### PNNL

- XXXXX

Prepared for the U.S. Department of Energy

u nder 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 redu ctions 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”

r etrofits 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 strat egies 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. Th is “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 provi de 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 reduc ing energy

costs . Ultimately, buildings could even act as disp atchable 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 potentia l 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 -b ased b uilding c ontrols 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

iii DRAFTtechnology 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 technolo gy 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 mone tary 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 tim e 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, u sing 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 effici ency 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, reduc ed 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 in teractions: 1) end-u ser s ervices, 2) e nergy

m arket s ervices , 3) g rid s ervices , and 4) s ocietal s ervices

. 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 documen t 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 . L ist ing real

- world examples, t h is

re ference 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. Ea ch 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 c ontracts

and r egulations and c urrent e xamples of th ese t ransaction s.

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 documen t 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.

v DRAFT

## Terms and Definitions

Advanced Metering Infrastructure (AMI) : typically refers to the full measurement and collection system that includes meters at the customer site, comm unication 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

st ate -of-the- art electronic/digital hardware and software, which combine interval data measurement with continuously available remote communications. These systems enable measurement of detailed, time

based information and frequent collection and transmitta l 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

tra nsmission 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 st art.

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 high er

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

Building Automation System (BAS): A distributed s upervisory 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, B E MS monitor and control services such as heating, v entilation and air

- conditioning (HVAC) within commercial and industrial facilities.

BEMS balance energ y 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 t he 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 ) : DER s are small, modul ar power

- generator s 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 DRAFTturbines, among others, and can support local electricity supply and reliability and local energy autonomy ( e.g.
, a microgrid , ener gy 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 ec o systems 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 R egional Transmission Organizations

, voluntary formation s 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 force s 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 tr ansaction

• 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, dis cussing, an d 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 DRAFTSensors and Controls: Mechanical and/or electric devices sensitive to light, temperature, humidity, etc.

that transmit a s ignal 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 settleme nt (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 c ontrol: A means of executing transactions through automatic control of the operating state of building equipment and other energy systems in resp onse 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 e nergy: A structure that combines information, data and energy infrastructure to enable energy

- based transactions.

• Transaction- based e nergy s ervices : Transaction

- based energy services for energy providers

and customers balanc e all parties’ energy needs against available resources , thereby making at least one individual better off without making any other individu al s worse off

.

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

hardware and communications netw ork 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 DRAFTValue : The monetary worth of goods, services or rights, specifi cally 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 Tool 17

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

xi DRAFT5.0 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 Rate s

........................................................................... 92

5.4 Transactive Energy Market Exchange

............................................................................. 96

5.5 Trading Efficienc y 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

xii DRAFT

## 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. E xample M&V Visualization: Energy Intensity as a Function of Time of Day and Day of the Year

......................................................................................................................... 17

Figure 2.2. Example M&V Visuali zation: 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 Netwo rk

.................................................. 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

xiii DRAFT

## 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 Exch ange 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

xiv DRAFT

## 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 eco system. Its purpose is to define the
concept of the transactional building controls framework , including the transactional network model,

il lustrat e the future transaction

- based energy ecosystem, give examples of potential implementations, and

outline the benefits of transactional ene rgy to stakeholders in the energy ecosystem. While it is not
intended to prescribe specific technology solutions, th e 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 th emselves, 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 commerci al and residential buildings have led to subst antial reductions in energy use per square foot. Driven by building codes, prescriptive measures, energy audits,

advances in efficient lighting, HVAC and e nergy management systems , the residential and commercial building sectors have lowered their energy intensity by over 30% [ Nadel 2011]. E xisting 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 b adly 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 elec tricity 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, e ven as buildings are made more energy efficient through codes, standards and beyond

- code design processes, over $30 billion worth of consumed energy is wasted b y 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 5,0 00 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 se rvice requirements (e.g., comfort) [ Katipamu la 2013].

1 DRAFTThe 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 building s.



## 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 strate gies 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 . Illustratio n 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 comme rcial 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

2 DRAFTsuddenly 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. Fi gure 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 O verview 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

3 DRAFTeffectively 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 engine ering 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 turn s the compressor on or off), thereby satisfying the heating and cooling nee ds 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 cap

and- trade type of arrangement , where one building could reduce energy or increase e fficiency measures more easily
than another, and then trade energy savings or efficiency gains

for some compensation

. Ultimate ly, 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, automatic ally adjust ing 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 redu ce 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

p otential 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 insta llation 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-b ased 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.

4 DRAFTframework 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 in dividual appliances and assets within the building to allow the buil ding 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 expensiv e and building owners are not fully aware of the benefits

, lessening the value proposition that building owners might be looking for. The nascent t ransactive energy value proposition provides this value.

Lastl y, 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 met ers,” 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 r esponse (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 En ergy 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.

5 DRAFTIn 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 als o 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 n ew and better use of existing communication, control and sensing technologies that:

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

external sensors and monitors ;

• can characterize the magnitude of change in de mand 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 li sted above (at the building scale) and still maintain acceptable comfort and productivity to satisfy the building occupants. F or 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 bro ad, conceptual level and providing a context for more detailed technical aspects of the subject matter. Transaction -b ased building c ontro ls are one part of the transacti onal energy
framework . While these controls realize benefits by enabling
automatic, market -based intra-building efficiency Figure 1

. 3 . Merging of Markets and

Control

6 DRAFToptimizations , 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 suppl y, 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 trans actions 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 cen tral concept of the transaction

- based system.

The term “ t ransactive e nergy”, defined by the Grid W ise TM 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 a s 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 ne w 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 transact ions 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 pr ovided 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

7 DRAFT

## 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 t hat 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 increa sed 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

environmen tal 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 pro viders

. 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

8 DRAFTMore specifically, this future state entails an array of changes in the area of buildings. Existing buildings would be retrofit ted 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 mai n purposes. First, o wners 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 inves tments 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 withi n 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 buildi ng 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 advance d 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 maintenanc e 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 main tenance of the RTUs , this effort wi ll 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 uptak e of the resulting RTU equipment, engaging utilities, deployment partners and

manuf acturing partners early in the effort will help post

- effor t 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 provid e financial incentives to promote the product(s) which would offset some

of the installation cost.



## 1.5 Examples of I mplementation

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 GridW ise Olympic Peninsula Test Bed Demonstration to the intra-building coordination and cont rol 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).

Ad ditionally, these demonstrati on 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 tra nsaction- based energy framework and its envisioned benefits to the energy ecosystem are described in Chapters 4, 5, 6 and 7.

9 DRAFT

### 1.5.1 Oly mpic Peninsula Demonstration Project

The purpose of the Olympic Peninsula (OlyPen) Project (2006-2007) was to create and observ e 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 dem and 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 broa d 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 com ponent 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

woul d not react to price incentives; whereas, more savings translated in t hermost ats 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 shif ting, 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 P roject

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 application s 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 th e initial phase, due to their significant energy use and

10 DRAFTthus energy savings opportunity, the focus is on RTUs for small commercial buildings. M ore details on the platform can be found in the PNNL report on VL [ Haack et al. 2013 ].

The TN p latform is design ed 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 a nd 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 remot e 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 d riven, 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

11 DRAFT1. 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 ma y 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 transa ctions 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 measuri ng 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 application s in the TN focus on characterizing the energy savi ngs 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 consump tion 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 as sociated 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 work ing 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, creat ing 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.

12 DRAFTThe 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 advant age of such forecasts to improve peak reductions and reduce overall energy usage. The TN P roject 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-u ser s ervices, en ergy m arket s ervices, grid s ervic es, and

s ocietal s ervices. 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 occ ur. 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 node s 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. Chap ter 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 transaction

based services, technical requirements to fulfill these, as well as benefits to participating stakeholders. These use cases are envisioned to define essential compone nts that would enable transactions in the energy and energy- related domain and give practical examples to the broader community of electricpower and buildings technology organizations, researchers, manufacturers, standards- and codesdeveloping organizations and vendors.

13 DRAFTQuestions 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.

14 DRAFT

## 2.0 Exchangeable Services

2.1 Introduction

A transact ional 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 s ervices ” 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 a ncillary 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 resu lt 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).

Und erlying 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 tra nsaction envisioned for the kind of framework discussed here have a broad range of needs, interests, and constraints. Depending on the participants and the exchangeable s ervices 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 transact ion 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 incen tivizes because they are required for its reliable operation.

