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Demand Response: Ontario’s Capacity Auction Program

In modern grids, optimizing efficiency in electricity consumption and reducing strain on grid infrastructure has become crucial. During times of high demand on the grid, also known as peaks, some grid operators and local agencies employ a voluntary program known commonly as demand response. Demand response programs can typically be boiled down to “getting paid to support the grid”. The long-term goal of the program is to contribute to a more sustainable and reliable energy system, all while ensuring demand from the consumer will not exceed the grid’s capacity limits. In Ontario, this program is named Capacity Auction and is operated by the Independent Electric System Operator (IESO). The principles of demand response programs are typically very similar in most modernized grids.

Demand response programs typically are opt-in programs that encourage electricity consumers to reduce their consumption from the grid during certain times of the year. The system operator will typically tell the volunteered customers when to curtail their load from the grid by a predetermined amount. This amount of reduced consumption would typically be pre-agreed upon by both the grid operator and the curtailing customer, and the grid operator will pay the customer if the curtailments were successful.

In Ontario, the Capacity Auction program will pay the customers for their availability and remain on standby during commitment periods, even if there are no activation calls during the year. To ensure the participants can properly meet the terms to receive payments, the IESO will call for one test activation during each of the two commitment periods. The activation notifications will come at least 2 hours before the actual curtailment is required.

The two commitment periods are in the Summer Period (May 1st to October 31st) and the Winter Period (November 1st to April 30th). The start of the summer periods are in line with the other IESO peak management program, known as the Industrial Conservation Initiative (ICI) program. Historically, it’s very rare for a curtailment activation to occur during the winter periods, and there have been typically fewer than 3 curtailment calls per commitment period.

What does a DR participant need?

The first thing any interested customers will need, is to enroll in the program. The participating organization must be registered in advance of the auctions. Facilities without the resources to manage the auctions on their own can also join the auction activities through a third party aggregator, approved by the IESO.

One thing to keep in mind is the IESO expects a reduction in consumption, so the consumption would have to be noticeably reduced compared to a typical day’s usage. For the participant, it’s often beneficial to keep an eye on the real-time consumption data of the facility, which will help identify if curtailment efforts are enough per the demand response agreement. The measurements will also need verification, which will typically be a feature of the real-time consumption data.

The other important factor is to ensure the facility has a curtialment action plan. Demand response activations can come from any time, and facilities should plan for any adjustments that could help contribute to reducing energy consumption. The challenge lies in how much to curtail, and how to ensure the curtailment can be met. A good actioan plan should be easily executable, and have the least impact on the business operations. Afterall, the payments would need to be greater than the opportunity cost of curtailments for the program to be cost-efficient for the participants.  

What type of energy reduction can be made?

Reductions in energy consumption typically default to shutting off facilities altogether, but curtailments do not always mean full termination of consumption. Each facility has its unique way of reducing energy use compared to its average use. Some ideas include:

  • Reducing non-essential lighting across the board during times of activation calls
  • Changing manufacturing or operational processes to complete maintenance instead
  • Reducing HVAC usage
  • Changing settings in freezers/coolers/boilers

The reductions don’t always mean a curtailment in energy consumption, but could also utilize distributed energy resources such as battery energy storage systems or generators. The goal is to reduce the load on the grid, which reduces stress on the energy infrastructure and removes the need for peaker plants. This also means distributed energy resources and microgrids will have a significant advantage during demand response activations.  

Ontario’s Demand Response program offers an exciting opportunity for consumers to actively engage in shaping the the province’s energy future. By being prepared to reduce electricity consumption during peak periods, participants earn not only financial incentives but also contribute to a more reliable, sustainable, and efficient energy grid. Embracing demand response allows us to unlock the potential of energy flexibility and move closer to a cleaner and more resilient energy future in Ontario.

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