCOs tend to work primarily with large commercial buildings and institutional customers (with 

large facilities). 

B.	 Energy services company, which can be a utility, a retail service provider, or a third-party 

aggregator that may also interact with the customer as an energy supplier and perhaps also engage 

them in demand response. 

Who is the market maker? 

•	 (B). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 N/A. 

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Are there other transactions associated with this? 

• Where there are wholesale energy markets for electricity that allow demand response participation, 

(B) may also schedule and aggregate demand response from a collection of customers and bid it as a 

block of demand reduction into the day-ahead or real-time market. 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

How is the transacted commodity measured and verified? 

•	 Load data from utility meter is compared to statistical/engineering model of pre-retrofit consumption 

as a function of weather. 

•	 Adjustment clauses may also apply for changed occupancy or usage patterns. 

•	 Lack of transparency in such approaches has been noted to be a source of friction in the relationship 

with the building/facility customer. Alternatives based on a more measurement-intensive approach, 

and/or in which the ESCO pays the energy bill and the customer pays the ESCO a bill for end-use 

services, are worthy of exploration. 

Activities/Services 

What equipment and technology is required? 

•	 None for current practice. 

•	 (Desirable) Continuous or spot end-use metering can improve targeting of efficiency measures and 

support improved baseline models and adjustment factors. 

•	 (Desirable) Data from commercial building control systems or smart residential thermostats and
 

appliances can likewise support improved targeting and measurement.
 

What is the benefit for the building? 

•	 Reduced utility bills, energy use and reduced environmental emissions. 

•	 Improved comfort, particularly if ESCOs commission building systems 

•	 Outsourcing of energy expertise, freeing up management to focus on core business, e.g., healthcare or 

education. 

What is the benefit for the grid? 

•	 Increased efficiency from end uses that contribute to peak loads reduces the need for capital 

investment for generation, transmission, and distribution capacity. Some PUCs provide utilities with 

incentives to meet energy efficiency targets. 

•	 When utilities are subject to a renewable portfolio standards (RPS) requirement, they may be allowed 

to earn credit for efficiency. 

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•	 When utilities are subject to a carbon market or tax, they can save money by reducing their need for 

more expensive solutions, or their need to purchase credits or pay taxes. 

What is the benefit for renewables? 

•	 N/A. 

What is the benefit for energy efficiency? 

•

•	 .Shared savings contract approach enables investments in energy efficiency that would otherwise not 

be made. 

Contracts/Regulations 

•	 Today, nearly all ESCO contracts are bilateral and subject only to the laws of commerce. 

•	 Where a regulated utility is involved, PUC approval must be sought to offer such services. 

Current Examples of this Transaction 

•	 Numerous examples of ESCO services are offered by companies such as Honeywell, Johnson
 

Controls, and Rockwell among others.
 

•	 Federal facilities such as military bases are a common customer (see Federal Energy Management 

Program). 

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4.3 Tenant Contracts with Building Owner for Energy 

Type of Transaction: Intra-Building 

Brief Description 

Building or facility owner or operator (1) passes through energy costs (including dynamic rates), peak 

demand charges, etc. allocated to tenants occupying the building, or (2) gives them a monthly allowance 

for energy consumption that is covered in the tenant’s monthly rent. In the case of (2), if the monthly 

allowance is exceeded by the tenant’s energy use, the tenant incurs a penalty, or they may receive a rebate 

to the extent the monthly allowance is not exceeded. Tenants or are also allowed to trade surplus 

allowances with other tenants who have a need for an additional allowance. 

This engages tenants in conserving energy, managing peaks loads, and responding to dynamic rates by 

co-optimizing comfort or quality of service for the costs of their provision. 

Narrative 

What is being transacted? 

There are two forms to these transactions, with the same basic intent of engaging building occupants in 

conserving energy, managing peaks loads (and costs), and responding to dynamic rates: 

•	 (1) Energy costs are passed through to the building occupants in the form of a monthly energy bill 

from the owner. If dynamic rates or a peak load ratchet are involved, building owner expresses those 

to tenants in near real time. 

•	 (2) The tenants agree to a monthly allowance for energy use, given by the building owner, as a part of 

a lease agreement. Rebates and penalties are given monthly based on whether the tenants are below 

or exceeds the monthly allowance, respectively. Tenants can exchange excess allowance with others 

tenants that are in deficit, at an agreed upon price. 

Why is it being transacted? 

•	 (1 and 2) Building owner passes through energy costs. 

•	 (1) Building owner allocates energy costs, peak demand charges, and dynamic prices to individual 

tenants or as an engagement mechanism.
 

•	 (2) Building owners can manage the monthly operating costs for electricity within a small tolerance 

of a desired threshold (equivalent to the aggregate allowance of tenants). Also, the tenants have the 

opportunity to receive payments if their electricity allowance is not exceeded. 

How is it being transacted? 

•	 In transaction (1): 

–	 Building owner bills tenants for energy costs (including those based on dynamic rates) and any 

peak demand charges, monthly based on metered energy use. 

•	 In transaction (2): 

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–	 A tenant signs an agreement with the owner/operator that includes a monthly allowance for 

electricity. The building owner sends each tenant the same dynamic rate that it receives to enable 

the tenants to make informed decisions on how to utilize their loads via a building automation 

system (BAS) or energy management system (EMS). 

–	 An “eBay-like” market is used for customers to offer and bid on surplus allowance. 

–	 The building owner is notified of the exchanges. 

–	 The tenants receive rebates or penalties relative to the amount the electricity bill for the tenant is 

below or above the monthly allowance. 

–	 Both transactions are classified as an over-the-counter (OTC) or bilateral transactions. 

What is the time scale of the transaction? 

•	 Irregular, long-term, perhaps annual for lease agreement. 

•	 In (1), monthly bills, unless dynamic rates or peak demand charges are involved. Then rates and 

consumption information must be exchanged
 

–	 If TOU price is used, perhaps daily 

–	 If CPP is used, demand response service is provided by customers upon irregular requests from 

utility and typically lasts 1 hour or more (up to contractual limits). 24-hour advance notice may 

be required for CPP events. 

–	 If RTP is used, demand response occurs as price changes at hourly intervals or less. 

–	 For peak demand charges, notification of a potential peak load is required on a short-term, 

irregular basis. 

•	 In (2), rebates and penalties are distributed monthly. 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Tenant, often but not always building owner, perhaps representing lease/rental tenants (occupants) 

collectively 

B.	 Building/facility owner 

Who is the market maker? 

•	 (B) 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 N/A 

Are there other transactions associated with this? 

•	 (1) Building owner participating in a contractual dynamic rate program or a transactive retail energy 

market is involved in those transactions between the building and the grid (see Use Cases 5.1 

Dynamic Rate, 5.4 Transactive Energy Market Exchange, and 6.2 Transactive Retail Energy Market). 

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Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

How is the transacted commodity measured and verified? 

•	 (1 and 2) Sub-metering or non-intrusive load monitoring (NILM) of tenant energy use, and thermal 

energy delivery in large commercial buildings with built up HVAC systems, are required. 

•	 (2) The dynamic rates are used to calculate whether the allowance has been exceeded. 

Activities/Services 

What equipment and technology is required? 

•	 Electric sub-metering equipment required to provide load data time-series for billing. 

What equipment and technology is desirable? 

•	 NILM technology (hardware and software used to disaggregate building loads) may be desirable, to 

the extent they provide sufficiently accurate information for all parties involved. 

•	 Control systems capable of automating the customer’s desired response. 

•	 Demand response resource forecasting as a function of time of day, day-of-week and weather if CPP 

or RTP rates are involved. 

What is the benefit for the building? 

•	 Lower electric bills result, to the extent load is shifted or energy consumption is reduced by tenants. 

•	 Ability to better manage monthly electricity bills because the monthly allowances given to the RTP 

signal are sent to tenants. 

What is the benefit for the grid? 

•	 Reduced investment for generation capacity to meet peak loads (CPP, RTP, and to a lesser extent
 

TOU).
 

•	 Reduced fuel costs or wholesale purchase costs for electricity (TOU, RTP). 

•	 Reduced expenditure for emergency reserves (CPP, RTP). Ability to balance the intermittency of
 

renewables at the sub-hourly level.
 

•	 Lowers cost drivers that increase energy rates. 

What is the benefit for renewables? 

•	 (1) Emergency response can sustain grid reliability in the face of increased strain on transmission
 

system for long-distance delivery of renewable power to load centers.
 

64
 
 

 

What is the benefit for energy efficiency? 

•	 Home/building networks can be leveraged for energy efficiency applications, better control,
 

diagnostics, and advice.
 

Contracts/Regulations 

•	 (1 and 2) Sub-metering and billing is subject to approval by PU Cs in some states. 

•	 (1) Dynamic rates are subject to public utility commission approval (investor-owned utilities) or 

board of directors’ approval (public utilities). 

•	 (2) The contract should contain the monthly allowance for electricity bills and the formula for
 

determining rebates and penalties as a result of staying below or exceeding monthly allowance.
 

Current Examples of this Transaction 

•	 None as described. Sub-metering and tenant billing is a well-known but seldom practiced strategy. 

This use case extends such approaches considerably. 

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4.4 Transactive Control for Large Commercial Building HVAC Systems 

Type of Transaction: Intra-Building (End-User Services) 

Brief Description 

Customer/building operator uses transactive concepts in a hierarchical control system for a multi-zone 

commercial building with a complex, built-up HVAC system comprising chillers, cooling towers, airhandling units, etc. 

Narrative 

What is being transacted? 

A set of transactive markets for energy is created at each of a hierarchical set of control layers, 

corresponding to the layers of the HVAC system, which converts or delivers heating and cooling energy 

to building zones. The markets are used to control the equipment or systems at each layer to maximize 

comfort in the occupied zones while minimizing energy cost. 

•	 The control layer purchases energy from the layer above, and sells to the components in the layer
 

below. 

•	 The purchase of offered energy is in one of several forms, depending on the layer of the HVAC
 

system involved: 

–	 electricity and natural gas at the building level 

–	 cooling water from the cooling tower(s) for the chiller(s) 

–	 chilled water from the chillers and hot water from the boilers for the air handlers 

–	 conditioned air for the air handlers, VAV boxes, and zones 

–	 reheat energy (electricity or hot water) for the air handlers or zones for temperature and/or 

humidity control. 

•	 These are likely to be pseudo-transactions, i.e., not literal financial exchanges, with the possible 

exception of the bottom-most layer supplying thermal comfort to the zones. 

•	 At the discretion of the building owner/operator, the “purchases” of energy by individual zones may 

be mapped to the tenants occupying the corresponding space and actually billed to them. 

Why is it being transacted? 

Customer/building operator desires to create a hierarchical transaction-based framework for their HVAC 

control system to: 

•	 Reflect the value of occupant comfort in terms of its energy cost so these can be appropriately
 

balanced.
 

•	 Decrease monthly utility bills by increasing the energy efficiency of the HVAC system via the selfoptimizing properties of a transactive approach. 

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•	 Incorporate a continuous demand response capability that maximizes incentives or bill savings while 

minimizing effects on the occupants. 

•	 Seamlessly incorporate additional system components, and new energy and cost-savings technologies 

like thermal or battery storage, into the building’s operation in a plug-and-play fashion to minimize 

costs of integrating them with the existing controls. 

•	 (Optionally) pass through costs associated with HVAC energy usage to tenants to provide an
 

incentive for their collaboration in achieving cost savings.
 

How is it being transacted? 

For example: 

•	 At the highest layer, the building/owner operator purchases electricity and natural gas to heat and cool 

the building (the building layer), and “sells” them to the system components in other layers below. 

This may be a simple pass through of the cost. Aggregating the total energy cost of the building is the 

primary function of the building layer. 

•	 A bank of cooling towers (or the individual stages of one or more cooling towers) individually 

purchases electricity needed to operate their fans and pumps (the heat rejection layer). In turn, it 

creates cooling water at a range of possible temperatures and flow rates (and corresponding costs) and 

“offers” this as a commodity for “purchase” by the building’s chillers. 

•	 A bank of chillers (the chilled water production layer) each bid to purchase electricity from the 

building layer and cooling water from the chilled water production layer and that layer offers to sell 

their collective output to the buildings’ air-handling units. 

•	 A bank of boilers (the hot water production layer) each bid to purchase electricity and/or natural gas 

from the building layer and offers to sell their collective output to the buildings’ air-handling units 

and any reheat coils in the VAV boxes or zones. 

•	 The buildings’ air-handling units (the air-handler layer) each bid to purchase chilled and hot water 

from their respective layers to produce conditioned air, and each air handler offers to sell its output to 

any VAV boxes and/or zones it supplies. 

•	 The VAV boxes and zones may be a single layer if they have a one-to-one correspondence or two 

layers if a VAV box serves more than one zone. Each node bids to purchase conditioned air from the 

air handler serving it, and sells conditioned air to the zone(s) it serves. 

•	 The zone layer balances comfort against cost and bids to purchase conditioned air from the airhandler layer (or VAV layer if present). It also bids to purchase energy for reheat from the hot water 

layer or electricity from the building layer to power any reheat coils that are present. 

•	 (Optional). The zones may also purchase electricity for lighting and plug loads, and may similarly
 

balance the quality of service for the occupants against cost of energy to supply those services.
 

What is the time scale of the transaction? 

•	 Transactions regarding energy dispatch of equipment would take place relatively frequently, perhaps 

initiated when any component requests a change in state. This might correspond roughly to a 1­

minute time scale. 

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•	 Any actual billing transactions with tenants would presumably occur on a monthly basis or other
 

convenient interval.
 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Each node of the intermediate layers of the building’s hierarchical control system transacts with 

the node of the layer(s) above it that supplies it with energy, and with the nodes of the layer(s) 

below it that it, in turn, supplies. The layer nodes are fundamentally optimization and control 

applications for the building operator. 

B.	 The building layer node at the top of the hierarchy may transact with the supplying utilities in real 

time to purchase energy (e.g., electricity, natural gas, etc.) needed by the building, or may simply 

reflect the current rate schedule to the layers below. The building layer is an application acting to 

reflect actual utility costs to the layers of the HVAC system, on behalf of the building owner or 

operator who pays the utility bills. 

C.	 Each node of zone layer at the bottom of the hierarchy transacts comfort conditions or quality of 

service for lighting and plug loads with the zone occupants’ willingness to pay. 