15 DRAFT4. 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 categor ies because they represent the type s of transaction s that are just getting underway, primarily in the commercial buildings sector . They can offer trade

- offs between the different electric end

uses 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 exch angeable services and type of interaction

— there exist a near

continuum of options, and there are many similarities between exchangeable service s and interactions. For example, some intra-building interactions consist of building managers act ing as his/he r own aggregator (e.g., coordinating tenants and departments of the same company to meet overall energy and capacity constraints)

, while many bu ilding

- 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 an d 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 efficien t, 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 s ervices 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 th is report lists some examples of use cases that describe possible transaction

- based

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

16 DRAFT

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

The Energy Charting and Metric s (ECAM ) is a tool developed by PNNL for charting energy performance from the b uilding automation s ystem ( 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 ECAM 1 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 e nergy 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 a fter 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 a nd regularly post their idle capacity and their electricity costs associated with

17 DRAFTcomputing (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

. Se e Section 4 .6 of this report for a more detailed explanation of this example, Figure 2.3 illustrates the transactions

.

Figure 2.3. Illustration o f Data Centers Trading Computation Tasks

18 DRAFTExample 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 insta lled 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 senso rs 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 p ackage 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

19 DRAFTThird Party Receives Payment for Energy Services

This use case illustrates how customers, such as commercial buildin g owners, contract with vendors that install, operate, and maintain equipment, such as a building

- cooling

- he ating

- power (BCHP) system, therm al or battery storage system, or a conventional generator. The customer desires to obtain a lower energy bill witho ut 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

b uilding 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 relate d transactions , while Table 2.3 shows the types of participants that may be involved in O&M services for buildings

- related transaction s, by type of

interaction.

Table 2.1. General Characteristics of End

- User Services

Service Description Time S cales

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 anal ysis

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 co ntrol 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 stra tegies 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 u sed 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.

20 DRAFTService Description Time S cales

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

con tinuous 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. Typi cal Participants in O&M Service Transactions

Transaction Type Actor/Stakeholder and Role Exchange Benefits Time S cale

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 DRAFTBuilding 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 S cale

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 bat tery or thermal storage system. Energy market services refer to 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 originate s 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. E nergy 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 m arket s ervice s 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 conc urrently. 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-t erm timeframe. Participants in the wholesale market consist of load serving entities, aggregators, and generators. Deregulated r etail energy markets 5
allow the customers, for example, to choose an electricity supplier from competing retailers who purchas e 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.

22 DRAFTTable 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 high er 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

co mbination 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 s hifting 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 explan ation 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 fu rthering 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 provide r 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 cas e can be found in Section 5.2 of this

report.

23 DRAFTTable 2.5 shows the types of participants that may be involved in an energy tran saction, 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 rea l- time prices (such as double

- action based retail markets) • Enables short

- term balancing of energy supply and demand

• M anage s intermittency of

renewables and load demand

variations

• Manages high cost of marginal generation Auctions or agreements for

energy exc hanges are typically

made minutes to day ahead in advance. Long

term 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,

lo ad serving entity, building owner) • Create s revenue streams for generating and/or delivering

energy

• Potential to reduce need for capacity investments.

24 DRAFT

## 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 t he 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. Solution s 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 flow s, 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 service s 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 s ervices 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 respon se, 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 capaci ty 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 DRAFTdevelopment and maintenance of gener ation, 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 ca n 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 th at 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 utili ty 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 resource s 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

- 20 07 Olympic Peninsula

Smart Grid Demonstration. Currently, th is model is also being tested in the American Recovery and

Re investment (ARRA) co

- funded AEP’ s gridSMART TM 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 share s of the overall capacity/energy rights by time shifting operations, etc. This is similar to the use case described in Section 6.3

.

26 DRAFTTable 2.7 . Typical Exchange Parameters for Capacity Transactions

Information Description

Price Payments and penalties resulting from exchange

. Quantity of c apacity 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 shiftin g 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 asse ts 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 typi cally 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 adva nce

market or rules for need for investment in additional infrastructure exchange (i.e., to support generation capacity aggregator, RTO/ISO, load serving entity)

27 DRAFT

### 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 exampl es 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

.

28 DRAFTFigure 2.6. Conceptual Overview of Intra

- Building Reaction to Request for Ancillary Services

Although there are variations in the implementation in terms of tec hnical, 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 f lexibility/ r amping 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.

29 DRAFTTable 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.

A nother 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, an d 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 . L oad s as a resource to act on the intermittent variability of renewables can also be considered in

this service

. Spinning rese rve must reach full power

within about 10 minutes. Capacity for spinning reserve is reserv ed 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 ca pable of reaching full output within the required amount of time. Can be brought online to reach full power within about 2 0 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 resp ond 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.

30 DRAFTTable 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

marke ts 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

31 DRAFT

## 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 certificate s (white tags) , acquired from customers (buildings) using

transactive mech anisms. 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 p rovisioning 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.

