2Q 2018

Transactive Energy Markets

Monetizing DER for the Commercial and Industrial, Residential, and Vehicle-to-Grid Segments

Many people are already well aware of transactive energy (TE) and flexibility since they have been topics of discussion for the past decade. However, recent developments have brought about a rash of TE trials since 2016. One significant driver is the development of blockchain. In addition, the TE value chain is more customer-centric than the old model of centralized generation. Regulators are increasingly warming to the idea of a future where customers can get a market-based financial return on their distributed energy resources (DER) investments rather than relying on subsidies.

For the first few years, TE adoption will be focused on a handful of specific markets. Australia and Germany will be the first to move out of trials and into larger-scale deployments. Japan, France, and the UK all show interest, while adoption in the US will be focused on a few markets with policies that are driving DER adoption, such as California and New York. However, TE must battle against vested interests, legacy infrastructure, technology, regulations, taxation, and attitudes. To date, a functioning business model around which TE can develop does not yet exist. Current TE trials around the world should help identify how money can be made in the future. Navigant Research anticipates that the first TE markets will appear in the next 5-10 years.

This report complements Navigant Research’s previous research on the opportunities for blockchain to support TE. The study analyzes the market issues, including demand drivers and barriers, associated with the development of TE markets and business models. Global market forecasts, broken out by segment, technology, and region, extend through 2026. The report also examines the value streams related to TE and provides recommendations for DER owners, network utilities and suppliers, TE vendors, and other stakeholders exploring the emerging TE markets.

Pages 42
Tables | Charts | Figures 20

  • What is transactive energy (TE)?
  • What is driving the development of TE markets?
  • What barriers are hindering the growth of ubiquitous TE markets?
  • Where will TE markets evolve first and why?
  • What is the potential size of the future global TE market?

  • Utilities
  • Energy trading software developers
  • Energy software vendors
  • Distribution system operators
  • Distributed energy resources (DER) manufacturers
  • Standards development associations
  • Regulators
  • Investor community

1. Executive Summary

1.1   Transactive Energy Is Gaining Traction

1.2   But Ubiquitous TE Markets Face Challenges

2. Market Issues

2.1   Defining Transactive Energy, a Term Not Yet Universally Accepted

2.2   Many Compelling Drivers Support the Case for TE

2.2.1   Renewables Drive the Need for Flexibility

2.2.2   Customer Centricity

2.2.3   DER Capacity Presents a Significant, Yet Untapped Total Addressable Market

2.2.4   TE Mitigates the Effect of DER Owners Islanding Themselves from the Network

2.2.5   TE Turns EV Management into an Opportunity

2.2.6   TE Helps Use Flexibility of DER to Reduce Infrastructure Investments

2.2.7   TE Makes the Grid More Resilient

2.2.8   TE Provides an Alternative to Renewables Subsidy Programs

2.2.9   The Development of 5G Communications Could Be a Turning Point for TE

2.2.10   The Blockchain Gold Rush Is Helping to Fund TE Trials

2.3   Different Markets Will Evolve in Different Ways

2.3.1   Aggregators Are Bringing Increasingly Smaller DER into Energy Markets

2.3.2   TE Markets Can Evolve as a Natural Consequence of Maturing Aggregation

2.3.3   Pure TE Platforms Start with Individual Residential Customers

2.3.4   Geography

2.4   TE Must Overcome Significant Barriers

2.4.1   Regulators Must Address the Issue of Network Utility Funding

2.4.2   Regulators in Vertically Integrated Markets Must Manage Conflicts of Interest

2.4.3   Tax Revenues Are at Risk, But TE Profits Could Be Taxed

2.4.4   There Is Currently No Functional Business Model for TE

2.4.5   TE Might Not Survive the Demise of the Majority of Startups

2.4.6   Vendor Incompatibility Is a Potential Obstacle

2.4.7   Customer Apathy and Lack of Understanding Will Hamper Adoption

3. Market Forecasts

3.1   Introduction

3.2   Methodology

3.3   Connected DER Power Capacity

3.4   Connected DER Power Output

3.5   Total Value of Connected DER Power Output

3.6   Total Value of Power Traded on TE Markets

3.7   Total TE Platform Revenue

4. Recommendations

4.1   TE Forces a Regulatory Rethink of the Electricity Market

4.2   TE Challenges the Existing Economic Model

4.2.1   Innovate around Flexibility; Explore Multiple Business Models

4.2.2   TE Will Be a Competitive Market, Even for Vertically Integrated Utilities

4.3   Create Strategies that Adapt to Different Customer Requirements

4.3.1   TE Adoption Will Vary Across Geographies

4.3.2   Do Not Overcomplicate This from a Customer’s Perspective

4.3.3   Overcome Customers’ Apathy and Misunderstanding

4.3.4   Customer Privacy Must Stay Front of Mind

4.4   Do Not Underestimate the Technological Challenge

4.4.1   Incumbents Do Not Have to Own TE Architecture

4.4.2   Choose Partners Wisely

5. Acronym and Abbreviation List

6. Table of Contents

7. Table of Charts and Figures

8. Scope of Study, Sources and Methodology, Notes

  • The Functions and Processes of a TE Framework
  • Total Installed Connected DER Power Capacity by Region, World Markets: 2017-2026
  • Percentage of Total Installed Connected DER Power Capacity by Technology, World Markets: 2026
  • TE Trial Launches by Region, World Markets: 2006-2018
  • Percentage of Cumulative TE Trial Launches by Region, World Markets: 2006-2018
  • Total Installed Connected DER Power Capacity by Technology, World Markets: 2017-2026
  • Total Connected DER Power Output by Region, World Markets: 2017-2026
  • Total Value of Connected DER Power Output by Region, World Markets: 2017-2026
  • Total Value of Power Traded on TE Markets by Region, World Markets: 2017-2026
  • Total Value of Power Traded on TE Markets by Segment, World Markets: 2017-2026
  • Total TE Platform Revenue by Region, World Markets: 2017-2026
  • TE Platform Revenue by Country, Top Six TE Markets: 2017-2026

  • Total Installed Connected DER Power Capacity by Region, World Markets: 2017-2026
  • Total Installed Connected DER Power Capacity by Technology, World Markets: 2017-2026
  • Total Connected DER Power Output by Region, World Markets: 2017-2026
  • Total Value of Connected DER Power Output by Region, World Markets: 2017-2026
  • Total Value of Power Traded on TE Markets by Region, World Markets: 2017-2026
  • Total Value of Power Traded on TE Markets by Segment, World Markets: 2017-2026
  • Total TE Platform Revenue by Region, World Markets: 2017-2026
  • TE Platform Revenue by Country, Top Six TE Markets: 2017-2026

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