D.	 Zone occupants transact with the zone layer node that serves them to reflect their willingness to
 

tradeoff comfort or quality of service to reduce their energy bill or meet their energy budget
 

allocated by the building owner/operator. These may be literal transactions in which funds are 

transferred or budgets affected, or pseudo transactions useful for control but for which the
 

occupants are not actually billed. 

E.	 Building owner/operator may engage in the transactions in one of several ways. Owners/operators 

may choose to assign the comfort/quality-of-service tradeoff parameters for the occupant zone 

nodes to reflect their own values and desire to save energy costs, particularly in an owner-occupied 

building. They may choose to let the occupants make those decisions, particularly in tenantoccupied buildings and bill them individually for their use. They may also assign them an energy 

budget and debit their consumption against it. 

F.	 Utility or retail load-serving entity may be transacting with the building owner via the building
 

layer node to reflect opportunities for demand response.
 

Who is the market maker? 

•	 The building owner/operator (E). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 N/A. 

Are there other transactions associated with this? 

•	 Utility or retail load-serving entity may, in turn, be transacting with a wholesale energy market, 

reflecting the price flexibility of the building in its purchases of energy or sales of load reduction into 

that market. 

Information Exchanged 

How is the transaction verified? 

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•	 Offers, bids, and clearing prices for energy exchange markets at each intermediate layer node are 

continually archived within the building systems. 

•	 Transactions with the utility or third parties for energy supply could take many forms, discussed in 

other use cases in this document. 

How is the transacted commodity measured and verified? 

•	 Interval metering of energy supplied at the building’s utility service entrance for
 

commercial/industrial customers is required.
 

•	 Btus flowing to, through, or from each node of each layer, likely must be measured or estimated (see 

Equipment and Technology, below). 

•	 Zone level metering of lighting and plug loads may be required if this optional feature is included. 

Activities/Services 

What equipment and technology is required? 

•	 The fundamental proposition of this use case is that transaction-based controls have the selfoptimizing and plug-and-play properties indicated. This needs to be established, and then transferred 

into commercial control systems offered by vendors. 

•	 Convenient and intuitive user interfaces or predetermined decisions are required to set the system up, 

particularly for the occupants’ expression of the energy cost tradeoff with comfort/quality of services. 

•	 Measurements of energy in fluid flows require integrating the flow rate and temperature differential 

of the supply and return flows. These temperatures are generally available in large building control 

systems today, but may not be suitably accurate for this purpose. In lieu of the expensive flow 

meters, proxy measurements for flow may be based on pump/fan characteristics, speeds, and pressure 

differentials (for example). 

What is the benefit for the building? 

•	 Lower energy cost from: 

o	 more efficient, system-level optimization and performance diagnostics of the building’s 

heating/cooling system. 

o	 induced conservation by building occupants. 

o	 the inherent ability of the system to provide continuous demand response to dynamic 

prices or incentives, to supply grid services valued by a utility or aggregator. (Or 

incentives) 

o	 incorporating additional system components and new energy and cost-savings 

technologies like thermal or battery storage into the building’s control system. 

What is the benefit for the grid? 

•	 Seamlessly obtain needed grid services (e.g., dispatchable), potentially at lower cost than from power 

plants. 

•	 Reduced investment for generation capacity to meet peak loads. 

•	 Reduced fuel costs or purchase costs for electricity produced on peak. 

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What is the benefit for renewables? 

•	 Lower cost grid services mitigate operational costs induced by the need to manage variable output 

from renewable generation, thereby promoting increased penetration. 

What is the benefit for energy efficiency? 

•	 Increased energy efficiency and conservation in large commercial buildings with complex HVAC 

systems, at lower cost than many physical infrastructure investments. 

Contracts/Regulations 

•	 Sub-metering and billing by building owners of electricity or gas consumed by tenants is prohibited 

in some states. State public utility commissions do not generally regulate billing for thermal energy 

flows within buildings, however. 

Current Examples of this Transaction 

•	 Contract networks for control of commercial buildings have been the subject of research at HP 

Corporation. See: Huberman, B., and S. Clearwater “Thermal Markets for Controlling Building 

Environments" Energy Engineering, 91, 26--56 (1994). 

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4.5 Diagnostic and Automated Commissioning Services 

Type of Transaction: Building to Other (Service Provider) 

Brief Description 

Customer (typically a commercial building operator or owner) signs up with a service provider for remote 

diagnostic services and/or automated commissioning services. 

Narrative 

What is being transacted? 

Customer is paying a fee for remote diagnostic services and/or automated commissioning services from 

the service provider, using data provided by a building automation system. This could take two forms: 

1. Fee may be for a one-time service or continual services over a period of time, such as a month. 

2. Fee may be on the basis of number or magnitude of faults detected and/or corrected. 

Why is it being transacted? 

•	 Customer desires a lower energy bill and better comfort from improved building operation. 

•	 Service provider desires a profit for services rendered. 

How is it being transacted? 

•	 Service provider creates a web application posting terms and conditions for services offered,
 

including confidentiality.
 

•	 Customer enables exchange of building metadata with the service provider. 

•	 Web application detects relevant building, systems, and equipment information and data streams 

available from the building, using the building’s metadata.
 

•	 Service provider lists services that can be supported by the data available from the consumers 

building.
 

•	 Customer signs up for selected services on line. 

•	 Data streams from the building are delivered to service provider per agreed upon schedule (may
 

include continuous streaming if supported).
 

•	 Diagnostic and commissioning information including savings estimates are delivered by service 

provider to customer electronically (e.g., via a web application).
 

•	 Service provider bills customer for service provided electronically. 

•	 Customer pays bill with credit card transaction or automatic bill-pay arrangement. 

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What is the time scale of the transaction? 

•	 One-time contract for customer sign-up. 

•	 One-time delivery of building metadata. 

•	 Periodic or continuous delivery of time-series data from building management system. 

Actor/Stakeholder Roles 

Who is transacting? 

A. Consumer (building owner or operator). 

B. Service provider. 

Who is the market maker? 

•	 (B). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 N/A. 

Are there other transactions associated with this? 

•	 Service provider may also offer corrective action services remotely and/or via dispatched personnel. 

•	 Savings may be transacted with a utility or aggregator to help meet regulatory requirements for
 

efficiency or in RPS or carbon markets, for example.
 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

How is the transacted commodity measured and verified? 

•	 Service provider periodically or continually delivers results of data analysis with conclusions and 

recommendations.
 

•	 Where the fee is based on the number or magnitude of savings from corrective actions identified, they 

may be based on savings estimates from the provider or actual savings achieved if corrective actions 

are also involved. 

Activities/Services 

What equipment and technology is required? 

•	 Description of building, systems, equipment, and control schemes, and how they are described, must 

be defined and standardized for use in such services. 

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•	 Means of describing data streams available from building management systems, and means of 

mapping them to diagnostic procedures and arranging for automatically uploading them to the service 

provider, must be developed and standardized. 

•	 Effective analytic procedures for detecting and diagnosing faults and identifying corrective actions 

and savings potential must be developed for use by the service provider. 

•	 Web applications that effectively communicate and support the business operations involved must be 

available. 

What is the benefit for the building? 

•	 Reduced utility bills from improved building operations. 

•	 Improved comfort and environmental services to building tenants and occupants. 

•	 Reduced expenditures for operations and maintenance. 

What is the benefit for the grid? 

•	 Increase efficiency from end uses that contribute to peak loads and reduce the need for capital
 

investment for generation, transmission, and distribution capacity.
 

•	 When utilities are subject to a RPS requirement, or a carbon market or tax, they can earn credit for
 

efficiency where allowed.
 

What is the benefit for renewables? 

•	 Diagnostics could also be provided for renewable distributed generation systems. 

•	 The installed base of renewable generation serves a higher fraction of the total load as the total load 

decreases, resulting in a cleaner overall electric power system. 

What is the benefit for energy efficiency? 

•	 May be a more cost effective delivery mechanism than traditional labor-intensive approaches to
 

achieve vast potential energy savings from improved building operations at scale.
 

Contracts/Regulations 

•	 Normal commercial business rules would seem to apply. 

Current Examples of this Transaction 

•	 Northwrite Corporation (Portland, OR) is an example of a company offering such automated services 

electronically over the internet. 

•	 Cimmetrics (Boston, MA) is an example of a company offering human-in-the-loop services remotely. 

None of these currently approach the level of automation described in this use case because the 

fundamental data standardization, detection, and automated delivery technologies do not currently exist. 

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4.6 Data Centers Trade Computation Jobs 

Type of Transaction: Service Provider to Service Provider 

Brief Description 

A data center (server farm or high-performance computing center) shifts computing jobs to another such 

service provider when electricity costs are cheaper. 

Narrative 

What is being transacted? 

•	 Data center located where electricity costs are currently high (e.g., during periods of peak demand) 

shifts jobs to a contemporary data center where costs are currently lower, and vice versa. 

•	 Data centers split the resulting electricity savings achieved by both. 

Why is it being transacted? 

•	 Each data center desires to lower its electricity bill while maintaining market share. 

How is it being transacted? 

•	 Their idle capacity and their electricity costs associated with computing (including CPU, data storage, 

and associated air conditioning) are posted at regular intervals. 

•	 Data center (A) with currently high costs checks availability of data center (B) with lower costs. 

•	 Data center (A) requests to shift job(s) to data center (B). 

•	 Data center (B) accepts offer. 

•	 Data center (A) delivers job to data center (B). 

•	 Data center (B) runs job. 

•	 A tally is kept on computer jobs shifted and electricity costs saved. Presumably net jobs shifted over 

an agreed upon period of 1 week, month, or year are kept near zero to maintain overall asset 

utilization balance. 

•	 Data centers split the resulting electricity savings achieved by both. 

What is the time scale of the transaction? 

•	 One-time contract for partnering agreement sign-up. 

•	 Transfer of job within 1 second or less. 

•	 Periodic or continuous tally and settlement of energy savings. 

•	 Agreed upon adjustment for any imbalance in overall jobs run. 

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Actor/Stakeholder Roles 

Who is transacting? 

A. Data center with currently high electricity costs. 

B. Data center with currently low electricity costs. 

Who is the market maker? 

•	 An independent third party could establish a market for bilateral transactions, or a more sophisticated 

version supporting multi-lateral transactions. 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 The local distribution utility may need to be notified so it can account for load swapping in its load 

estimation and forecasting. 

Are there other transactions associated with this? 

•	 N/A. 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) establishing contract between (A) and (B). 

•	 Tally records jobs shifted. 

How is the transacted commodity measured and verified? 

•	 Inherent in above for computer resources. 

•	 Each data center must compute electricity costs per unit of computing so that electricity savings can 

be accurately accounted. 

Activities/Services 

What equipment and technology is required? 

•	 Applications supporting real-time transfer of computing jobs. 

•	 Means of estimating electricity costs per unit of computing. 

•	 Applications that record jobs transferred and electricity saved. 

What is the benefit for the building? 

•	 Each data center benefits from reduced utility bills. 

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What is the benefit for the grid? 

•	 Reduced peak demand reduces the need for capital investment for generation, transmission, and
 

distribution capacity.
 

•	 Ability to shift load on short notice can help balance intermittency from renewable resources. 

What is the benefit for renewables? 

•	 See above regarding balancing. 

What is the benefit for energy efficiency? 

•	 Some energy efficiency benefits may occur as a result of lower air conditioning costs during cooler 

hours of the day at the off-peak data center. 

Contracts/Regulations 

•	 Normal commercial business rules would seem to apply. 

Current Examples of this Transaction 

•	 No examples of this transaction currently exist of which we are aware. This solution can most easily 

be affected by optimizing energy related computing costs at different data center locations within the 

same company. 

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4.7	 Microgrid Coordinating Demand Response, Distributed Generation and 

Storage 

Type of Transaction: Building to Building 

Brief Description 

Consumers sign up to participate in a transactive energy market within a microgrid to balance its 

resources and loads when operating in islanded mode to ensure reliable electricity services. In the 

example presented here, all resources are independently owned by building owners, including distributed 

generation and storage (DG and DS). The microgrid use case is built upon use case 6.2 Transactive Retail 

Energy Market, and only primary differences or additions to it will be highlighted here. 

Narrative 

What is being transacted? 

•	 Each building, DS, and DG owner connected in an islanded microgrid (“members”) agrees to pay an 

annual fee to an independent microgrid operator (IMO) to manage the microgrid economically, 

reliably, and equitably between these stakeholders, including energy trading. 

•	 Consumers and DG/DS resource owners also agree to pay (when consuming) or receive (when 

injecting energy) based on a real-time price (RTP) that varies over time at short intervals (e.g., 5-min) 

based on a market clearing mechanism operated by the IMO. 

Why is it being transacted? 

•	 A microgrid can be connected with or islanded from a large-scale power system. In the islanded 

mode, the energy and capacity is limited to the resources on hand and should be managed to maintain 

security and reliability, while also considering economics. Assuming all the resources are owned by 

members, a transactive energy market is used to help ensure economic, reliable and secure operation 

of the microgrid. 

•	 The market-based RTP is used by the IMO to balance the microgrid’s building loads and charging of 

DSs with output from DGs and DSs in the microgrid. 

•	 When in grid-connected mode, all members agree that the IMO will use the same transactive RTP
 

market mechanism to
 

– reflect the rate from the load serving entity and allocate energy costs to members 

– aggregate services from the members and offer them to the grid to earn incentives from the grid. 

How is it being transacted? 

•	 Consumers sign up with an independent microgrid operator (IMO) to manage energy trading between 

buildings, DSs, and DGs within a microgrid. 

•	 At each interval, the consumer’s energy management system assembles a bid curve for electricity
 

supply or demand as a function of RTP, based on information from resources and/or loads they
 

manage. 

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•	 The IMO uses a price-discovery mechanism (e.g., the clearing price of a double-auction market for 

electricity) that considers economics, while simultaneously managing system security and reliability 

constraints. 

•	 Consumers are notified by the IMO of the RTP cleared by the market at each interval. 

•	 The transactions are made using a double auction approach. 

What is the time scale of the transaction? 

•	 Irregular, long-term (~annual or until-further-notice) for membership sign up. 

•	 Member bid curves, price-discovery, and response of loads and distributed assets to RTP occurs at 

hourly or sub-hourly intervals (e.g., 5 minutes may be required for relatively precise control). 

•	 Members are billed or credited in a monthly settlement of the energy sold and purchased by the
 

members. Settlement could also occur in near real time with a credit-card-like transaction.
 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Microgrid members, e.g., building or facility owners/operators, with or without distributed assets 

(i.e., DG, DS, or demand response capabilities). 