32 DRAFTFigure 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 curtail ments, 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-hea ting

- 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 dynam ic 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, el ectric, 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 DRAFTExample 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 2 015. 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, t hey 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 credit s; 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 smal l 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 n ew 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 tran sactions, 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 tr ansaction 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 n etworks consisting of customer devices, systems, and owners and tenants, within
buildings or facilities.

2. Inter -building n etworks 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 effe ctively 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 DRAFTsecond is a basic interopera bility 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 regula tory polic ies 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 vo ltage, 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 product s 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
specificall y 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 condition s 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 participa nts. 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 DRAFTii. 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 includ e 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 condit ions: A contract may also include default terms and

conditions that may be applied in case of emergencies, technical outage, etc. For

insta nce, 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 bas is 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. The se 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

- rela ted transactions in the context of the general
principles under which commercial business is conducted.

37 DRAFT

## 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 automatic ally as application s 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 s ystem o perator’s energy market for electricity)

• purchased (e.g., by a customer, a retail utility, or a load serving entity)

• transform ed 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 application s 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 te mperature 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 bu ilding 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 DRAFTFigure 3.1 provides a conceptual illustration of a generic transactional node that is generally
applicable to all the nodes in such energy networks. Inpu ts 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 Transacti onal 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 “ C loud.” It then balances supply and demand for services
with its own local needs and objectives (defined by the node’s owner), and exerts control o ver 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 invo lve 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 p art 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 Netwo rks

3.3.1 Intra

- Building Networks

Figure 3.2 shows a physical represent ation 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 minimizat ion 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 DRAFTEngaging 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

Tstat

. VAV
Lights

Plugs systematically and automatic ally
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

re sponse, 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 insi de 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 energ y. 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. Add itionally, 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. The y 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),

42then 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 probl em 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 f lows
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 cool ed 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 natu ral 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 c hilled 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

43thermal 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 co mplexities 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 pa rties 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 ene rgy (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 th e 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

### 3 rd



### - Party

Service

Provider 3 rd



### - Party DG & Battery

Multi

- Bldg. Facility

3 rd



### - Party BCHP System & TES +

▬



### Bldgs. RTUs

EVs

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

45

## 3 rd



## - Party Customer

Networks Networks

RTU to Grid

Nodes to Gas

Nodes

RTU RTU RTU RTU Elec.

HVAC Gas Bldg.

RTU EV RTU RTU Facility

Bldg. BCHP / TES Bldg. EV EV Bldg. DG /

DS

EV Device Networks Networks

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

46The 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 servic e 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 A ggregator in Sections 6 .1 and 6.4, respectively, of this report ).

• Trade mea sured 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 E Vs. 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

utilit y 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 c harges.

• 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 B uilding

- 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 d elivered 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

48These and other exa mpl e 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 i ndependent s ystem operator (ISO), or a Regional Transmission Operator
(RTO) that dispatches the available generation to meet the load as it varies, while avoid ing overloading
the transmission lines and supplying the necessary ancillary services needed to ke ep 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 i t 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 b e 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 a re 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. T hus 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.

49Figure 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

whi ch 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

ef

fect, 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),

whi ch 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 durin g 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 thi rd parties, as discussed in Section 3.2.2 ) who are able to reduce the ir
load either by reducing demand or dispatching distributed generation or storage devices. Such rates may
remain fully regulated by public utility commissions vi a 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 a nd
provide proper incentives for customers to respond appropriately.

The extension of the wholesale transactional approach to the distribution network described above
represents just on e 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.

50

## 3.4 Demonstration of Buildings -to- Grid Transaction Network s

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 i n 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 d evelop a regional communications and control

infrastruct ure 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 , f ac ilitate 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 inc entive s ignals and load e stimates
used by the demonstration essentially are examples of the general concept of b ids and o ffers in Figure 3.1,

and t he 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.

51The PNWSGD has implemented a regional network of such transa cti onal 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, w estern Idaho

, and parts of Montana and Wyoming). Because transmission with in 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

generat ors 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.

Lo ok- 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

52from battery storage, to volt

- VAR control systems 1 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 AE P 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 margin al 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 U tility 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 pri ces 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 pe riods. 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 cu sto mer as a lump -sum payment at the end of each monthly billing period based on time- se ries 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 thermostat s 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 illustrat ed?

