February 26, 2022 – With support from Natural Resources Canada, Ontario’s Independent Electricity System Operator has undertaken a demonstration project in York Region to explore market-based approaches to secure energy and capacity services from distributed energy resources (DERs) for local needs, while co-ordinating across the electricity system.

“As Ontario electricity demand is forecast to increase this decade, we’re actively exploring the integration of DERs into local and provincial electricity systems,” said Lesley Gallinger, IESO’s president & CEO. “Lessons learned from this demonstration project show us how local supply options can help keep the grid reliable and affordable.”

A key objective of the IESO-York Region Non-Wires Alternatives (NWA) demonstration project is to better understand the potential of using DERs in place of traditional poles-and-wires infrastructure by having them operate in real-world applications.

The project is funded through IESO’s Grid Innovation Fund and Natural Resources Canada, and is being delivered by Alectra Utilities, the local distribution company.

The demonstration project leverages both existing and new resources in southern York Region, where electricity demand is growing and expected to exceed system capability over the next 10 years.

The project achieved a “Canada first” in the fall of 2020, says Alectra, with the local capacity auction procuring a total of 10 MW of capacity from a variety of resources.

These resources—which are owned and operated by manufacturers, supermarket operators, and residential participants—were procured with a clearing price of $0.64/kW-day. The procured resources committed to being available for a six-month summer period (from May 2021 to October 2021) to support the grid during demand peaks by either generating electricity for the grid, or by reducing their consumption on demand.

Another first was achieved in June 2021, Alectra continues, when participant DERs were activated during a heatwave to help reduce local demand (4.5 MW on June 7, 2021, and 3.6MW on June 28, 2021). This was the first time in Canada that DERs secured through a local capacity auction were used to help reduce local peak demand.

During the six-month period in the summer of 2021, the project saw eight activations that coincided with the hottest days of the year.

“The IESO NWA demonstration project has proven the potential for using local solutions as a cost-effective alternative to traditional electricity infrastructure,” said Alectra’s president & CEO, Brian Bentz.

The project successfully reduced peak demand at the local grid-level, helping to ensure system reliability and potentially helping defer the need for traditional infrastructure, Alectra reports.

The participants also benefitted, earning an average of $125,000 per MW of DER capacity; 65% of this sum for making their DERs available during the commitment period, and 35% for using their DERs to meet local energy needs during peak demand.

Now in Year 2 of the project, the local capacity auction (which concluded in October 2021) was expanded to allow participants with “reserve-capable” DERs—participants who have the capability of delivering supply or reducing their consumption within 30 minutes—to help manage the grid during peak periods caused by unexpected events.

A total of 15 MW of capacity (of which 6.8 MW is reserve-capable) was procured, with a clearing price of $0.40/kW-day, lower than last year’s cost of $0.64/kW-day, says Alectra.

“We are thrilled to be part of this new local market. It gives us the opportunity to bring forward a new revenue stream and help manage growing local energy needs,” said Atal Walia, director of Operations, Tycho Poly Inc.