B.	 IMO (independent microgrid operator) may bid for or offer energy into the market from assets it 

operates that are owned collectively by the members. 

Who is the market maker? 

•	 The IMO 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 N/A. 

Are there other transactions associated with this? 

•	 Member assets could also participate in a unit commitment and/or ancillary service market for the 

microgrid for purposes of enhancing its reliability and economic efficiency. 

•	 Building, DG, and DS owners may also be responsible for additional annual fees associated with the 

IMO operations and equipment or upgrades needed to ensure reliable service is provided by the 

microgrid. 

•	 The IMO may act as a distributed asset aggregator on behalf of the members when not operating in 

islanded mode. 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

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•	 Real-time posting of cleared prices, net energy consumed or produced, and cost to date for the billing 

period, for each member. 

How is the transacted commodity measured and verified? 

•	 Time-series load data from advanced metering infrastructure (AMI) meters is integrated with timeseries RTP data by (B) to compute member bills. 

•	 Credit for any additional incentives earned for response when grid connected can be constructed from 

the member’s bid history. 

Activities/Services 

What equipment and technology is required? 

•	 Interval metering is required (AMI) to provide net-load data time-series. 

•	 A wide-area communication network with bandwidth sufficient for broadcasting demand bids and the 

RTP on a 5-minute interval is required. 

•	 Price-discovery mechanisms that consider bids and reconfiguration schemes to coordinate distributed 

energy resources economically and reliably. 

•	 Automated price responsive controls for thermostats, water heaters, HVAC equipment, lighting, etc. 

that implement the customer’s desired response are required. 

•	 Home/building energy management systems and local area communications network capable of
 

assembling the demand bid curve, implementing control, and/or broadcasting the RTP to the
 

appliances and equipment within a building are required.
 

•	 A user interface for the member to set the price responsiveness of their appliances and equipment is 

required (e.g., personal computer, mobile phone app, home energy display, super smart thermostat). 

•	 (Desirable) A means of forecasting RTPs 24-hours ahead allows the members to optimize their
 

response over time.
 

•	 (Desirable) Applications for optimizing a building’s response given a 24-hour forecast of RTPs
 

hosted by a home/building energy manager.
 

What is the benefit for the building? 

•	 Improved reliability provided by the microgrid. 

•	 Ability to control costs by utilizing the microgrids energy resources that are independent of the power 

grid. 

•	 Potential for revenue from sales of energy from DERs to the microgrid. 

What is the benefit for the grid? 

•	 If the microgrid is permanently islanded, or if it responds to energy market costs or incentives for grid 

services when grid connected, the grid’s need to invest in capacity can be reduced, its wholesale 

energy production or market costs reduced. 

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What is the benefit for renewables? 

•	 Balancing the intermittent output from renewables at the sub-hourly level by the microgrid reduces 

integration costs. 

•	 Microgrids may incorporate significant amounts of distributed renewable generation (e.g., solar
 

photovoltaic systems)
 

What is the benefit for energy efficiency? 

•	 Home/building networks can be leveraged for energy efficiency applications, better control,
 

diagnostics, and advice.
 

Contracts/Regulations 

•	 Isolated microgrids with high penetration of renewables could experience reliability issues if 

proper regulations are not in place to ensure that the right equipment or resources are available to 

absorb surpluses and deficits in generation and demand. This implies that: 

–	 the IMO should ensure that the appropriate mix of DG, DS, DR, and non-responsive loads are 

transacting at all times 

–	 the IMO should ensure that curtailment or dump load equipment and procedures are available 

along with who is responsible for investments 

–	 bidding rules should also be in place so that poor bidding does not cause system collapse. 

Current Examples of this Transaction 

•	 N/A. 

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4.8 Trading Positions in an Electric Vehicle Charging Queue 

Type of Transaction: Customer to Customer 

Brief Description 

A limited number of electric vehicle (EV) charging stations are available at a parking lot. Re-charging is 

available on a first-come-first-served basis. A vehicle changes positions in the charging queue with 

another owner for a negotiated price. 

Narrative 

What is being transacted? 

•	 An EV owner (A) trades positions in the charging queue with another EV owner (B) that has a
 

preferred position for a negotiated price.
 

Why is it being transacted? 

•	 (A) needs his vehicle charged earlier than his position in the queue. 

•	 (B) can accept a later charging time and is willing to exchange positions in the queue for a payment 

from (A). 

How is it being transacted? 

•	 A limited number of EV charging stations are available at the parking lot. An attendant moves EVs 

or cables and /or charging station to the charging slot on a first-come-first-served basis based on a 

queue. 

•	 The charging queue is posted by a market maker in an on-line web application accessible by smart
 

phone with estimated charge completion times.
 

•	 (B) arrives at the parking lot, is assigned the next charging position in the queue (by default). 

•	 (B)’s vehicle communicates state-of-charge information to web application so charging time can be 

estimated and posted. 

•	 (B) logs into web application, indicates willingness to trade by posting a latest acceptable charging
 

time and an offer price to swap positions via the web application.
 

•	 (A) arrives at the parking lot, is assigned the next charging position in the queue (by default). 

•	 (A)’s vehicle communicates state-of-charge information to web application so charging time can be 

estimated and posted. 

•	 (A) logs into web application, checks his position in the queue, determines that the charge completion 

time is too late, views posted offers and prices that have acceptable charging times, and accepts the 

offer from (B). 

•	 Market maker updates charging queue for parking lot attendant and bills (A) and credits (B), retaining 

a transaction fee for the service (optional). 

•	 Bill and credit show up on (A)’s and (B)’s parking fee, or via a credit card transaction. 

What is the time scale of the transaction? 

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•	 Asynchronous bilateral transaction occurs on time scale of less than 1 minute, as a matter of 

convenience. The EV owner at the front of the queue may provide is “displacement” price and latest 

full charge end time when he signs up, and the rest of the transaction can be automatic. 

Actor/Stakeholder Roles 

Who is transacting? 

A. EV owner with urgent need for vehicle charging. 

B. EV owner without urgency to charge. 

C. Market maker facilitating transaction. 

Who is the market maker? 

•	 The parking lot management or a third-party web-based business. 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 The parking lot attendant must be aware of the queue and must update the queue as vehicles are 

charged (removing them from the trading list).
 

Are there other transactions associated with this? 

•	 N/A 

Information Exchanged 

How is the transaction verified? 

•	 Market maker sends confirmation of positions traded and price accepted to both parties via an e-mail 

or text message. With a software controlled prioritized charging system, this can be automatic. 

How is the transacted commodity measured and verified? 

•	 Vehicle owner is notified when vehicle charging is complete. 

•	 Some guarantee of charging vehicles in the prescribed order is required on the part of the parking lot 

management, with a refund and perhaps a penalty payment if a mistake is made. 

Activities/Services 

What equipment and technology is required? 

•	 Wireless/cell phone access at parking lot. 

•	 (Desirable) A kiosk for trades for those without cell phone availability. 

•	 (Desirable) Communications to vehicle charge management system to obtain state-of-charge when 

entering queue. 

•	 (Desirable) State-of-charge estimating application on-board vehicle. 

•	 Web-application for charging queue, offers, and bids. 

•	 Modified parking fee billing software and/or credit card network access. 

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•	 (Desirable) Web application for parking lot attendant to verify charging order (e.g., it could scan the 

license plate). 

What is the benefit for the building? 

Parking lot management may: 

•	 Receive a share of the proceeds from the market maker. 

•	 Obtain higher level of customer satisfaction. 

•	 Save capital expense because it needs fewer charging stations to meet customer needs. 

What is the benefit for the grid? 

•	 System could be leveraged to include peak load management via a dynamic charging fee or
 

surcharge.
 

What is the benefit for renewables? 

•	 System could potentially be linked to a green power signal or premium. 

What is the benefit for energy efficiency? 

•	 N/A 

Contracts/Regulations 

•	 Some regulatory oversight of market makers may be required. 

Current Examples of this Transaction 

•	 This has reportedly been envisioned in association with charging stations for the Bay Area Rapid 

Transit system in San Francisco. 

Questions for Chapter 4: 

What are some additional uses cases for this end-user service category? 

Please see the use-case template in section 8.0 to provide your input. 

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5.0 Energy Market Services 

Chapter 2 describes energy market services as energy and energy-related services that help support 

the efficient utilization of the energy generation and delivery assets. The primary need, and hence, value 

for energy market services originates outside the meter, i.e., within the power grid or the natural gas 

delivery infrastructure. In a region with a wholesale power market, these services may reflect those costs. 

In other regions they may reflect power production and delivery costs for a vertically-integrated utility. 

Although the value may be derived from the grid benefits, the overall economic benefits for such 

transactions accrue to both parties involved in the transaction. Energy market services may include 

mechanisms such as time-of-use and real-time pricing, etc., that help manage constrained resources, such 

as electricity or water delivery “pinch points”. Energy market services primarily help customers derive 

economic gain by offering cost savings opportunities, such as incentives or lower prices for modifying 

their consumption patterns, providing capacity deferral and other benefits to utilities. 

Example use cases describing transactive mechanisms that help with the efficient utilization of energy 

generation and delivery system resources and assets described here are: 

•	 Dynamic rates 

•	 Optimize electric vehicle charging for dynamic rates 

•	 End-use differentiated dynamic rates 

•	 Transactive energy market exchange 

•	 Trading efficiency to relieve congestion 

•	 Differentiated reliability service. 

These are examples of services that originate both outside and behind the meter, i.e., within customer 

premises. Each of these example use cases is described further below. 

5.1 Dynamic Rates 

Type of Transaction: Building to Grid 

Brief Description 

Customer signs up with a retail utility or a retail service provider for a dynamic (time-varying) rate 

program such as (1) time-of-use (TOU), (2) critical-peak-price (CPP), or (3) real-time price (RTP). 

Narrative 

What is being transacted? 

Customer changes their contract with utility or retail service provider for electricity purchased at a 

constant flat rate for a contract with a rate that varies over time. This is typically in one of several forms: 

1)	 TOU rate in which the unit energy price is higher during peak hours and lower during off-peak
 

hours, e.g., by a factor of ~2×
 

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–	 an intermediate price level during “shoulder” hours (hours when generation demand/costs are 

higher than average but not at peak) may also be incorporated. 

2)	 CPP rate in which a very high unit price (~10-20×) can be declared by the utility or retail service 

provider, with 24-hour notice to customers 

–	 limited to a maximum number of days per year (typically 10 or 15) and hours per day (typically 

4 to 6). 

3)	 TOU/CPP rate, which is a combination of a TOU rate on most normal days with a CPP rate during 

critical peak hours on critical peak days. 

4)	 RTP rate that varies continuously, may require 24-hour ahead prices be delivered to the consumer. 

Why is it being transacted? 

•	 Assuming the utility or retail service provider has properly structured the dynamic rate to be revenue 

neutral (for the average customer load shape), an incentive is created for customers to sign up and 

voluntarily engage in demand response. 

•	 The utility or retail service provider correspondingly obtains: 

–	 daily load shifting by customers that corresponds to electricity production costs (TOU) 

–	 demand response for peak-load or peak-price management on a limited number of days per year 

(CPP) 

–	 continuously available demand response resource (RTP). 

How is it being transacted? 

•	 Customer signs up for a dynamic rate program. 

•	 Dynamic rates are sent to customers for them to decide how to manage their loads. 

–	 24-hr advance notice via phone, e-mail or pager is required for CPP events 

•	 The customer can take advantage of the rate by shifting some of their load from higher-price periods 

to lower-price periods, thereby lowering their bill. 

–	 This can be accomplished by demand response, battery or thermal storage, and/or use of a 

dispatchable distributed generator (in the subsequent discussion the term demand response will be 

used, but in principle refers to net load reduction from any of the above). 

•	 The transaction is classified as an over-the-counter (OTC) transaction. Today, such exchanges are 

only marginally automated or conducted electronically. Doing so in a more “e-commerce” style 

would make them much more “transactive” in the context of this reference document.
 

What is the time scale of the transaction? 

•	 Irregular, long-term (~annual or until-further-notice) for program signup. 

•	 TOU load shifting occurs every day. 

•	 CPP demand response service is provided by customers upon irregular requests from utility and
 

typically lasts 1 hour or more (up to contractual limits).
 

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– 24-hour advance notice is required for CPP events. 

•	 RTP demand response occurs as price changes at hourly intervals or less. 

•	 Customer savings from shifting load to lower-price periods are reflected in monthly electric bills. 

Actor/Stakeholder Roles 

Who is transacting? 

A. Consumer (ratepayer), often but not always building owner, perhaps representing lease/rental
 

tenants (occupants) collectively.
 

B. Utility, retail service provider, or a third-party aggregator. 

Who is the market maker? 

•	 (B). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 If a CPP event is called by retail service provider that is not the utility/load serving entity, the latter 

may need to be informed (if required by regulation or policy). For example, the aggregator may 

either be held responsible for providing a certain level of load reduction by the utility or may be 

receiving additional benefits from the utility for providing the load reduction services. 

Are there other transactions associated with this? 

•	 Where there are wholesale electricity markets that allow demand response participation, (B) 

aggregates CPP demand response from a collection of customers and either i) bids it as a block of 

demand reduction into the day-ahead or real-time market, or ii) reduces their bid for electricity to 

serve their load by that amount. 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

How is the transacted commodity measured and verified? 

•	 Metered time-series load data is integrated with price time-series data by (B) to compute customer 

bill. 

Activities/Services 

What equipment and technology is required? 

• Interval metering (AMI/AMR) is required to provide load data time-series.
 

What equipment and technology is desirable?
 

•	 Thermostats, water heater controls, etc. that automate the customer’s desired response by TOU time 

blocks and/or a CPP/RTP signal (from the utility or retail service provider). 

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– Use of a CPP/RTP signal requires a higher bandwidth network than typical AMI networks have. 

•	 Demand response resource forecasting as a function of time-of-day, day-of-week and weather for
 

CPP and RTP.
 

What is the benefit for the building? 

•	 Lower electric bills result, to the extent load is shifted. 

•	 Reduced rates result (for all customers) by lowering utility revenue requirements resulting from
 

benefits provided to the grid.
 

What is the benefit for the grid? 

•	 Reduced expenditure for emergency reserves (CPP, RTP). 