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

5354

## 4.0 End- User Services

This chapter describes a non

- exhaustive, but representative set of u se cases illustr ating the e nd -u ser services, defined in Chapter 2 of this report. 1

Chapter 2 describes e nd- user services as energy an d energy- related products, services, and rights that

the end user purchases to balance and co

- optimize their overall energy costs, comfo rt 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 a nd valuation s ervices 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 -p arty e nergy provider

• Efficiency shared s avings

• Tenant c ontract s with b uilding owner for e nergy

• T ransactive c ontrol for l arge com mercial b uilding HVAC s ystems

• Diagnostic and a uto mated commissioning s ervices

• Data c enters t rade computation j obs

• Microgrid coordinating demand response, d istributed g eneration and s torage

• Trading positions in an e lectric v ehicle c harging 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.

55

## 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 the n 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 el ectric 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 m aintain 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 t heir 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.

56Actor/Stakeholder Roles

Who is transacting?

A. Consumer (building owner)

.

B. Service p rovider , who most commonly may be a third -party vendor but wh o 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

Se rvices

.

• 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 determ ined 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.

57• 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 provide r.

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?

• Increase d demand management and efficiency from en d 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 offe r such services.

Current Examples of this Transaction

• T here is some t hird -party ownership and operation of combined-heating- power (CHP) systems.

58

## 4.2 Efficiency Shared Savings

Type of Transaction: Building to Other (Service Provider)

Brief Desc ription

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 t ransactional 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/Stakehol der 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 n eeds to be notified or acknowledge a transaction has been made?

• N/A.

59Are 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 bene fit 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., healthc are or
education.

What is the benefit for the grid?

• Increase d efficiency from end uses that contribute to peak loads reduce s the need for capital investment for generation, transmission, and distribution capacity. Some PUCs provide utilities with

incentive s 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.

60• 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 efficienc y?

•

• .S hared 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 in volved, 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).

61

## 4.3 Tenant Contracts with Building Owner for Energy

Type of Transaction: Intra

- Building

Brief Description

B uilding 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) give s them a m onthly allowance

for energy consumption that is covered in the tenant’s monthly rent. I n the case of (2), i f the monthly allowance is exceeded by the tenant ’s energy use , the tenant incur s a penalt y, or they may receive a rebate

to the extent the monthly allowance is not exceed ed

. Tenants or are also allowed to trade surplus

allowance s 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 d ynamic 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 ten ant s 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 tenant s 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

opp ortunity 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 o n metered energy use.

• In transaction (2):

62– A tenant signs a n 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 info rmed 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 tenant s 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 ).

63Information 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 technolog y 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 s ystems capable of automating the customer’s desir ed 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).

• R educed 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 d rivers 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.

64What 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 s ome 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.

65

## 4.4 Transactive Control for Large Commercial Building HVAC System s

Type of Transaction: Intra

- Building (End

- User Services)

Brief Description

Customer/building operator uses transactive concepts in a hierarchical c ontrol 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 hi erarchical set of control layers,
corresponding to the layers of the HVAC system , which converts or deliver s heating and cooling energy
to building zones . The markets a re 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 sell s 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 invo lved:

– 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 self

optimizing properties of a trans active approach.

66• 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 “ sell s” them to the s ystem 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 purchase s 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 commodi ty 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 th at layer offers to sell

their col lective 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 un its 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 servin g 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 wate r 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 request s a change in state. This might correspond roughly to a 1­

minute time scale.

67• 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 transact s with
the node of the layer(s) above it that suppl ies 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
application s 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 com fort 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 transac tions 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 tenant

occupied buildings and bill them individually fo r 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?

68• 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 nod e 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 self

optimizing and plug-and-play properties indicated. This needs to be established, and then transferred into commercial control systems offered by vend ors.

• 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 requi re 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 aggregat or. (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.

69What 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 commerc ial 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 u tility 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).

70

## 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 det ects 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.

71What 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 o perator).

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 requir ed?

• Description of building, systems, equipment, and control schemes, and how they are described, must

be defined and standardized for use in such services.

72• 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 operatio ns.

• 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 c ould 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.

73

## 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 associa ted 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) t o 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.

• Tra nsfer 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.

74Actor/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 no tified or acknowledge a transaction has been made?

• The local distribution utility may need to be notified so it c an account for load swapping in its load estimation and forecasting.

Are there other transactions associated with this?

• N/A.

Information Exchan ged

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 resour ces.

• 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 r educed utility bills.

75What 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 abov e re garding 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 bus iness 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.

76

## 4.7 Microgrid Coordinati ng Demand Response
, Distributed Generation and Storage

Type of Transaction: Building to Building

Brief Description

Consumers sign up to participate in a transactive energy market wi thin a microgrid to balance its

resources and loads when operating in is land ed mode to ensure reliable electricity services. In the example presented here , all resources are independently owned by building owners, including distributed generation and stor age ( DG and DS ). The microgrid use case is built upon u se c ase 6.2 Transactive Retail Energy Market , and only primary differences or additions to it will be highlighted here.

