This dissertation presents the design, analysis, and validation of a hierarchical transactive control system that engages demand response resources to enhance the integration of renewable electricity generation resources. This control system joins energy, capacity and regulation markets together in a unified homeostatic and economically efficient electricity operation that increases total surplus while improving reliability and decreasing carbon emissions from fossil-based generation resources.

The work encompasses:​ (1) the derivation of a short-term demand response model suitable for transactive control systems and its validation with field demonstration data;​ (2) an aggregate load model that enables effective control of large populations of thermal loads using a new type of thermostat (discrete time with zero deadband);​ (3) a methodology for optimally controlling response to frequency deviations while tracking schedule area exports in areas that have high penetration of both intermittent renewable resources and fast-acting demand response;​ and (4) the development of a system-wide (continental interconnection) scale strategy for optimal power trajectory and resource dispatch based on a shift from primarily energy cost-based approach to a primarily ramping cost-based one.

The results show that multi-layer transactive control systems can be constructed, will enhance renewable resource utilization, and will operate in a coordinated manner with bulk power systems that include both regions with and without organized power markets. Estimates of Western Electric Coordinating Council (WECC) system cost savings under target renewable energy generation levels resulting from the proposed system exceed US$150B annually by the year 2024, when compared to the existing control system.