•	 Reduced investment for generation capacity to meet peak loads (CPP, RTP, and to a lesser extent
 

TOU).
 

•	 Reduced fuel costs or wholesale purchase costs for electricity (TOU, RTP). 

What is the benefit for renewables? 

•	 Emergency response can sustain grid reliability in the face of increased constraints on transmission 

system for long-distance delivery of renewable power to load centers. 

•	 PV solar output is more valuable to the consumer under dynamic rates because peak output usually 

corresponds to higher-price periods. 

What is the benefit for energy efficiency? 

•	 Provides more cost savings for efficiency from end uses (air conditioning, water heating, commercial 

lighting) that tend to consume more energy during peak periods (TOU). Note the converse is also 

true, however. 

Contracts/Regulations 

•	 Dynamic rates are subject to public utility commission (investor-owned utilities) or board of
 

directors’ approval (public utilities).
 

Current Examples of this Transaction 

•	 A number of utility opt-in dynamic rate programs exist, but are often in pilot form. 

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5.2 Optimize Electric Vehicle Charging for Dynamic Rate 

Type of Transaction: Building to Grid 

Brief Description 

Customer signs up with retail utility or a retail service provider for a dynamic (time-varying) rate program 

to charge electric vehicles (EVs). 

Narrative 

What is being transacted? 

•	 Customer signs up with utility or retail service provider to provide electricity used to charge EVs via 

dynamic (time-varying) rate program. The customer is responsible for any EV charging based on the 

dynamic rates received. 

•	 The customers can use EMSs or building automation systems that will consider forecasts in dynamic 

rates, time limits specified for fully charging EVs, and specified charging levels for emergency use of 

EVs, etc. to optimize charging of EVs. 

Why is it being transacted? 

•	 Assuming the utility or retail service provider has properly structured the dynamic rate to be revenue 

neutral (for the average customer load shape), an incentive is created for customers to sign up and 

voluntarily engage in charging during periods that will result in lower electricity bills. 

•	 The utility or retail service provider correspondingly obtains: 

–	 daily load shifting by customers that reflects the needs of the grid, such as load reduction during 

peaks or load increases when there is excess wind generation. 

What is the timescale of the transaction? 

•	 Long-term ~ (annual or until-further-notice) for program sign-up. 

•	 Change in charging schedule occurs at hourly intervals or less as a result of price changes. 

•	 Customer savings from charging EVs to lower-price periods is reflected in monthly electric bills. 

How is it being transacted? 

•	 Customer signs up for EV dynamic rate program. 

•	 Dynamic rates are sent to customers for them to decide how to utilize their loads. 

•	 Customer uses EMS or BAS to develop charging schedules for plugged-in EV based on dynamic rate 

forecasts. This enables the customer to take advantage of the rate by shifting EV charging from highprice periods to low-price periods, thereby lowering electricity bills. 

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Actor/Stakeholder Roles 

Who is transacting? 

A. Consumer (ratepayer), often but not always building owner or tenants, who owns an EV. 

B. Utility or retail service provider. 

Who is the market maker? 

•	 (B) (most likely, but could also be a third-party aggregator interacting with a utility). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 N/A 

Are there other transactions associated with this? 

•	 N/A 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

•	 Notification of RTP by (B) to (A). 

How is the transacted commodity measured and verified? 

•	 Metered time-series load data is integrated with price time-series data by (B) to compute customer 

bill. 

Activities/Services 

What equipment and technology is required? 

•	 Interval metering is required (AMI/AMR) to provide load data time-series. 

•	 (Desirable) EV charging controls, etc. that automate the customer’s desired response by dynamic rate 

signal received from the utility or retail service provider. 

– Use of a RTP signal requires a higher bandwidth network than typical AMI networks have. 

•	 (Desirable) Real-time price forecasting as a function of time-of-day, day-of-week and weather for
 

(RTP) or forecasted prices from service provider.
 

What is the benefit for the building? 

•	 Lower electric bills result, to the extent EV charging is shifted to lower-price periods. 

•	 Reduced rates result (for all customers) by lowering utility revenue requirements based on benefits 

provided to the grid. 

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What is the benefit for the grid? 

•	 The utility or retail service provider can use dedicated rates for dedicated loads to encourage specific 

loads. For example, giving electric vehicles a special TOU rate can encourage EV sales, which in 

turn benefits the grid with a more predictable load curve. 

•	 Reduced expenditure for emergency reserves (RTP). 

•	 Reduced investment for generation capacity to meet peak loads (RTP, and to a lesser extent TOU). 

•	 Reduced fuel costs or wholesale purchase costs for electricity (TOU, RTP). 

What is the benefit for renewables? 

•	 A dynamic rate for EVs could benefit the integration of wind power by providing a new load for
 

excess wind generation at night, for example.
 

What is the benefit for energy efficiency? 

•	 N/A 

Contracts/Regulations 

•	 Dynamic rates are subject to public utility commission approval (investor-owned utilities) or board of 

directors’ approval (public utilities). 

Current Examples of this Transaction 

•	 N/A 

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5.3 End-Use Differentiated Dynamic Rates 

Type of Transaction: Building to Grid 

Brief Description 

Customer signs up with retail utility or a retail service provider for different dynamic (time-varying) rate 

programs for different end uses: e.g., a time-of-use rate (TOU) for process end uses like dishwashing and 

clothes washing and drying that are driven by occupant usage patterns, and 2) a real-time price (RTP) for 

end uses like space conditioning and water heating where automated controls can be employed to respond 

to short-term changes in price. The essential driver for splitting the loads into two rate classes is that 

loads driven by behavior are best shifted by the occupants’ awareness of consistent pricing patterns, 

whereas loads that operate more continuously and have thermostatic controls can be programmed to 

respond automatically to rates that vary more dynamically. Such a “split rate” approach may be both 

more equitable and more effective for encouraging load shifting at appropriate times. 

Narrative 

What is being transacted? 

•	 Customer changes their contract with the utility or retail service provider for electricity purchased to 

one with a rate that varies over time, depending on the end use involved. The customer pays for 

consumption with either: 

–	 A TOU rate in which the unit price is higher during peak hours and lower during off-peak hours, 

e.g., by a factor of ~2x (a third, intermediate level during shoulder hours may also be 

incorporated). 

–	 A RTP rate, which varies continuously on hourly (or 5- or 15-minute) intervals, perhaps requiring 

24-hour ahead prices be delivered to the consumer. 

•	 The applicable rate is dependent on the type of load and the availability of automated controls. The 

customer bill for RTP loads is based on sub-metering them, or a means of estimating them with 

reasonable accuracy. The remainder of customer power consumption is billed at an RTP rate. 

Why is it being transacted? 

•	 Assuming the utility or retail service provider has properly structured the dynamic rate to be revenue 

neutral (for the average customer load shape), an incentive is created for customers to sign up and 

voluntarily engage in demand response by shifting some of their usage to periods with lower prices. 

•	 The utility or retail service provider correspondingly obtains: 

–	 daily load shifting by customers that corresponds to electricity production costs (TOU) 

–	 continuously available demand response resource (RTP). 

•	 A TOU rate encourages changes in time-of-use of appliances on a regular, daily basis but cannot 

provide greater response to short term, or irregular intermittent needs of the grid in the way an RTP 

can. 

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–	 For example, TOU may be used for certain loads that need to be engaged at predictable times, 

such as electric vehicles or washing machines, where the customer knows in advance when to 

take advantage of lower charging rates during off-peak hours. 

–	 RTP can be used for space conditioning and water heaters that can be engaged through 

programmable controls to dynamically respond to prices.
 

What is the time scale of the transaction? 

•	 Long-term ~ (annual or until-further-notice) for program sign-up. 

•	 Ongoing (demand response occurs as price changes at hourly intervals or less). 

•	 Customer savings accrued from shifting load to lower-price periods are reflected in monthly electric 

bills. 

How is it being transacted? 

•	 Customer signs up with utility for RTP rate for end uses that will be managed with dynamic demand 

response, e.g., air conditioning and water heating. 

•	 Customer’s other end uses are charged a TOU rate because customer manages them by shifting his 

usage patterns on a regular basis.
 

•	 Utility arranges for separate metering or possibly using existing meter data software tools; to the
 

extent it can sufficiently differentiate both loads.
 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Consumer (ratepayer), often but not always the building owner, perhaps also representing the
 

collective response of lease/rental tenants to the grid.
 

B.	 Utility or retail service provider. 

Who is the market maker? 

•	 (B) (most likely, but could also be a third-party aggregator interacting with a utility). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 The distribution utility may need to be informed if they are not the retail service provider, so they can 

take into account the effect of customer response to RTP signals on their distribution system. This 

would be required if an aggregator was setting RTP rates to provide load reduction services to the 

distribution system. 

Are there other transactions associated with this? 

•	 The utility/retail service provider or aggregator may trade the demand response from the RTP loads in 

a wholesale energy market. 

Information Exchanged 

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How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

•	 Notification of RTP by (B) to (A). 

How is the transacted commodity measured and verified? 

•	 Metered time-series load data is integrated with price time-series data by (B) to compute customer
 

bill.
 

Activities/Services 

What equipment and technology is required? 

•	 Interval metering is required (AMI/AMR) to provide load data time-series. 

•	 A means of determining the consumption of the RTP end uses at the rate’s time interval is required. 

This could be in the form of sub-metering of the end use(s), or a means of reasonably estimating them 

through a disaggregation process. 

•	 (Desirable) thermostats, water heater controls, etc. that automate the customer’s desired response by 

TOU time blocks and/or a RTP signal (from the utility or retail service provider). 

–	 Use of a RTP signal requires a higher bandwidth network than current AMI networks typically 

have. 

•	 (Desirable) demand response resource forecasting as a function of time of day, day-of-week and 

weather for (RTP).
 

What is the benefit for the building? 

•	 Lower electric bills result, to the extent load is shifted. 

•	 Reduced rates result (for all customers) by lowering utility revenue requirements based on benefits 

provided to the grid. 

What is the benefit for the grid? 

•	 Reduced investment for generation capacity to meet peak loads (RTP, and to a lesser extent TOU). 

•	 Reduced fuel costs or wholesale purchase costs for electricity (TOU, RTP). 

•	 Reduced expenditure for emergency reserves (RTP). 

•	 The utility or retail service provider can use dedicated rates for dedicated loads to encourage specific 

loads. For example, giving electric vehicles a special TOU rate can encourage electric vehicle (EV) 

sales, which in turn benefits the grid with more desirable load shape. 

What is the benefit for renewables? 

•	 A TOU for EVs could benefit the integration of wind power by providing a new load for wind 

generated at night, for example.
 

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•	 TOU and RTP can benefit PV solar in a net metering situation because PV output is often correlated 

with higher-price periods. 

What is the benefit for energy efficiency? 

•	 TOU provides more cost savings for efficiency from end uses (air conditioning, water heating, 

commercial lighting) that tend to consume more energy during peak periods. Note the converse is 

also true, however, end uses that tend to consume more energy during off-peak TOU periods will 

exhibit less reward when their efficiency is improved (but they will benefit from overall lower energy 

use and associated costs for all the time they are running). 

Contracts/Regulations 

•	 Dynamic rates are subject to public utility commission (investor-owned utilities) or board of
 

directors’ approval (public utilities).
 

Current Examples of this Transaction 

•	 A number of utility opt-in dynamic rate programs exist, but most are often in pilot form. A
 

combination of RTP and TOU rates for different end uses (as described here) does not exist in the
 

U.S. to our knowledge. 

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5.4 Transactive Energy Market Exchange 

Type of Transaction: Building to Grid 

Brief Description 

Customer purchases electric energy and delivery services from generation and transmission and 

distribution (T&D) suppliers in an asynchronous, bi-lateral, stock market-like transaction. Separate 

forward contracts can be purchased at various time scales. Customer can re-sell contracts for unneeded 

energy and delivery back into the market. 

Narrative 

What is being transacted? 

•	 Energy, and energy transport products can be offered and purchased in an electronic marketplace, 

organized and operated much like a stock market, at various time scales: year ahead (i.e., base load), 

month ahead (i.e., load shape), and 1-hour (i.e., spot market) and 5-minutes ahead (i.e., real time). 

•	 Separate forward contracts can be purchased by the consumer from tenders offered by suppliers and 

deliverers, to meet needs for electric energy. Unneeded energy under contract for supply and delivery 

can be re-sold by offering it back to the market as a tender. 

How is it being transacted? 

Bi-lateral transactions between a customer and suppliers of energy and delivery services are conducted in 

an asynchronous fashion much like a stock market: 

•	 An Indication of Interest is non-binding and may include 

– a request for a tender 

– a forecast of usage by a buyer 

– a forecast of price by a seller. 

•	 A tender is a bid or offer for an energy transaction with an expiration date and time. 

•	 A transaction is formed by accepting a tender. 

•	 Publication communicates the transacted prices, quantities, and costs or revenues back to the market. 

•	 Delivery is the metered quantity delivered. 

•	 Settlement is the payment for the contract. Customer pays bill with credit card transaction or
 

automatic bill-pay arrangement.
 

Why is it being transacted? 

•	 By optimizing his portfolio of purchases across the long and short term, a consumer can reduce his 

overall cost for electricity.
 

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•	 Generation suppliers can offer tenders that optimize their operating efficiency and return on
 

investment.
 

•	 T&D suppliers can explicitly manage capacity constraints at each point in the system via the quantity 

of their tenders for delivery. 

What is the time scale of the transaction? 

Several time scales, depending on type of power purchased. For example: 

•	 Base load energy is purchased about 1-year ahead. 

•	 Load shape energy is purchased about 1-month ahead. 

•	 Spot market energy is purchased every hour. 

•	 Real-time imbalance energy is purchased every 5 minutes unless otherwise provided under the terms 

of a contract. 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Customer (consumer of electric energy; may also be a supplier) 

B.	 Generators 

C.	 Transmission owner/operator or utility 

D.	 Distribution utility 

E.	 Aggregators 

F.	 Microgrid operators 

G.	 Third-party equipment owners (e.g., thermal or electric energy storage systems, distributed
 

generation)
 

Who is the market maker? 

•	 An independent system operator (ISO) or a third-party market operator may set up and operate a
 

market for generation and transmission services for a region.
 

•	 A distribution utility or a third-party market operator may set up and operate a market for distribution 

services for their service territory. 

•	 A facility or microgrid owner may set up and operate a market for service within their footprint. 

Who else needs to acknowledge/verify a transaction has been made? 