Narrative

What is being transacted?

• Each b uilding, DS, and DG owner connected in an islanded microgrid (“members”) agree s 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 r eceive (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 is landed 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

memb ers, 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

.

77• 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.

• Memb er 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 precis e control).

• Members are bill ed or credited in a monthly settlement of the energy sold and purchased by the

memb er s. Settlement could also occur in near real time with a credit

- card

- like transaction.

Actor/Stak eholder Roles

Who is transacting?

A. Microgrid members , e.g., building or facility owner s/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 operation s 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).

78• 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 commodit y measured and verified?

• T ime

- series load data from advanced metering infrastructure (AMI) meters is integrated with time

series RTP data by (B) to compute member bills.

• Credit for a ny additional incentives earned for response when grid connected can be co nstructed from

the memb er’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.

• H ome/building energy management system s 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 memb er 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 member s 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 red uced, its wholesale energy production or market costs reduced.

79What is the benefit for renewables?

• Balancing the intermitten t 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/Regulat ions

• 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 implie s 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 responsi ble 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

.

80

## 4.8 Trading Position s in an Electric Vehicle Charging Queue

Type of Transaction: Customer to Customer

Brief Description

A limited number of electric vehicle (EV) charging station s are available at a parking lot. Re

- charging is

available on a first

- come

- first

- serve d basis. A vehicle changes positions in the charging queue with

anothe r 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, vi ews 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?

82• 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 with out 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 i s required?

• Wireless/cell phone access at parking lot.

• (Desirable) A kiosk for trades for those without cell phone availability.

• (Desirable) C ommunications to vehicle charge management system to obtain state -of- charge when entering queue.

• (Desirable) S tate -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.

83• (Desirable) Web application for parking lot attendant to verify charging orde r (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.

84

## 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 originate s outside the meter , i.e., within the power grid or the natural gas delivery infrastructure . In a region with a wholesale power market, thes e 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 ac crue to both parties involved in the transaction. E nergy market services may include

mechanisms such as time

- of

- use and real

- time pricing, etc., th at help manage constrained resources, such as electricity or water delivery “pinch points”. Energy m arket s ervice s 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 r ate s

• Optimize e lectric v ehicle charging for d ynamic r ate s

• End -u se d ifferentiated d ynamic r ates

• Transactive e nergy m arket exchange

• Trading e fficiency to r elieve congestion

• Diff erentiated r eliability s ervice

.

These are examples of services that originate both outside and behind the meter , i.e., within customer premises. Each of these example us e cases is described further below.



## 5.1 Dynamic Rate s

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×

85– an intermediate price level during “shoulder” hours (hours when generation d emand/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 req uire 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 create d 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 p eak

- 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 m anage 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 high er

- price periods

to low er -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).

• T he 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 r eference 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).

86– 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 ar e 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 serv ice 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

deman d 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 ?

• T hermostats, 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 ).

87– Use of a CPP/RTP signal requires a higher bandwidth network than typical AMI networks have.

• D emand 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). Not e 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.

88

## 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 e lectric v ehicles (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 low er 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 high

price periods to low- price periods, thereby lowering electricity bills.

89Actor/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) R eal

- 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 low er -price periods.

• Reduced rates result (for all customers) by lowering utility revenue requirements based on benefits provided to the grid.

90What is the benefit for the grid?

• The utility or retail service provider can use dedicated rates for dedicated loads to encourage spec ific 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 t o 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 f or

excess wind generat ion 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 utilit ies).

Current Examples of this Transaction

• N/A

91

## 5.3 End

- Use Differentiated Dynamic Rate s

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 con ditioning 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 occupant s’ 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

in corporated ).

– A RTP rate , which varies continuously on hourly (or 5- or 15- minute) intervals

, perhaps requir ing

24- hour ahead prices be delivered to the consumer.

• The applicable rate is dependent on the type of load and the availability of automated contro ls

. The

customer bill for RTP loads is based on sub- metering them, or a means of estimating them with

reasonabl e accuracy. The remainder of customer power consumption is billed at an RTP rate.

Why is it being transacted?

• Assuming the utility or retail se rvice 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 ti me -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.

92– 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

programm able 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 wa ter 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 ser vice 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

93How is the transaction v erified?

• 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 requ ired.

