Important changes to the IESO Capacity Auction

The IESO recently announced that it will hold the Capacity Auction on Wednesday, December 2 with a target capacity of 700 MW for summer 2021 and target capacity of ZERO MW for winter 2021/2022. The pre-auction report is available through the IESO Reports Site at http://reports.ieso.ca/public/CA-PreAuction/PUB_CA-PreAuction_2021_v1.xml

The demand response (DR) community was surprised by the IESO’s announcement stating it will not procure capacity for the winter 2021-2022 commitment period in the upcoming December Capacity Auction. DR participants provide a reliable, flexible and cost-effective resource to the electricity system. DR has repeatedly proven itself to be a valuable and dependable resource when called upon, most recently during the IESO’s emergency activations on July 9th and 10th. The IESO itself stated that during the July emergency activations, “[DR] did a good job of arresting demand” and that “the control room was pleased with the outcomes” of the activation.

We are deeply dismayed by the IESO’s decision to procure zero DR capacity in the winter of 2021/22. The lack of transparency in why or how the IESO arrived at this decision is troubling. Zero DR will have a negative impact on the manufacturing sector that relies on DR revenue to stay competitive. It will also have a negative impact on electricity system reliability. Despite the IESO’s forecast of sufficient supply adequacy this summer, DR was called upon several times to standby and in two instances was activated to address emergency situations. DR is a very cost-effective reliability resource that will not be available in 2021/22 should the province need it. We call on the IESO to reverse its decision not to procure DR and to implement transparent resource procurement processes with genuine stakeholder consultations.

Rodan Energy immediately responded to the IESO’s decision by submitting a letter to the IESO executive leadership, jointly with the Advanced Energy Management Alliance.

The demand-side sector supported the IESO through the evolution of the market and continues to support the IESO as it evolves procurement mechanisms. Rodan has been, and continues to be, heavily involved in these engagements. The reduction of the capacity target to zero in the winter 2021-2022 commitment period completely undermines the value DR provides, and we encourage all stakeholders to voice their protest over this decision. The system cost reductions resulting from procuring MW in winter 2021-2022 are minimal compared to the overall electricity system total costs. Moreover, DR provides a very cost-effective insurance policy to system reliability as we experienced this summer when we reached our highest peaks since 2013, which triggered emergency activations. Let’s not forget that Ontario often experiences winter peaks.

Commercial and industrial DR contributors are Ontario’s largest employers. The DR program reduces their energy costs, which enables them to further invest in their businesses and the province’s economy. DR is imperative to our customers’ ability to stay competitive, now more than ever.

We all are living in unprecedented times, with many unknowns on how and when the economy will recover. Short-term commitments, such as the Capacity Auction, enable the IESO to procure resources without long-term contracts or other protracted procurements. It is critical that the IESO provide transparency on how the future capacity needs of the system are established and recognition of the benefits DR resources provide. The DR sector holds the unified view that to fully eliminate DR capacity without a genuine and transparent stakeholder engagement creates regulatory uncertainty and is unacceptable.

DER Survey

The IESO has issued a survey on the behalf of the Ministry of Energy, Northern Development and Mines to assist them in better understanding the role Distributed Energy Resources (DERs) play in the Industrial Conservation Initiative (ICI) and the DER capacity available in Ontario. The survey focuses on the investment in and operation of peak modifying behind-the-meter strategies including load control capabilities.

If you have invested in, or have plans to invest in or have existing or planned contractual arrangements with a third party for the installation and operation of DERs (storage, generation, etc) at your facility, we strongly encourage you to participate in this survey. The survey will remain open until September 25, 2020. If you are interested in completing the survey, please email engagement@ieso.ca or access the survey here:

http://ieso.ca/en/Sector-Participants/Engagement-Initiatives/Engagements/Distributed-Energy-Resources-Survey