•	 Transactions for generation, transmission, and distribution of energy need to be linked or otherwise 

coordinated across markets at these scales. 

Are there other transactions associated with this? 

•	 A number of hedging and derivative products can be envisioned. 

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Information Exchanged 

How is the transaction verified? 

•	 Electronic verification of tenders between transacting parties is provided by the market. 

How is the transacted commodity measured and verified? 

•	 Metered time-series load data is integrated with prices spelled out in the contract terms to compute 

the customer payment due to the suppliers. 

Activities/Services 

What equipment and technology is required? 

•	 Interval metering is required (AMI/AMR) to provide load data time-series. 

•	 A wide-area communication network with bandwidth sufficient for the high volume of transactions is 

required. This is likely the customers broadband. 

•	 A standardized protocol (proceeding as a subset of the TEMiX protocol) for the electricity
 

transactions.
 

•	 A portfolio optimizer that manages the purchase and resale of the customer’s energy contracts to
 

minimize overall costs.
 

•	 Market operating software that coordinates generation and delivery markets (if separate). 

•	 A standardized protocol for the financial settlement transactions. 

•	 A home/building energy management system and local area communications network capable of 

acting on the customers behalf implementing control, and/or broadcasting the prices to the appliances 

and equipment is required (e.g., a smart thermostat, an AMI meter, a personal computer). 

•	 A user interface for the customer to set the price responsiveness of their appliances and equipment is 

required (e.g., personal computer, mobile phone app, home energy display). 

What equipment and technology is desired? 

•	 Automated price responsive controls for thermostats, water heaters, HVAC equipment, lighting, etc. 

that implement the customer’s desired response are required. 

•	 Applications for optimizing a building’s response given a 24-hour forecast of RTPs hosted by a
 

home/building energy manager.
 

What is the benefit for building customers? 

•	 Customers can take advantage of forward markets to better manage their energy consumption, lower 

their bill, and, in specific cases, sell energy back to the grid, creating new value streams. 

•	 Reduced rates result (for all customers) by lowering utility revenue requirements resulting from
 

benefits provided to the grid.
 

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What is the benefit for the grid? 

•	 The various time-horizons of forward and spot contracts provide a clear basis for merchant 

generators, ISOs, utilities, retail service providers, and aggregators to forecast net consumer load and 

the need for future capacity, including the type of generation needed (base load, intermediate, and 

peaking plants). 

•	 The high cost for spot market purchases for peak power will reduce peak demand, thus leading to 

reduced investment for transmission and generation capacity to meet peak loads.
 

•	 Reduced fuel costs for generators may result from better scheduling via their tenders. 

•	 Reduced congestion costs caused by transmission constraints. 

•	 Ability to balance the intermittency of renewables at the sub-hourly level. 

•	 Increased ability to provide relief in case of emergency situations, such as weather related outages. 

What is the benefit for renewables? 

•	 Generation agnostic, supports lowest cost option, and hence, 

– Increases integration of renewables in times of oversupply/low cost. 

What is the benefit for energy efficiency? 

•	 Home/building networks can be leveraged for energy efficiency applications for better control,
 

diagnostics, and advice.
 

Contracts/Regulations 

•	 Tariffs would be subject to FERC approvals where these are used in interstate commerce, and public 

utility commission (investor-owned utilities) or board of directors’ approval (public utilities). 

•	 Hedges and derivatives other than the basic transactions may or may not be allowed and may or may 

not be regulated by the combined action of these entities. 

Current Examples of this Transaction 

There are no current deployments. Dr. Ed Cazalet of TeMix, Inc. is actively constructing prototype 

software and tools around these concepts. We have attempted to represent many of his ideas here as 

described in various presentations at GridWiseTM Architecture Council meetings and workshops. 

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5.5 Trading Efficiency to Relieve Congestion 

Type of Transaction: Building to Grid 

Brief Description 

The utility or aggregator sets up an “eBay-like” marketplace to obtain efficiency that specifically targets 

an area served by a congested, capacity-limited element of a distribution or transmission system. This use 

case is a modification of the previously described use cases 4.2 Efficiency Shared Savings and 7.2 

Efficiency Incentive Payment. Only key differences will be noted here. 

Narrative 

Why is it being transacted? 

•	 In addition to other values the utility or aggregator may obtain from energy efficiency described in 

the related use cases, the utility desires to focus such investment on customers served by a congested 

distribution substation or feeder, or a congested transmission line, to defer a pending investment 

increasing its capacity. 

•	 Customer may obtain an investment from the utility or aggregator because of the customer’s location, 

or a higher investment level to achieve a higher level of savings. The resulting energy savings result 

in lower electric bills and/or a higher incentive payment for the efficiency achieved. 

How is it being transacted? 

•	 In addition to the process described in the related use cases, an eBay-like system of identifying
 

customers in the right locations could be established if there were postings by customers of energy
 

audit-like results expressing their savings opportunity and their required investment threshold.
 

•	 Utility or aggregator could then readily target the lowest cost energy saving opportunities in the
 

targeted locations.
 

What is the benefit for the grid? 

•	 In addition to other benefits cited in the related use cases, the utility or load-serving entity avoids 

capital investment to upgrade distribution and transmission system capacity.
 

•	 It may also avoid transmission congestion charges associated with higher locational marginal prices 

(LMPs) where wholesale markets have been implemented. 

Current Examples of this Transaction 

•	 Areas where LMPs are high because of transmission congestion have received increased attention
 

from efficiency programs operated by states and utilities. The well-known load pocket in Western
 

Connecticut is one such example.
 

•	 We are not aware of a transaction-based approach being implemented as described above. 

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5.6 Differentiated Reliability Service 

Type of Transaction: Building to Grid 

Brief Description 

Customer signs up for premium reliability service, paying a surcharge for being more likely to have 

service restored quickly after a distribution-level outage. The distribution utility uses the additional 

revenue to invest in deployment of fault detection, location, isolation, and reconfiguration (FDLIR) 

technology, improving system reliability for all customers, without increasing overall rates. This assumes 

that the distribution system has the ability to “back feed” power from adjacent feeders, or has some 

distributed energy resources (DERs) it can use to provide power to premium rate customers in some 

circumstances. It further assumes that automated metering infrastructure (AMI) with remote disconnect 

capability is deployed. 

When a distribution outage occurs, the utility uses the FDLIR technology to quickly isolate the faulted 

section, and determine how many customers can be supported with the available capacity from adjacent 

feeders and DERs. If all customers cannot be supported given the current time-of-day, day-of-week, and 

weather, then it uses the remote disconnect feature of the AMI system to reduce the load that must be 

served. First priority goes to the premium rate customers. 

Narrative 

What is being transacted? 

•	 Customer signs up with load serving entity (LSE) to receive a higher level of service reliability in the 

aftermath of a local outage. 

•	 The customer agrees to pay a monthly premium for the service. 

Why is it being transacted? 

•	 Power outages cause over $100 billion in economic losses annually. Over 90% of accumulated times 

of customer outages occur as a result of distribution-level problems. Investment in FDLIR and other 

technologies that can improve distribution reliability is lagging. This is caused by, in part, the fact 

that many customers are unwilling to undergo rate increases to support such investments because they 

are generally satisfied with the reliability of their service. Other customers, particular businesses, 

may be willing to pay higher rates to support such investments. Differentiated reliability services can 

create a revenue stream to provide more reliable services to consumers who value it, and in turn, 

minimize these economic losses. 

•	 Premium rate customers desire the maximum possible reliability. 

•	 Note the investments in FDILR, DERs, and other technology will improve reliability in general for 

non-premium customers, also. 

How is it being transacted? 

•	 Customer signs up for a premium reliability plan. 

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•	 The distribution utility gives first priority to premium customers in the aftermath of an outage. 

•	 On-line reports provided by the distribution utility explaining their outage restoration actions and
 

timelines may be essential for customer acceptance.
 

What is the time scale of the transaction? 

•	 Irregular, long-term (annual or until-further-notice) for program sign-up depending on changes in 

customer values or loads. For example, if critical loads are no longer used, customers may want to 

consider a plan without a premium. 

•	 Emergency situations are typically unpredictable and occur irregularly. 

•	 Premiums are paid monthly by customers. 

•	 Post-outage reports explaining restoration actions and timelines may be posted on line. 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Consumer (ratepayer), often but not always building owner, perhaps representing lease/rental
 

tenants (occupants) collectively.
 

B.	 Distribution utility. 

Who is the market maker? 

•	 (B). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 N/A 

Are there other transactions associated with this? 

•	 N/A 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

How is the transacted commodity measured and verified? 

•	 Not required. Post-outage reports may be provided after each event to assure premium customers that 

they received priority, and that restoration of non-premium customers was also increased within that 

constraint. 

•	 If terms of the agreement are not met by the distribution utility, penalties may be due to customers 

individually or collectively (e.g., via a public utility commission).
 

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Activities/Services 

What equipment and technology is required? 

•	 AMI with remote disconnect switches and a network with sufficient bandwidth to communicate with 

customer meters quickly in the aftermath of an outage. 

•	 Time-series load data from the AMI meters can be used to improve the forecast for the load upon 

restoration of service, maximizing the number of premium and non-premium customers whose power 

can be restored almost immediately. 

•	 Optimization algorithms and reconfiguration schemes need to incorporate the use of DERs and AMI 

networks in the fashion described. 

What is the benefit for the building? 

•	 Reliable service delivered to minimize economic losses after outages. 

What is the benefit for the grid? 

•	 Revenue streams for investment in improving overall reliability, such as FDLIR and distributed
 

energy resources.
 

What is the benefit for renewables? 

•	 N/A 

What is the benefit for energy efficiency? 

•	 N/A 

Contracts/Regulations 

•	 Regulators may need to establish rules and policies that protect both premium and regular customers, 

including penalties for inappropriate use of such systems. 

•	 Regulatory oversight may be needed to ensure the utility does not allow distribution reliability to 

regress, in general.
 

•	 Regulatory oversight may be necessary to ensure disadvantaged customers (e.g., the elderly or poor) 

are not improperly impacted by the utility offering differentiated reliability service plans. 

Current Examples of this Transaction 

•	 N/A 

Questions for Chapter 5: 

Are there additional or better uses cases for this energy market service category? 

Please see the use-case template in section 8.0 to provide your input. 

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6.0 Grid Services 

Chapter 2 defines grid services as energy, and energy-related products, services, and rights that help 

support enhanced grid planning, operations and metering within both centralized and decentralized 

structures of asset location and ownership. The need, and hence, value for grid services originate outside 

the meter, i.e., outside the customer premises. Grid services, such as peak-load shifting and ancillary 

services help maintain grid reliability and resiliency, as well as aid in renewables integration by providing 

flexibility to the system. Solutions that help in delivery of grid services may borrow from similar 

concepts developed for integration of energy storage and other demand-side resources into the power 

system. These concepts must also be cognizant of – and preferably providing solutions for – known 

problems, such as, measurement and verification, net-metering, voltage instability resulting from two-way 

power flows, etc. Examples of transactive mechanisms that may be employed for providing different grid 

services must also provide commensurate incentives to the providers of these services. 

We expect that two broad categories of grid services will dominate the design and operation of a 

buildings-centered transactional framework: management of capacity constraints, and the provision of 

ancillary services. Example use cases described here are: 

• Interruptible Service or Direct Load Control 

• Transactive Retail Energy Market 

• Trading Allocated Capacity Rights 

• Ancillary Services via Aggregator 

• Transactive Acquisition of Ancillary Services 

• Distribution-Level Ancillary Services 

• Rate Dependent Priority for Cold Load Pickup 

Each of these use cases is described further in the sections below. 

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6.1 Interruptible Service or Direct Load Control 

Type of Transaction: Building to Grid 

Brief Description 

Customer signs up with retail utility/load serving entity or a demand response aggregator for (1) 

interruptible service or (2) direct load control program, in exchange for a reduced rate or a credit on their 

electric bill. 

Narrative 

What is being transacted? 

In exchange for a discount on their effective monthly utility bill, 

1)	 Customer trades right of retail utility/load serving entity to cut off their electric service in an
 

emergency
 

2)	 Customer trades right of utility to a) shut off or cycle their water heater or air conditioner (AC) or 

b) move their AC thermostat up “X” degrees 

In both cases, the utility is limited to exercise the right a maximum number of days per year (typically 5 

or 10) and hours per day (typically 5 or 6). 

Why is it being transacted? 

Customers desire to decrease monthly utility bill, and the utility desires to acquire: 

•	 Emergency load reduction capability (Option 1) 

•	 Demand response resource for peak load/peak price management on a limited number of days per
 

year (Option 2).
 

How is it being transacted? 

•	 Customer signs up for program (1) or (2). 

•	 Service is provided by customers upon request from utility. 

•	 Advance notice via phone call or pager is required for interruptible events; some advance notice may 

be required contractually for direct load control events. 

•	 Incentives appear as credits or rate reductions in customer’s monthly electric bills. 

•	 This transaction is considered to be an over-the-counter transaction. Today, such exchanges are only 

marginally automated or conducted electronically. Doing so in a more “e-commerce” style would 

make them much more “transactive” in the context of this reference document. 

What is the time scale of the transaction? 

•	 Irregular, long-term (e.g., annual or until-further-notice) for program sign-up. 

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•	 Service provided by customers upon irregular requests and lasts for 1 hour or more, up to contractual 

limits. 

•	 Advance notice of service required is short-term (e.g., 10-minutes). 

•	 Customer incentives are received monthly. 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Consumer (ratepayer), often but not always building owner, perhaps representing lease/rental
 

tenants (occupants) collectively.
 

B.	 Utility or retail load-serving entity, or a third-party aggregator operating in a wholesale electricity 

energy and/or capacity market. 

Who is the market maker? 

•	 (B). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 If an event is called by an aggregator, the distribution utility may need to be informed. For example, 

the aggregator may either be held responsible for providing a certain level of load reduction by the 

utility or may be receiving additional benefits from the utility for providing the load reduction 

services. 

Are there other transactions associated with this? 

•	 In option (2), if there are wholesale electricity markets that allow demand response participation, (B) 

schedules and aggregates demand response from a collection of customers and either i) bids it as a 

block of demand reduction into the day-ahead or real-time market, or ii) reduces their bid for 

electricity to serve their load by that amount. 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

How is the transacted commodity measured and verified? 

•	 Interval metering for commercial/industrial customers is typical for (1). 

•	 Not required for (2). 

Activities/Services 

What equipment and technology is required? 

•	 None for (1). 

•	 Load control switch and one-way, low-bandwidth communications system for (2). 

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•	 (Desirable) Demand response resource forecasting as a function of time-of-day, day-of-week and 

weather for (2).
 

What is the benefit for the building? 

•	 Discount on electric bill for providing the service. 

•	 Reduced rates result (for all customers) from lowering utility revenue requirements resulting from
 

deferring capacity investments.
 

What is the benefit for the grid? 

•	 Reduced expenditure for emergency reserves. 

•	 Reduced investment for generation capacity to meet peak loads. 

•	 Reduced fuel costs or purchase costs for electricity produced on peak. 

What is the benefit for renewables? 

•	 Emergency response can sustain grid reliability in the face of increased strain on transmission system 

for long-distance delivery of renewable power to load centers. 

•	 Emergency response can help accommodate fast decreases in availability of renewable power (cloud 

passing over PV array, sudden decreases in wind velocity) 

What is the benefit for energy efficiency? 

•	 N/A. 

Contracts/Regulations 

•	 Rates for interruptible service and incentives for direct load control are subject to approval by a 

public utility commission (investor-owned utilities) or board of directors (public utilities).
 

Current Examples of this Transaction 

•	 Numerous examples of these utility programs exist. 

•	 Direct load control is especially common among rural cooperatives. 

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6.2 Transactive Retail Energy Market 

Type of Transaction: Building to Grid 

Brief Description 

Customer signs up with retail utility or a retail service provider for a transactive control and coordination 

program, involving a real-time price (RTP) determined by customer bids for electricity demand from a 

short-term (~5-minute) retail price-discovery process (e.g., a market). 

Narrative 

What is being transacted? 

•	 Customer changes their contract with utility or retail service provider for electricity purchased at a 

constant, flat rate, for a contract with a real-time price (RTP) that varies over time at short intervals 

(e.g., 5 minutes). 

Why is it being transacted? 

•	 The customer can take advantage of the RTP by shifting some of their load from higher-price periods 

to lower-price periods, thereby lowering their bill. 

•	 The utility or retail service provider correspondingly obtains: 

–	 daily load shifting by customers that corresponds to wholesale electricity costs 

–	 continuously available demand response/net load reduction resource for use in an emergency 

–	 more precise control of demand and net load to automatically manage capacity constraints, of 

generation and at various levels of the transmission and distribution systems, on a continuous 

basis. 

How is it being transacted? 

•	 The customer signs up for the transactive control and coordination program 

–	 This can be accomplished via demand response, battery or thermal storage, and/or use of a fuelbased distributed generator. 

•	 At each interval, the customer’s energy management system assembles a bid curve for electricity
 

demand as a function of RTP.
 

•	 The RTP is the result of a price-discovery mechanism (e.g., the clearing price of a local retail doubleauction market for electricity) that reflects wholesale production or market purchase costs for 

electricity, and simultaneously manages transmission and distribution capacity constraints. For 

example, 

–	 When no constraints are present, the base RTP is a retail markup of the wholesale cost of
 

electricity, per a typical rate case.
 

–	 When constraints are present, the RTP rises to balance demand with available supply. 

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–	 Revenues collected when the RTP is above the base RTP (during times of when supply is 

constrained) can be built into the rate case.
 

–	 Alternatively, it can be returned as a credit on the customer’s monthly bill along with an 

additional incentive for response during such periods, constructed from the customer’s bids. 

•	 Consumers are notified by the retail service provider or aggregator of RTP at each interval. 

•	 Demand bid curves at each interval can be used to construct incentives and rebates. 

•	 The transactions can be made using a bilateral or double auction transaction approach. 

What is the timescale of the transaction? 

•	 Irregular, long-term (~annual or until-further-notice) for program sign-up. 

•	 Customer bid curves, price-discovery, and response of loads and distributed assets to RTP occurs at 

hourly or sub-hourly intervals (e.g., 5 minutes is preferable for precision control). 

•	 Customer incentives from shifting load to lower-price periods are reflected in monthly electric bills. 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Consumer (ratepayer), often but not always building owner, perhaps representing lease/rental
 

tenants (occupants) collectively.
 

B.	 Utility or retail service provider. 

Who is the market maker? 

•	 (B). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 If a retail service provider other than the distribution utility is involved, distribution benefits can only 

be taken into account if the transactions are fully consistent with distribution constraints. Therefore 

coordination with the distribution utility would be required. 

•	 The same is true for the transmission utility or operator. 

Are there other transactions associated with this? 

•	 A hierarchical chain of wholesale markets can be utilized to simultaneously manage constraints at any 

point above the retail price-discovery node. 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

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How is the transacted commodity measured and verified? 

•	 Metered time-series load data is integrated with price time-series data by (B) to compute customer 

bill. 

•	 Any additional incentives for response can be constructed from the customer’s bid history for the
 

month.
 

Activities/Services 

What equipment and technology is required? 

•	 Interval metering is required (AMI/AMR) to provide load data time-series. 

•	 A wide-area communication network with bandwidth sufficient for assembling demand bids and 

broadcasting the RTP on a 5-minute interval is required.
 

•	 Automated price responsive controls for thermostats, water heaters, HVAC equipment, lighting, etc. 

that implement the customer’s desired response are required. 

•	 A home/building energy management system and local area communications network capable of 

assembling the demand bid curve, implementing control, and/or broadcasting the RTP to the 

appliances and equipment is required (e.g., a smart thermostat, an AMI meter, a personal computer). 

•	 A user interface for the customer to set the price responsiveness of their appliances and equipment is 

required (e.g., personal computer, mobile phone app, home energy display). 

•	 (Desirable) A means of forecasting RTPs 24-hours ahead allows the consumer to optimize their
 

response over time.
 

•	 (Desirable) Applications for optimizing a building’s response given a 24-hour forecast of RTPs
 

hosted by a home/building energy manager.
 

What is the benefit for the building? 

•	 Lower electric bills result, to the extent load is shifted from higher-price periods to lower-price
 

periods.
 

•	 Reduced rates result (for all customers) by lowering utility revenue requirements resulting from
 

benefits provided to the grid.
 

What is the benefit for the grid? 

•	 Reduced investment for generation capacity to meet peak loads. 

•	 Reduced investment for transmission capacity to meet peak loads. 

•	 Reduced investment for distribution capacity to meet peak loads. 

•	 Reduced fuel costs or wholesale purchase costs for electricity. 

•	 Reduced congestion costs resulting from transmission constraints. 

•	 Enhanced ability to balance the intermittency of renewables at the sub-hourly level. 

•	 Increased ability to manage an emergency. 

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What is the benefit for renewables? 

•	 Balancing the intermittency of renewables at the sub-hourly level reduces integration costs. 

•	 Emergency response can sustain grid reliability in the face of increased strain on transmission system 

for long-distance delivery of renewable power to load centers. 

•	 PV solar output is more valuable to the consumer under dynamic rates because peak output usually 

corresponds to higher-price periods. 

What is the benefit for energy efficiency? 

•	 Home/building networks can be leveraged for energy efficiency applications, better control,
 

diagnostics, and advice.
 

Contracts/Regulations 

•	 Dynamic rates are subject to public utility commission (investor-owned utilities) or board of
 

directors’ approval (public utilities).
 

Current Examples of this Transaction 

•	 Olympic Peninsula Smart Grid Demonstration (2006-7) 

•	 AEP’s gridSmartsm Demonstration (ongoing) 

•	 Pacific Northwest Smart Grid Demonstration (ongoing) 

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6.3 Trading Allocated Capacity Rights 

Type of Transaction: Building to Building 

Brief Description 

Existing customer rate plans explicitly include (1) payment for the right to utilize a specified amount of 

system capacity (kW), or (2) customers are allocated their share of the system capacity by their service 

provider. An allocation may be based on a utility’s standard “rules-of-thumb” regarding diversified peak 

loads for a customer class. Customers are encouraged to trade their short-term capacity rights with each 

other in near real time, so the capacity right need only reflect a customer’s diversified share of peak load, 

rather than their absolute peak load. 

The customer is required to manage their average load over short time intervals (e.g., a 5-min interval) to 

not exceed their current capacity limit. In this fashion, peak demand at any constrained point in the grid 

can be managed. The governing constraint may be in overall generation capacity or at a point of delivery 

in the transmission or distribution systems. In the case of (2) a forward market is also set up to allow 

customers to trade for long-term capacity rights. 

Narrative 

What is being transacted? 

•	 Customers exchange capacity rights with each other to cover their average load over short time 

intervals (e.g., 5-min). 

•	 Capacity rights may be obtained by one of two mechanisms: 

1.	 Customers may have purchased them with their rate plan. Customers need sign up only for the 

amount of diversified capacity they require. 

2.	 Customers may be allocated their share of the system capacity by their service provider. Any 

excess capacity may be held by the utility for future customers. A multi-tiered approach may be 

used to reflect capacity limits of generation, transmission, or distribution system levels. 

•	 Capacity rights are assumed to have been purchased from or allocated by a utility, a retail service 

provider, an aggregator or third-party distributed asset owner.
 

Why is it being transacted? 

•	 Managing current grid capacity constraints and limiting future investments in capacity. 

•	 Customers can benefit by being able to better manage their peak loads, or installing more efficient air 

conditioning equipment (for example), and thereby being able to sign up for a cheaper plan with less 

capacity or sell some of their long-term allocated capacity rights. 

How is it being transacted? 

•	 Customer acquires capacity rights through (1) or (2). 

•	 Under (2), if a forward market is set up, the consumers can submit bids periodically to buy and sell 

allocated capacity rights. 

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•	 The transactions can be made using a double auction or a brokered transaction approach. 

•	 The market operator notifies customers of the clearing price and delivers short- or long-term 

certificates for capacity rights purchased.
 

What is the time scale of the transaction? 

The transactions should be made frequently as load forecasts are continuously updated to provide more 

accurate information about customer needs, therefore the time scales for transactions are: 

•	 Long-term rights: months/years. 

•	 Short-term rights: 5-min real time and, optionally, 5-min rights a day ahead. 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Consumer (ratepayer), often but not always the building owner, perhaps representing lease/rental 

tenants (occupants) collectively, buys and sells capacity rights. 

B.	 Utility or retail load-serving entity, or a third-party aggregator, or an ISO/RTO operating a 

wholesale market, issues allocated capacity rights or “leases” them as a component of customer 

rates. 

C.	 (Optionally)A third-party energy provider or a microgrid operator may offer or allocate issue such 

rights. 

Who is the market maker? 

•	 May be the allocating or issuing entity, or an independent market operator. 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 If an independent market operator is involved, notification of trades to the allocating or issuing entity 

may be required. 

Are there other transactions associated with this? 

•	 N/A. 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B) and/or (C). 

How is the transacted commodity measured and verified? 

•	 Metered time-series load data from advanced metering infrastructure (AMI) is required to verify that 

consumption remained at or less than the capacity rights held by each customer at that time. 

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Activities/Services 

What equipment and technology is required? 

•	 Interval metering is required (AMI) to provide load and generation time-series data to determine if the 

compliance with the capacity rights are met. 

•	 Internet service to communicate the quantities, price, and time periods for exchange of capacity
 

rights.
 

What is the benefit for the building? 

•	 Ability to lower monthly bills by buying additional capacity needed and selling excess capacity not 

needed in a competitive market. 

What is the benefit for the grid? 

•	 Ability to manage capacity in real time to reduce need for investment in additional infrastructure for 

increasing overall generation, transmission and distribution capacity 

What is the benefit for renewables? 

•	 N/A 

What is the benefit for energy efficiency? 

•	 To extent more efficient equipment also has lower peak draw, encourages installing more efficient 

air conditioning equipment (from above). 

Contracts/Regulations 

•	 Contracts must include the capacity limit in MW, the time period for which the contract is valid and 

penalties for overages. 

Current Examples of this Transaction 

•	 N/A 

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6.4 Ancillary Services via Aggregator 

Type of Transaction: Building to Grid 

Brief Description 

Customer signs up with a demand response aggregator or utility to provide ancillary services in the form 

of (1) regulation, or (2) spinning reserve. Today, these are provided by central generation capacity that is 

not otherwise engaged in producing electricity. These services can also be partially provided by 

customers by allowing them to participate in one of three load control programs: interruptible service, 

direct load control, or dynamic rate, with additional incentives and rebates. The utility reserves capacity 

based on the willingness of customers to participate, loads are dispatched by the utility when necessary 

based on a 4-second resolution regulation signal. 

Narrative 

What is being transacted? 

•	 Customer contracts with an aggregator to allow their load or distributed assets (battery or thermal 

storage, dispatchable distributed generation) to be dispatched by the aggregator to provide ancillary 

services to the grid. 

•	 Currently, this is primarily practiced by demand response aggregators where there are wholesale 

markets that allow demand participation in providing these services. However, a utility or retail
 

service provider can also play this role.
 

•	 Ancillary services can be provided in one of two forms (although others may be defined in the
 

future):
 

1)	 Regulation – alternately increasing or decreasing net load in response to a signal from the grid, 

for short periods, by an amount up to the contractual limit, with essentially no change in total 

consumption in the long run. 

2)	 Spinning reserve – reducing net load upon command from the transmission system operator by 

the contracted amount for periods typically a few minutes duration, but ranging upward as high as 

30 minutes on occasion. The contractual limit on the duration can be as long as 2 hours. 

Why is it being transacted? 

•	 The market prices for ancillary services can be reduced by reducing the need for overall generation 

capacity and increased competition to provide the services by allowing customer’s load to participate 

in the markets. 

•	 Customers receive incentives in the form of payments for allowing their load to be remotely
 

controlled by an aggregator to provide ancillary services to the grid.
 

How is it being transacted? 

•	 Customer signs up with a demand response aggregator to allow the aggregator to dispatch their load 

within capacity limits, which will to be specified by the customer periodically. 

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•	 Aggregators typically engage their customers in providing traditional demand response or net load 

reduction (see use cases 6.1 Interruptible Service or Direct Load Control and 5.1 Dynamic Rate, with 

additional rebates and incentives. 

•	 The utility reserves the capacity needed from the aggregator. 

•	 Loads are dispatched by the utility when necessary based on a 4-second resolution regulation signal. 

•	 The transaction is classified as an over-the-counter (OTC) transaction. 

What is the time scale of the transaction? 

•	 Irregular, long-term (~annual or until-further-notice) for program sign-up. 