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 typical ly

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 i s 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 ut ility 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 desirab le 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.

94• 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 perio ds. 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 dynami c 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.

95

## 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 electron ic 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 t ender

– 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 t ender

.

• 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.

96• 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. Custome r (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 se t 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?

• Transaction s 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.

97Informat ion 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 wit h 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 T EMiX protocol) for the electricity

transactions.

• A portfolio optimizer that manages the purchase and resale of the customer’s energy contracts to

minimize overall costs.

• M arket 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 co mputer).

• 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 resul t (for all customers) by lowering utility revenue requirements resulting from benefits provided to the grid.

98What is the benefit for the grid?

• The various time -horizons of forward and spot contracts provide a clear basis for merchant generators, ISOs, util ities, 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 t enders

.

• Reduced congestion costs caused by transmission c onstraints.

• 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

• T ariffs 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 TeMi x, 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

.

99

## 5.5 Trading Efficiency to Relieve Conge stion

Type of Transaction: Building to Grid

Brief Description

The utility or aggregator sets up an “ eBay

- like ” market place to obtain efficiency that specifically targets an area served by a congested, capacity

- limited element of a distribution or transmi ssion 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 rel ated 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 f ro m 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 l ower 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 location s.

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) wher e 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 p ocket in Western Connecticut is one such example.

• We are not aware of a transaction

- based approach being implemented as described above.

100

## 5.6 Differentiated Reliability Service

Type of Transaction: Building to Grid

Brief Descriptio n

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 ha s 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 ou tage 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 servi ng entity (LSE) to receiv e 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 time s 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 man y 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 investme nts. Differentia ted 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.

101• The distribution utility gives first priority to p remium customers in the aftermath of an outage.

• On

- line r eports provided by the distribution utility explaining the ir outage restoration actions and timelines may be essential for customer acceptance.

What is the time scale of the transaction?

• Irregular, l ong- 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 with out a premium.

• Emergency situations are typically unpredictable and occur irregularly.

• Premiums are paid monthly by customers.

• Post -outage r eports 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 u tility

.

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 wi th 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 customer s individually or collectively (e.g., via a p ublic u tility commission).

102Activities/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.

• T ime

- 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

• Reg ulators 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.

• R egulat ory 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.

103104

## 6.0 Grid Services

Chapter 2 defines g rid 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 an d ancillary services help maintain grid reliability and resiliency, as well as aid in renewables integration by providing flexibility to the system. Solution s 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 resulti ng from two

- way power flow s, etc

. E xamples of transactive mechanisms that may be employed for providing different grid

services must also provid e commensurate incentives to the provider s of these services.

We expect that two broad categories of grid servi ces 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.

105

## 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) Custome r 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 bot h 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 acqu ire:

• 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.

106• 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 Ex changed

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 requ ired 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).

107• (Desirable) D emand 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.

108

## 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 ra te, 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 low er

- 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 u se 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 fuel

based distributed generator.

• At each interval, the customer’s energy management system assembles a b id 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

el ectricity, 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.

109– 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).

110How 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/S ervices

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 inte rval 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 res ponsiveness 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) Applic ations 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 high er -price periods to low er

- 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 a bilit y to balance the intermittency of renewables at the sub -hourly level.

• Increased ability to manage an emergency.

111What 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

correspo nds 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 gridSmart sm Demonstration (ongoing)

• Pacific Northwest Smart Grid Demo nstration (ongoing)

112

## 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 encourage d 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 poin t 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?

• C ustomers exchange capacity rights with each othe r to cover their average load over short time intervals (e.g., 5

- min)

.

• Capacity rights may be obtained by one of two mechanisms:

1. C ustomers may have purchased them with their rate plan. Customers need sign up only for the amount of diversified capacity t hey 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 pl an 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 a nd sell allocated capacity rights

.

113• 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

te nants (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 requi red to verify that

c onsumption remained at or less than the capacity rights held by each customer at that time

.

114Activities/Services

What equipment and technology is required?

• Interval metering is required (AMI) to provide load and generation time- series data to determine i f 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 a nd 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).

Contra cts/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

115

## 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 a dditional 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 pr acticed 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.

• A ncillary services can be provided in one of two f orms (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 contractu al 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 increas ed competition to provide the services by allowing cust om er ’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.

116• 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 th e aggregator

.

• Loads are dispatched by the utility when necessary based on a 4 -s ec ond 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 (~ann ual 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- mi n in many regions).

• Dispatch of regulation occurs at 4

- sec ond 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 transa cting?

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) aggregat or s 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 veri fied?

