In partnership with PLMA, this group is for practitioners from energy utilities, solution providers, and trade allies to share load management expertise and explore innovative approaches to program delivery, pricing constructs, and technology adoption.


The Interactive Future Grid

image credit: Source: The distribution system operator with transactive (DSO+T) study, PNNL, Jan 2022
Fereidoon P. Sioshansi, Ph.D.'s picture
President Menlo Energy Economics

Dr. Sioshansi is President of Menlo Energy Economics, a consulting firm based in San Francisco, California, advising clients on the rapid transformation of the electricity sector and emerging...

  • Member since 2004
  • 44 items added with 55,215 views
  • May 2, 2022

In the last few years, much attention has focused on making customer demand more active and more directly engaged in balancing supply and demand. A recent report from the Pacific Northwest National Laboratory (PNNL) concludes that assets and appliances behind the customers’ meter, if aggregated and properly managed can act as “shock absorbers” helping balance supply and demand, especially during emergencies.


Matching loads and generation and vice versa

Source: The distribution system operator with transactive (DSO+T) study, PNNL, Jan 2022


Currently, customers are often asked to voluntarily reduce demand when asked by the grid operators in emergencies. While useful as far as it goes, the PNNL says such schemes won’t be good enough in the future. Moreover, as customer-owned solar panels, distributed storage and EV ownership continues to grow, a lot more can be done with behind-the-meter (BTM) assets. According to Hayden Reeve, an author of the report, “We’ll quickly get to a point where the number of devices and the variability of generation and load will drive a need for better coordination.”

Such interactive customer-grid connections require fundamental changes in utility tariffs, most notably the introduction of dynamic rates. But dynamic rates have faced persistent resistance from utilities, regulators and customers in the past. Even now, the industry “is moving at glacial speed” according to Ahmad Faruqui, an economist, formerly with the Brattle Group.

The Federal Energy Regulatory Commission (FERC) in its annual review of advanced meter deployment blamed regulators for the slow growth of dynamic rates. “Even as the number of customers participating in demand response programs grows, regulatory barriers to customer participation continue to exist,” the commission concluded.

Implementing dynamic rates requires smart meters and smart tariffs. Currently, more than 103 million US homes and businesses have smart meters, roughly 65% of all meters. However, only 12 million customers were on dynamic rates in 2020, according to the Energy Information Administration (EIA). Of these 3 states — California, Maryland and Arizona — accounted for 60% of dynamic rate customers in 2020 (chart below).

Dynamic tariffs: Limited to a few states

Source: Energy Wire News


The PNNL report outlines a much bolder strategy of connecting customer resources to utility grids in what it calls “transactive” relationships. The new partnership “puts the customer in control of how much or little they participate, and fairly compensates them for the level of flexibility they provide to the grid,” the report said.

Once customers sign up, their “smart” thermostats, EV chargers and other connected resources would be scheduled to respond to forecasts of wholesale electricity prices to reduce overall power demand and costs, while meeting customers’ preferences.

It is not a new idea. But the concept has eluded the industry and experts working on dynamic tariffs for decades.

Simple: Shave the peaks, fill the valleys

Source: The distribution system operator with transactive (DSO+T) study, PNNL, Jan 2022


The PNNL researchers created a computer-based model of their proposal based on the system managed by the Electric Reliability Council of Texas (ERCOT), the state’s main grid operator. The computer program simulated data from 100 power sources, 200 distribution and transmission systems, and 60,000 homes and businesses with their energy-consuming appliances.

Automated customer-utility connections resulted in load shifting by customers that reduced peak demand by 9 to 15%, or the equivalent output of multiple coal-fired power plants, PNNL said. The energy savings could be worth up to $5 billion annually in Texas alone and $50 billion annually if deployed across the continental US. n

This article originally appeared in the May 2022 issue of EEnergy Informer, a monthly newsletter edited by Fereidoon Sioshansi who may be reached at


No discussions yet. Start a discussion below.

Fereidoon P. Sioshansi, Ph.D.'s picture
Thank Fereidoon P. for the Post!
Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.
More posts from this member

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »