Electricity demand has increased drastically during recent years. Expansion of power generation and transmission systems to address the growing demand for electricity is a lengthy process and requires extensive capital investment. Moreover, conventional methods of power generation can cause severe environmental issues. Discussed concerns have attracted considerable attention to demand-side management (DSM) policies by which system operators can monitor and control consumers in order to better match the electricity demand with power supply conditions. Meanwhile, power systems are going through a transition period due to the high penetration of renewable energy resources (RERs) and widespread use of smart devices. To remain efficient, DSM policies need to adapt to these transformations. Transactive energy (TE) is a newly-introduced DSM policy which is intended for the changing environment of power systems and is able to maintain the dynamic power balance in smart grids. This paper studies the reasons that led to the initiation of DSM programs. Further, the concept of demand response (DR) is elaborated and various types of DR programs and the existing challenges toward these programs are evaluated. Last but not least, TE is introduced as a general form of DR and the benefits and challenges that implementation of TE frameworks may bring about are analyzed.

Keywords: Transactive Energy, Demand Response, Demand-Side Management, Smart Grid

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