•	 Reserving the capacity for ancillary services generally occurs at same the time scale as the wholesale 

energy market interval (today 1 hour, moving to 15-min in many regions). 

•	 Dispatch of regulation occurs at 4-second intervals. Regulation signals tend to change from positive 

to negative over periods of a few minutes. 

•	 Dispatch of spinning reserve may occur any time, with full response to be delivered within 10
 

minutes.
 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Consumer (ratepayer), often but not always building owner, perhaps representing lease/rental
 

tenants (occupants) collectively
 

B.	 Demand response aggregator, or less commonly a utility or retail service provider. 

Who is the market maker? 

•	 (B). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 N/A. 

Are there other transactions associated with this? 

•	 (B) aggregators offer to provide ancillary services from a collection of retail customers and bid it as a 

block into an ancillary services market. 

•	 Aggregators also often engage their retail customers by providing energy efficiency retrofits and
 

services via shared savings or fee-for-service contracts.
 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

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•	 Regulation signal sent to customer every 4-seconds indicating fraction of the customer’s capacity for 

net load increase or decrease that is to be dispatched. 

•	 Notification of spinning reserve event by (B) to (A), and subsequently its termination. 

How is the transacted commodity measured and verified? 

•	 Metered 4-second interval load data is generally required. 

•	 Establishing the baseline consumption against which the measured load is subtracted to estimate the 

response can be problematic. 

•	 Willingness has been expressed by some market operators to allow metering a sub-sample of 

customers providing ancillary services with the same technology and end use (e.g., residential water 

heaters). 

Activities/Services 

What equipment and technology is required? 

•	 Very short-term interval metering (~4-second) is required (shorter than typical AMI capabilities) to 

provide load data time-series. 

•	 Controls that automate the response are required due to the short allowable time lag. 

•	 A high bandwidth/low latency network is required (e.g., broadband is typically used). 

•	 Aggregator must have technology to forecast the resource available as a function of time-of-day, dayof-week and weather. 

What is the benefit for the building? 

•	 Payments from the aggregator – a new source of revenue can be realized from already installed
 

building assets.
 

•	 Reduced rates result (for all customers) by lowering utility revenue requirements resulting from
 

benefits provided to the grid.
 

What is the benefit for the grid? 

•	 Reduced need for overall generation capacity resulting from lower amount of capacity held out of
 

markets to meet regulation and spinning reserve requirements.
 

•	 Lower market prices for ancillary services resulting from the increased competition to provide them. 

•	 Reduced wear and tear on generators providing regulation. 

•	 Reduced fuel costs for generators supplying regulation as a result of higher operating efficiency (heat 

rate). 

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What is the benefit for renewables? 

•	 Penetration of renewables above ~20% is expected to result in increasing need for ancillary services. 

•	 Reducing the need for power plants to provide these services lowers the cost of integrating
 

renewables with the grid.
 

What is the benefit for energy efficiency? 

•	 N/A. 

Contracts/Regulations 

•	 Ancillary service markets are relatively new, are not universally present even where electricity
 

markets exist, and are not uniform in design or rules for resources to participate.
 

•	 Current communication, measurement and verification requirements preclude use of loads smaller 

than large industrial loads in many cases. 

Current Examples of this Transaction 

•	 A number of markets for spinning reserve exist and allow participation by customer assets when 

aggregated to a significant size (e.g., PJM, ISO-New England, New York-ISO, Midwest-ISO).
 

•	 Fewer markets for regulation exist, and fewer of them allow participation by customer assets (e.g., 

PJM, New York-ISO, Midwest-ISO). 

•	 Enbala, Inc. is a leader in making a business of aggregating loads to provide ancillary services. 

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6.5 Transactive Acquisition of Ancillary Services 

Type of Transaction: Building to Grid 

Brief Description 

Customer signs up with a utility, retail service provider, or demand response aggregator to provide 

ancillary services via transactive control in the form of (1) regulation, or (2) spinning reserve. Today, 

these are almost exclusively provided by central generation capacity that is not otherwise engaged in 

producing electricity. 

Narrative 

What is being transacted? 

•	 Customer contracts with utility or demand response aggregator to provide ancillary services for a 

block of time, utilizing transactive control for their demand response or net load reduction 

capabilities.
 

•	 Today, ancillary services can be provided by a building in one of two forms (although others may be 

defined in the future): 

1)	 Regulation – alternately increasing or decreasing net load in response to a signal from the grid, 

for short periods, by an amount up to the contractual limit, with essentially no change in total 

consumption in the long run. 

2)	 Spinning reserve – reducing net load upon command from the transmission system operator by 

the contracted amount for periods typically a few minutes duration, but ranging upward as high as 

30 minutes on occasion. The contractual limit on the duration can be as long as 2 hours. 

Why is it being transacted? 

•	 The customer receives a payment for the contribution of their load or distributed assets in providing 

ancillary services to the grid. 

•	 The utility or aggregator obtains a resource, in the form of a change in net load that can be aggregated 

with that of other customers and bid into ancillary service markets, in competition with generators 

that almost exclusively provide such services today. 

•	 Alternatively, where such markets do not exist (e.g., in vertically-integrated utility systems), the 

resource obtained can be used to displace costs for providing such services.
 

How is it being transacted? 

•	 Customer signs up with a demand response aggregator to provide ancillary services for a block of
 

time via transactive control for their demand response
 

–	 If practiced in conjunction with a Transactive Retail Energy Market (see use case 6.2 Transactive 

Retail Energy Market), the distribution utility may be the most convenient market operator so that 

distribution constraints can be fully taken into consideration. However, a retail service provider 

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or demand response aggregator can also play this role. In either case, we will use the term 

“aggregator” in the discussion below. 

•	 Aggregators typically engage their customers in providing traditional demand response or net load 

reduction (use cases 6.1 Interruptible Service or Direct Load Control and 5.1 Dynamic Rate), with 

additional rebates and incentives. 

•	 At each interval, the customer’s energy management system assembles a bid curve to allocate 

capacity to provide ancillary services as a function of RTP.
 

•	 A price-discovery mechanism clears a price based on aggregated bids from a population of customers 

for ancillary services. 

•	 Loads are dispatched by the utility when necessary based on a 4-second resolution regulation signal, 

within the capacity limits specified by the customer. 

•	 The transactions can be made using a double auction approach. 

What is the time scale of the transaction? 

•	 5 minutes for offer from customer to participate and notice from aggregator of acceptance. 

•	 Dispatch of regulation occurs at 4-second intervals. Regulation signals tend to change from positive 

to negative over periods of a few minutes. 

•	 Dispatch of spinning reserve may occur any time, with full response to be delivered within 10
 

minutes.
 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Consumer (ratepayer), often but not always the building owner, perhaps representing lease/rental 

tenants (occupants) collectively 

B.	 Utility, or (with proper coordination to the utility), a demand response aggregator or retail service 

provider. 

Who is the market maker? 

•	 (B). 

Who else needs to be notified or acknowledge a transaction has been made? 

• Distribution utility, if they are not serving as (B), needs to verify the feasibility of the transaction. 

Are there other transactions associated with this? 

•	 (B) aggregates offers from multiple consumers (A) to provide ancillary services and bids these as a 

resource into an ancillary services market (where such markets exist). 

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Information Exchanged 

How is the transaction verified? 

•	 Electronic exchange of consumer offer from (A) and aggregator’s acceptance of offer from (B) are 

exchanged. 

•	 Regulation signal sent to customer every 4-seconds indicating fraction of the customer’s capacity for 

net load increase or decrease that is to be dispatched by the consumer’s control system. 

•	 Notification of spinning reserve event by (B) to (A) to be dispatched by the (A)’s control system, and 

subsequently its termination. 

How is the transacted commodity measured and verified? 

•	 Metered 4-second interval load data is generally required. 

•	 For regulation services, a payment is made for the degree to which their load matches the control
 

signal.
 

Activities/Services 

What equipment and technology is required? 

•	 High-bandwidth/low-latency network (e.g., broadband or radio broadcast) to get 4-second control
 

signal to the consumer.
 

•	 Very short-term interval metering (~4-second) (shorter than typical AMI capabilities) to provide load 

data time-series. 

•	 Advanced AMI processing capability to compute the incentive based on the integral of the control
 

signal and the managed net load.
 

•	 A home/building energy management system and local area communications network capable of
 

assembling the demand bid curve, implementing control, and/or broadcasting the RTP to the
 

appliances and equipment (e.g., a smart thermostat, an AMI meter, a personal computer).
 

•	 Controls that automate the response of the consumer equipment resulting from the short allowable
 

time lag.
 

•	 (Desired) Aggregator may need technology to forecast the resource available as a function of time-ofday, day-of-week and weather. 

What is the benefit for the building? 

•	 Payments from the aggregator. 

•	 Reduced rates result (for all customers) by lowering utility revenue requirements as a result of
 

benefits provided to the grid.
 

What is the benefit for the grid? 

•	 Reduced need for overall generation capacity due to lower amount of capacity held out of markets to 

meet regulation and spinning reserve requirements. 

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•	 Lower market prices for ancillary services resulting from the increased competition to provide them. 

•	 Reduced wear and tear on generators providing regulation. 

•	 Reduced fuel costs for generators supplying regulation as a result of higher operating efficiency (heat 

rate). 

What is the benefit for renewables? 

•	 Penetration of renewables above ~20% is expected to result in increasing need for ancillary services. 

•	 Reducing the need for power plants to provide these services lowers the cost of integrating
 

renewables with the grid.
 

What is the benefit for energy efficiency? 

•	 N/A. 

Contracts/Regulations 

•	 Ancillary service markets are relatively new, are not universally present even where electricity
 

markets exist, and are not uniform in design or rules for resources to participate.
 

Current Examples of this Transaction 

•	 None. The closest example of this use case is the response to the magnitude of wind generation in the 

Pacific Northwest Smart Grid Demonstration. This is an example of a potential new type of ancillary 

service for balancing fluctuating output from renewables that is commonly called ramping. 

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6.6 Rate Dependent Priority for Cold Load Pickup 

Type of Transaction: Building to Grid 

Brief Description 

The distribution utility leverages demand response programs at its disposal to mitigate very large loads 

that result after an outage because of pent-up demand for electricity by thermostatically-controlled loads 

(cold load pickup). This use case is an extension of the previously described use cases 5.1 Dynamic Rate, 

6.1 Interruptible Service or Direct Load Control, and 6.2 Transactive Retail Energy Market. Only key 

differences will be noted in this section. 

Narrative 

What is being transacted? 

•	 Interruptible services, critical peak price, and direct load control events are called to activate 

maximum demand response. Real-time prices are similarly raised to very high levels to trigger
 

demand response.
 

•	 RTP customers receive a rebate for the difference in their energy bill resulting from such events. 

Why is it being transacted? 

•	 Distribution utility utilizes demand response mechanisms at its disposal to reduce load temporarily 

immediately following power restoration to mitigate cold load pickup, making it easier to restore 

power to larger groups of customers. This speeds restoration time. 

How is it being transacted? 

• Any excess charges resulting from the artificially high rates are rebated to customers on RTP plans. 

What is the time scale of the transaction? 

•	 Customer rebates are received on their monthly bill. 

Activities/Services 

What is the benefit for the building? 

•	 Faster power restoration after an outage. 

What is the benefit for the grid? 

•	 Utilities can avoid the expense of crews energizing small sections of feeders individually after an
 

outage to avoid overloads and protection re-trips caused by motor inrush currents and loss of load
 

diversity.
 

What is the benefit for renewables? 

•	 N/A. 

What is the benefit for energy efficiency? 

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• N/A 

Contracts/Regulations 

• Scheme may require approval by public utility commission or board of directors’ approval. 

Current Examples of this Transaction 

• N/A. 

Questions for Chapter 6: 

Can you describe additional uses cases for this grid service category? 

Please see the use-case template in section 8.0 to provide your input. 

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7.0 Societal Services
 

Chapter 2 describes societal services as energy and energy-related services that have an agreed upon 

value acknowledged by society, and provided to all involved or affected parties, and whereby settlements 

may be made by the larger governing entity. The responsibility of monetizing the societal value, in most 

cases, would be performed by the governing entity, as well. Examples of societal services may include 

participation by utilities, and third parties into emissions cap-trade markets etc., using energy efficiency 

certificates (white tags), acquired from customers (buildings) using transactive mechanisms. The value 

(monetary or other) gained from providing societal services would be shared between the involved 

parties. Examples of use cases with details on the transactive mechanisms that could be employed for 

providing societal services that are described here are: 

• Emergency Power Rationing 

• Efficiency Incentive Payment 

• Air Shed Management 

Each of these is described in more detail, below. 

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7.1 Emergency Power Rationing 

Type of Transaction: Building to Grid 

Brief Description 

Customer signs up with retail service provider to receive power rationing services under global 

emergency conditions (i.e., blackouts). The retail service provider owns distributed energy resources 

(DERs) that can be coordinated to provide constant service to consumers with critical loads, within limits 

and capabilities, to minimize impacts to the people or businesses involved. 

Narrative 

What is being transacted? 

•	 Customer signs up with load serving entity (LSE) to receive highest quality of electricity service
 

possible that will optimize social welfare of all consumers involved during an emergency situation
 

(i.e., blackout). The customer agrees to pay a monthly premium for the service.
 

Why is it being transacted? 

•	 Power outages cause over $100 billion in economic losses, annually. Power rationing based on social 

welfare can be used to minimize impacts to well-being of the people involved (impact to health, 

businesses, economy, etc.). For example, higher priority should be given to supply critical loads in a 

hospital than to a residential building without critical need occupants resides because the former 

could result in loss of life without electricity service. 

How is it being transacted? 

•	 Customer fills out a load assessment questionnaire. 

•	 LSE offers the customer quotes on different premium plans that specify the capacity rights the 

customer is eligible for during an emergency, based on the responses given in the questionnaire. The 

questionnaire ensures that the capacity rights granted are limited to the specific needs of the 

customers and that customers who can afford premium service are not the only consumers that will 

receive power during emergency situations. 

•	 Customer signs up for one of the premium plans that specifies the capacity limits during emergency 

situations. 

•	 During an emergency situation, the LSE will immediately notify customers via text, email, pager 

and/or two-way communications with EMS. The customer will have several seconds to minutes to 

reduce loads within the provided capacity limits. The LSE will provide the highest quality of 

electrical services within their capability and the customer set limits. 

•	 If the customer exceeds the contracted capacity limits at any time, electricity supply to the entire
 

building can be discontinued until the emergency situation is resolved.
 

•	 Reports are provided by the LSE, identifying the emergency situation and the actions executed within 

the terms and conditions of the policy contract. 

What is the time scale of the transaction? 

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•	 Irregular, long-term (~annual or until-further-notice) for program sign-up depending on changes in 

customer critical loads. For example, if critical loads are replaced by more efficient loads or are no 

longer used, customers may want to consider a plan with a lower premium. 

•	 Emergency situations are typically unpredictable and occur irregularly. 

•	 Customers respond to notification of an emergency situation within seconds to minutes. 

•	 Premiums are paid monthly by customers. 

•	 Irregular reports, explaining service provided within contract terms and conditions during
 

emergencies.
 

Actor/Stakeholder Roles 

Who is transacting? 

A.	 Consumer (ratepayer), often but not always building owner, perhaps representing lease/rental 

tenants (occupants) collectively. 

B.	 Utility, retail service provider, or a third-party aggregator. 

Who is the market maker? 

•	 (B). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 N/A 

Are there other transactions associated with this? 

•	 N/A 

Information Exchanged 

How is the transaction verified? 

•	 Contractual notice exchanged (paperwork or electronic) between (A) and (B). 

How is the transacted commodity measured and verified? 

•	 Reports are provided after each emergency to verify that actions were taken within the customer 

agreement. 

•	 If terms of the agreement are not met by the LSE, penalties will be due to the customer. 

Activities/Services 

What equipment and technology is required? 

•	 Interval metering (AMI/AMR) is required to provide load data time-series 

•	 Optimization algorithms and reconfiguration schemes used to coordinate emergency distributed
 

energy resources to maximize the time that electricity services can be provided to critical loads.
 

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•	 A home/building energy management system and local area communications network capable of 

automatically switching off non-critical loads within capacity limits when notified of an emergency 

situation. 

What is the benefit for the building? 

•	 Reliable service delivered to critical loads that will have a major impact on either health or business, 

if the loads are lost during emergency situations. 

What is the benefit for the grid? 

•	 Reduced economic losses from power outages of critical loads. 

•	 Revenue streams for owning distributed energy resources. 

What is the benefit for renewables? 

•	 N/A 

What is the benefit for energy efficiency? 

•	 N/A 

Contracts/Regulations 

•	 Contracts should include the following 

– Capacity rights in an emergency situation 

– What constitutes an emergency situation 

– LSE responsibilities 

– Guarantees and disclaimers during an emergency situation 

– Customer responsibilities 

– Consequences for LSE for not meeting terms of the agreement 

– Consequences for customer for not meeting the terms of the agreement 

•	 Further regulations may be necessary to ensure that some elderly and poor citizens can also receive 

electricity during emergency situations if there is an absolute need for it. 

Current Examples of this Transaction 

•	 N/A 

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7.2 Efficiency Incentive Payment 

Type of Transaction: Building to Grid 

Brief Description 

Customer signs up with a utility that provides an incentive payment for the efficiency achieved, and uses 

the resulting savings to meet regulatory obligations or in a secondary market for generation for carbon 

market and for meeting renewable portfolio standards (RPS). 

Narrative 

What is being transacted? 

1)	 In traditional programs, a utility (or retail service provider) subsidizes the cost of increasing the 

energy efficiency of a building or facility. 

2)	 In a new alternative, the utility creates a market-like incentive program paying a bounty for
 

customer-financed and implemented energy efficiency measures that can be translated into
 

capacity.
 

Why is it being transacted? 

•	 Often the utility or retail service provider is incentivizing customer energy efficiency results because 

it must meet regulatory societal goals for deploying efficiency or as part of an RPS, set by a state, a 

public utility commission, or its board of directors. 

•	 The utility or retail service provider can sell the resulting energy efficiency into a) a RPS market, or 

b) a carbon market where such markets exist and allow participation of energy efficiency. 

•	 Customer obtains a lower energy bill and an incentive payment for the efficiency achieved. 

How is it being transacted? 

•	 Customer signs up for program. 

•	 Customer installs energy efficiency measures at their expense. 

•	 Customer applies to utility for bounty (incentive payment) for savings achieved. 

•	 Utility verifies savings and sends payment to customer. 

What is the time scale of the transaction? 

•	 Sign-up occurs once or irregularly. 

•	 Payment may occur once after verification, or annually as persistence is re-verified over some period 

of years. 

(The latter is particularly useful for behavior-driven efficiency measures such as diagnostics and
 

commissioning, equipment and system tune-ups, thermostat setback programs, etc.)
 

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Actor/Stakeholder Roles 

Who is transacting? 

A. Consumer (building owner). 

B. Utility/load-serving entity. 

Who is the market maker? 

•	 (B). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 N/A. 

Are there other transactions associated with this? 

• See secondary transaction by utility to a market, noted above under Why is it being transacted? 

Information Exchanged 

How is the transaction verified? 

•	 Application from (A) to (B) for incentive payment. 

•	 Payment of incentive (B) to (A) subsequent to verification of savings. 

How is the transacted commodity measured and verified? 

•	 Utility verifies savings, either by stipulation via an engineering calculation, spot measurements, or 

analysis of metered data, or some combination thereof. 

Activities/Services 

What equipment and technology is required? 

•	 (Desirable) AMI meter. 

•	 (Desirable) Continuous or spot end-use metering can improve targeting of efficiency measures and 

support savings verification. 

•	 (Desirable) Data from commercial building management and control systems or smart residential 

thermostats and appliances can likewise support improved targeting and measurement. 

What is the benefit for the building? 

•	 Reduced utility bills and direct payment from utility. 

What is the benefit for the grid? 

•	 Increase efficiency from end uses that contribute to peak loads and reduce the need for capital
 

investment for generation, transmission, and distribution capacity.
 

•	 When utilities are subject to a RPS requirement, they can earn credit for efficiency where allowed. 

•	 When utilities are subject to a carbon market or tax, they can save money by reducing their need to 

purchase credits or pay taxes. 

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What is the benefit for renewables? 

•	 No direct benefit. 

•	 Program could be expanded to include renewable generation. 

What is the benefit for energy efficiency? 

•	 Opportunity for incentive payment spurs penetration of efficiency measures. 

Contracts/Regulations 

•	 Where a regulated utility is involved, public utility commission approval must be sought to offer such 

services. 

Current Examples of this Transaction 

• Seattle City Light has just announced this type of program to meet their energy efficiency goals. 

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7.3 Air Shed Management 

Type of Transaction: Building to Other 

Brief Description 

An air shed management authority created to improve air quality in a “smog basin” receives the authority 

to manage pollution levels in its district on declared “smog alert” days via an air quality surcharge on 

electricity and natural gas rates. These variable real-time surcharges may be zero or near zero under 

normal circumstances, but rise during such events, to reflect discharges from 1) generation used to power 

electric end uses and 2) gas and oil end uses, to encourage the following: 

•	 load curtailments, particularly for customer segments and end uses that have high contributions of
 

local pollutants
 

•	 shifting electricity generation to cleaner and extra-regional sources, including curtailment of
 

distributed generation and combined cooling-heating-power systems in the air shed district.
 

The surcharges are applied to existing utility rates, whether flat or time-varying dynamic rates, via the 

utility billing infrastructure. 

Narrative 

What is being transacted? 

•	 A real-time surcharge to all customers’ existing utility rates in the air shed district is applied to all 

customers’ consumption.
 

•	 Customers can respond to the variation in total price by curtailing their consumption during surcharge 

periods. 

Why is it being transacted? 

•	 The air shed management authority wants to reflect the costs of shifting electricity generation to 

cleaner and extra-regional sources, and thereby encourage curtailment of end-use loads (gas, electric, 

and other fuels), and of fuel-powered distributed generation and combined cooling-heating-power 

systems in the district, in proportion to the benefit that doing so provides to air quality. 

•	 Customers receive a lower energy bill if they respond to the surcharges by curtailing consumption
 

during surcharge periods or shifting their consumption to lower surcharge periods.
 

How is it being transacted? 

•	 The utility (or retail service provider) applies the surcharge from the air shed authority to all 

customers existing utility rates in the air shed district based on the fuel type (and perhaps the rated
 

conversion efficiency of the generation or end-use equipment), and delivers the prices to the 

customers.
 

•	 As an alternative, the air shed management authority itself could deliver notice of the surcharges to 

the customers. 

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•	 Customers can respond to the variation in price by curtailing their consumption during surcharge
 

periods.
 

What is the time scale of the transaction? 

•	 Surcharges are sent out with hourly granularity, a 48-hour look-ahead, and updated on a regular (e.g., 

daily or hourly basis). 

•	 Savings appear on the customer’s regular (e.g., monthly) utility bill. 

Actor/Stakeholder Roles 

Who is transacting? 

A. Air shed management authority 

B. Utility/load-serving entity. 

C. Consumer (building owner). 

Who is the market maker? 

•	 (A). 

Who else needs to be notified or acknowledge a transaction has been made? 

•	 N/A. 

Are there other transactions associated with this? 

•	 Presumably there is an associated re-dispatch of central generation to reflect their contribution to the 

district’s air pollution as well. This may be conducted using the LMP-style computation of marginal 

costs, with the surcharges incorporated there as well. 

Information Exchanged 

How is the transaction verified? 

•	 Receipt for notification of surcharge prices from customer to utility (or air shed management district 

if it is the sender). 

How is the transacted commodity measured and verified? 

•	 No verification is required. AMI electric and gas meters simply measure consumption. 

Activities/Services 

What equipment and technology is required? 

•	 AMI electric and gas meter. 

•	 (Desirable) Means of defining and communicating conversion efficiencies allows incentive to
 

naturally target “dirtier” loads.
 

•	 (Desirable) End-use metering for non-electric loads can improve accuracy of surcharges. 

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What is the benefit for the building? 

•	 Reduced surcharges on their utility bills. 

What is the benefit for the grid? 

•	 The construction of cleaner, but potentially more expensive power plants receive an additional 

incentive. 

What is the benefit for renewables? 

•	 Surcharges encourage the expansion of distributed and centralized renewable generation. 

What is the benefit for energy efficiency? 

•	 Surcharges spur the penetration of efficiency, especially for fuel-consuming end-use loads and 

distributed generation. 

Contracts/Regulations 

• Where a regulated utility is involved, public utility commission approval may be required. 

Current Examples of this Transaction 

•	 We are not aware of any current examples of this transaction. In some instances, air shed 

management districts do have authority to curtail loads (usually industrial) and order shifting of 

generation outside the district. 

Questions for Chapter 7: 

What are some additional uses cases for this societal service category? 

Please see the use-case template in section 8.0 to provide your input. 

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8.0 Use Case Template
 

Type of Transaction: Please choose Building to Grid; Building to Building; Building to Other; IntraBuilding; Customer to Customer; or describe other. 

Brief Description 

Insert short description 

Narrative 

What is being transacted? 

Insert short description 

Why is it being transacted? 

Insert short description 

How is it being transacted? 

Insert short description 

What is the time scale of the transaction? 

Insert short description 

Actor/Stakeholder Roles 

Who is transacting? 

Insert short description 

Who is the market maker? 

Insert short description 

Who else needs to be notified or acknowledge a transaction has been made? 

Insert short description 

Are there other transactions associated with this? 

Insert short description 

Information Exchanged 

How is the transaction verified? 

Insert short description 

How is the transacted commodity measured and verified? 

Insert short description 

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Activities/Services 

What equipment and technology is required? 

Insert short description 

What is the benefit for the building? 

Insert short description 

What is the benefit for the grid? 

Insert short description 

What is the benefit for renewables? 

Insert short description 

What is the benefit for energy efficiency? 

Insert short description 

Contracts/Regulations 

Insert short description 

Current Examples of this Transaction 

Insert short description 

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9.0 References
 

GridWise Transactive Energy Framework. 2013. p.9 .Pacific Northwest National Laboratory, Richland, 

WA. http://www.gridwiseac.org/pdfs/te_framework_report_pnnl-22946.pdf 

Haack, Jeremy, BA Akyol, S Katipamula, and RG Lutes. 2013. VOLTTRONTM Lite: Integration Platform 

for the Transactional Network, Pacific Northwest National Laboratory, Richland, WA. 

Katipamula, Srinivas, DP Chassin, DD Hatley, RG Pratt, and DJ Hammerstrom. 2006. Transactive 

Controls: Market-Based GridWise Controls for Building Systems, Pacific Northwest National Laboratory, 

Richland, WA. 

Katipamula, Srinivas, RG Lutes, H Ngo, and RM Underhill. 2013. Transactional Network Platform: 

Applications, Pacific Northwest National Laboratory, Richland, WA. 

Kuruganti, Teja, J Nutaro, D Fugate, M Starke, E Vineyard, and P Hughes. 2013. Autonomous Control 

and Communication Applications for Transactional Network, Building Technologies and Research 

Integration Center, Oak Ridge National Laboratory, Oak Ridge, TN. 

MacDonald J., P Cappers, D Callaway, and S Kiliccote. 2012. Demand Response Providing Ancillary 

Services, A Comparison of Opportunities and Challenges in the US Wholesale Markets. LBNL-5958E, 

Ernest Orlando Lawrence Berkeley National Laboratory, Berkeley, CA. 

http://drrc.lbl.gov/sites/drrc.lbl.gov/files/LBNL-5958E.pdf. 

Nadel, Steven. 2011. Buildings Energy Efficiency Policy – A Brief History. Presented at Policy Options 

Workshop on Accelerating Energy Efficiency in Commercial Buildings. 

http://btric.ornl.gov/CCPT_Wkshp%20AgendaComm%20Bldgs_files/EEbldgshistoryforDOEORNLNade 

l.pdf 

National Energy Technology Laboratory. 2011. Demand Dispatch – Intelligent Demand for a More 

Efficient Grid, Morgantown, WV. Available from Smartgrid.gov at: 

http://www.smartgrid.gov/document/demand_dispatch_intelligent_demand_more_efficient_grid 

Piette, Mary Anne, R Brown, P Price, J Page, J Granderson, D Riess, S Czarnecki, G Ghatikar, and S 

Lanzisera. 2013. Automated Measurement and Signaling Systems for the Transactional Network, by 

Building Technology and Urban Systems Department, Environmental Energy Technologies Division, 

Lawrence Berkeley National Laboratory, Berkeley, CA. 

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