Innovation and Sector Evolution White Paper Series Exploring Expanded Distributed Energy Resource Participation in the IESO Administered Markets Part 1: Conceptual Models for DER Participation Public Webinar October 24, 2019
Purpose of the Webinar • The IESO posted the Part 1: Conceptual Models for DER Participation white paper on October 17 • To purpose of this webinar is to: – Provide the IESO’s working definition of DER – Detail the conceptual framework being used to categorize and evaluate DER participation models – Identify which participation models are available in the IESO administered markets today, which are partially enabled, and which are not enabled at all – Identify the key barriers preventing expanded DER participation • To seek feedback on the barriers to integrating DER to inform the second white paper in this series 2
Background • This initiative kicked off on June 12, 2019 with the posting of a Project Brief outlining the objectives and research questions for this white paper. Stakeholder feedback on the Project Brief included suggestions to: – Develop a definition of DERs for this work – Identify the drivers of growth of DERs – Consider the full range of benefits and challenges at the transmission and distribution levels – Explain why requirements (that may act as barriers to DER participation) exist • This feedback was incorporated into the white paper • This white paper is the first in a two-part series that will identify high-level options for integrating DERs into the IESO Administered Markets (IAMs) – This first white paper is intended to level set on the definition of DERs, principles for integrating DERs, participation models that are available, barriers that exist today and an overview of DER models in other jurisdictions – The second white paper will perform a more detailed exploration of the conceptual models identified in the first paper and identify potential options that may be appropriate for integrating DERs into the IESO-administered markets 3
Framework for Exploring Expanded DER Notional Participation in IESO Markets Timelines Step 1 – Whitepaper – Models for DER Participation • Conceptual description of benefits & challenges with DER integration • Identify objectives for DER integration • Identify current participation models in Ontario and in other jurisdictions • Identify potential barriers to meeting objectives in Ontario (to be explored in whitepaper 2) 2019 Step 2 – Whitepaper – Options for Enabling DER Participation • Identify high-level options for expanded DER participation in IAMs • Identify conceptual pros and cons of different options • Streamline options where possible • Identify evaluation framework for assessing options (to be used in step 3) Step 3 – Evaluation of Options • Align with Market Development Advisory Group and IESO capital project prioritization processes 2020 • Develop high-level cost benefit assessment of options • Identify targeted pilot projects to prepare for expanded DER participation • Identify capital project(s) to be considered for prioritization (for step 4) Step 4 – Prioritization and Implementation 2021 • Use established capital project & MDAG processes to prioritize DER integration with other projects • Implement pilot projects (if/as necessary) to explore potential for expanded DER participation 4
Growth of DERs in Ontario • Traditionally, electricity systems have relied on large generators transmitting power across long distances – Large fixed cost assets with limited flexibility to scale up or down with changes in demand • DER growth in Ontario has historically been driven by policy – FIT, microFIT, conservation programs resulted in ~4,000MW (about 10% of Ontario capacity) – Industrial Conservation Initiative (ICI) has driven behind the meter DER storage – Net metering regulatory frameowrk • DER growth is increasingly being driven by consumer demand – Due to declining costs, customer preferences for reliability, generation type 5
DER capacity in Ontario relative to total installed system capacity 6
The Opportunity for Integration • Enabling DERs in wholesale markets will better enable value to be derived from these resources to benefit all consumers – Provide flexibility, scalability to respond to changing demand (avoid large fixed-costs) – Increase options to cost-effectively address future supply needs – Make DERs visible to IESO (reducing today’s challenges of lack of visibility) – Enable DERs to respond to price signals – encouraging location and timing of use to match system need – Discourage DER owners from disconnecting from grid by enabling DER owners to realize revenue streams from assets when not used for self • There are currently limited opportunities for existing DERs to participate • Key challenge for IESO will be timing of any changes to markets, tools, rules to enable DERs (most likely post-Market Renewal) vis a vis consumer driven DER growth 7
Purpose of White Paper • This series of two white papers will set the stage for action to integrate DERs into the IESO-Administered Markets (IAMs) in a rational manner • This first white paper is intended to be a “level setter” on a number of topics, including: – Terminology (including the definition of DER) – Principles the IESO will uphold when considering efforts to integrate DERs – Scope of the exercise (including which markets we are examining for enhanced participation) – Which participation models are available in the IAMs today, which are partially enabled, and which are not enabled at all – Barriers to integration • The second white paper will perform a more detailed exploration of the conceptual models identified in the first paper and identify potential options for integrating DERs into the IAMs. The second white paper will also identify areas where demonstration projects would be beneficial 8
Definition of DER • There is no universal definition for the term DER – Definitions tend to differ from jurisdiction to jurisdiction based on the purpose the definition is being used for (e.g. market rules vs a specific program) • For the purposes of this work, the IESO’s working definition is: – A Distributed Energy Resource is a resource that: 1. Is directly connected to the distribution system, or indirectly connected to the distribution system behind a customer’s meter; and 2. Generates energy, stores energy, or controls load • The IESO has defined DER in alignment with definitions used by other organizations (e.g. the Ontario Energy Board). The definition focuses on what the resources do/can do without focussing on specific technologies or arrangements – This technology neutral approach is more likely to be flexible enough to include emerging technologies and technical models in the future 9
IESO Principles for Integrating DERs • Provide an appropriate level of visibility of the resources operating within the distribution system • Enable increased competition by removing unnecessary barriers that limit DERs ability to compete within the IAMs • Expose resources operating within the distribution system to economic signals reflecting the conditions and needs of the bulk system • Maintain an appropriate level of system reliability • Consider and respect the potential impacts on the distribution system • Prioritize initiatives with the greatest benefits • Support sector evolution that enables transparency and competition at all levels of the system 10
Markets Being Considered for DERs • The conceptual framework used for this white paper exists within a post Market Renewal Project paradigm (i.e. considers markets as they will exist in the future) • Three key IAMs are being considered within the context of this initiative • Removing barriers to participation in these markets is the first step to allowing DERs to provide other products (e.g. ancillary services) 11
Operational Categories of DER • The conceptual framework uses four operational categories for DER that refer to the manner in which a DER operates (i.e. how the resource behaves) • DERs can operate as: – Generation (of a single fuel type) only – Demand response (a load-modifier that does not inject) – Storage (an energy-limited withdrawal or injection) – Hybrid (combining more than one operational category or generation of multiple fuel types) 12
Conceptual Models for DER Participation • The framework then considers whether a DER is dispatchable (or not) and whether it would participate directly in the IAMs as a single resource, or aggregated with other DERs 13
DER Participation Models • On the next slide the operational categories (generation, DR, storage, hybrid) and markets under consideration (energy, operating reserve, and capacity) are layered across the conceptual models for participation • The resulting schematic displays which types of DER can participate in the IAMs today, which IAMs they can participate in, and how they can participate – Forms the basis of understanding which participation models are currently enabled, and which ones could be enabled in the future if certain barriers to participation are addressed 14
DER Participation Models • Minimum size threshold of 1MW for all types 15
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