• Contractual notice exchanged (paperwork or electronic) between (A) and (B).

117• Regulation signal sent to customer every 4

- sec onds 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

- sec ond 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

heater s).

Activities/Services

What equipment and technology is required?

• Very short- term interval metering (~4

- sec ond ) 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 h igh bandwidth/low latency network is required (e.g., broadband is typical ly used ).

• Aggregator must have technology to forecast the resource available as a function of time -of-day, dayof- week and weather.

What is the benefi t 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).

118What is the benef it 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 communic ation, 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

a ggregated to a significant size (e.g., PJM, ISO

- New England , N ew York

- ISO, M idwest

- ISO ).

• Fewer markets for regulation exist, and fewer of them allow participation by customer assets (e.g.,

PJM, N ew York

- ISO, M idwest

- ISO ).

• Enbala, Inc. i s a leader in making a business of aggregating loads to provide ancillary services.

119

## 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 deman d response aggregator to provide ancillary services via transactive control in the fo rm of (1) regulation, or ( 2) spinning reserve. Today, these are almost exclusively provided by central generation capacity that is not otherwise engaged in producing elec tricity.

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 t he 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 u se c ase 6.2 Transactive Retail Energy Market ), the distribution utility may be the most convenient m arket operator so that distribution constraints can be fully taken into consideration. However, a retail service provider

120or demand response aggregator can also play this role. In either case, we will use the term “aggregator” in the discussion below.

• Ag gregators typically engage their customers in providing traditional demand response or net load
reduction (u se c ases 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 funct ion 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 -s ec ond 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 o ccurs at 4

- sec ond 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).

121Information 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

- sec onds 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

- sec ond 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

- sec ond control signal to the consumer.

• Very short- term interval metering (~4

- sec ond) (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 co ntrol 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 sm art 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 th e grid?

• Reduced need for overall generation capacity due to lower amount of capacity held out of markets to meet regulation and spinning reserve requirements.

122• Lower market prices for ancillary services resulting from the increased competition to provide th em.

• 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

• Ancil lary 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 renewa bles that is commonly called ramping

.

123

## 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 resul t after an outage because of pent -up demand for electricity by thermostatically-controlled loads (cold load pickup)

. This use case is a n extension of the previously described u se c ase s 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 cr ews energizing small sections of feeders individually after an outage to avoid overloads and protection re- trips caused by motor inrush currents and l oss of load diversity.

What is the benefit for renewables?

• N/A

.

What is the benefit for energy efficiency?

124• N/A

Contracts/Regulations

• S cheme may require approv al 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.

125126

## 7.0 Societal Services

Chapter 2 describes s ocietal services as energy and energy- related services that have a n 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. Examp les 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. E xamples of use cases with details on the transactive mechanisms that could be employed for

pro viding societal services that are described here are:

• Emergen cy Power Rationing

• Efficiency Incentive Payment

• Air Shed Management

Each of these is described in more detail, below.

127

## 7.1 E mergency Power Rationing

Type of Transaction: Building to Grid

Brief Description

Customer signs up with retail serv ice 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 r esolved

.

• 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?

128• 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 t he 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 w ill 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.

129• A home/building energy management system and local area communications network capable of automatically switching off non- critical loads within c apacity 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 i s 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 term s 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

130

## 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 sta ndards (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 in centive 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 i nto 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 a n 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

- drive n efficiency measures such as diagnostics and commissioning, equipment and system tune- ups, thermostat setback programs, etc.)

132Actor/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, o r 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.

133What is the benefit for renewables?

• No direct benefi t.

• 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 utilit y 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.

134

## 7.3 Air Shed Management

Type of Transacti on: 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 seg ments and end uses that have high contributions of local pollutants

• shifting electricity generation to clean er 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

th e customers.

135• 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 regula r (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 ma ker?

• (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) M eans of defining and communicating conversion efficiencies allows ince n tive to naturally target “dirtier” loads.

• (Desir able) End -use metering for non- electric loads can improve accuracy of su rcharges

.

136What 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 pe netration 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

managemen t 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.

137138

## 8.0 Use Case Template

Type of Transaction: Please choose Building to Grid; Building to Bui lding; Building to Other; Intra

Building; 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

139Activities/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

140

## 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, C A. 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
Effic ient Grid , Morgantown, WV. Available from Smartgrid.gov at: http://www.smartgrid.gov/document/demand_dispatch_intelligent_demand_more_efficient_grid

Piette, M ary 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 Laborator y , Berkeley, CA

.

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