Presentation to the Minister of Energy

by the ILM Task Force, Ontario Energy Association

October 2, 2013

By Ron Dizy, Enbala (Chair),

Paul Grod, Rodan Energy (Vice Chair)

and Herb Healy, EnerNOC

Agenda

ILM Task Force

What is ILM?

Why is it germane to the LTEP?

What services can ILM provide?

What is ILM’s relative value? Some practical examples

What steps should be taken to better reflect ILM in the LTEP?

ILM Task Force Members

AMPCO – Adam White Canadian Manufacturers and

Exporters Association – Ian Howcroft and Paul Clipsham

ENBALA – Ron Dizy (Chair) and Keyvna Cohanim

Energate – Alan Clarke EnerNOC – Herb Healy IESO – Mark Wilson LocalGrid Technologies – Bob Leigh MaRS – Jesika Briones, Jon

Dogterom

Ministry of Energy – Paul Kersman and Mike Smith

OEA – Avi Lipsitz

OEB – Takis Plagiannakos

Office of the Minister of Energy - Chris Wray

OPA – Evelyn Lundhild and Julia McNally

PowerStream – Martin Rovers, John Mulrooney

Rodan Energy – Paul Grod (Vice-chair) and Paul Shervill

Siemens – Richard Wunderlich (Vice-chair) and Darryl Johnstone

Union Gas – Ed Seaward

John Lambert, Independent Consultant

What is ILM?

ILM (Intelligent Load Management) enables system operators and utilities to control how much and when power is consumed from the grid

Provides a new, highly cost effective tool to more efficiently operate the grid Shaves peaks and fills valleys in the power curve

Enhances reliability – local or province-wide – e.g. 100MW of local relief during Toronto power outage

Delivers Operational Flexibility

Economic value – reduces overall cost, enhances asset life, reduces need to overbuild costly infrastructure

What is ILM?

ILM is distinct from conservation and energy efficiency - conservation and energy efficiency refer to “using less” on a continuous basis whileILM is a targeted, dispatchable system resource

Conservation

CDMDR

Flexibility

ILM

Energy

Efficiency

Intelligent

Load

Management

TodayTarget

What is ILM?

ILM refers to a family of demand response

products which include:

Peak load management - to reduce peak demand at

critical times through curtailment or time shifting

Regulation - to assist system operators with minute by

minute adjustments to the grid

Ramp - a resource which fills-in while generators are

coming up to full power

Balancing - clean cost effective hedge when intermittent

wind or solar output is not available

Reserve margin - to help meet reliability requirements

Surplus base-load generation -– soak up excess power

produced by inflexible generation

Higher Wind and Solar

increases Net Load

ramp by 100-400 MW

ILM fills-in while generators are

coming up to full power

Source - IESO Stakeholder Summit -

March 4, 2013

ILM can address

surplus generation

2000MW of DR to

reduce infrastructure

overbuild

Why ILM is germane to the LTEP?

Several system changes have been made in recent years which system operators must accommodate: Changing supply mix -

coal phase out more renewable (wind, solar) generation added more natural gas nuclear refurbishment

Smart grid advancements – smarter networks opportunities for greater participation by loads advancements in real time load control

The value of ILM ILM products can provide capacity, operational

flexibility and help defer the need for capital expenditures at both the transmission and distribution levels

ILM products: less expensive and cleaner than many traditional

solutions

in combination with generation solutions optimizes operation of the system

promotes customer engagement

enhances power system efficiency

ILM is cost effective

Source: DR-OPA. DR3 Program Rates – range from $65,000 to $100,000/MW/year (100 hour program) Gas Peaker Plant – US Energy Information Administration. www.eia.gov/forecast/capitalcost. Based on conventional combined cycle plant cost ranges between $170,000 + $210,000/MW/year.

$190,000 /MW/year

$85,000/MW/year

0

50,000

100,000

150,000

200,000

Gas Peaker Plant Demand Response

$/M

W/y

ear

Adjusting Dispatch Stack to Supply Flexibility

Level of Demand

In order to provide necessary flexibility we must:

•Request nuclear maneuver

•Curtail wind

•Run a gas generator at 300 MW minimum

Implications:

•Paying nuclear (and wind) for energy we don’t use

•Paying gas unit to be on, when we don’t require its energy

•EQUALS – VERY EXPENSIVE WAY TO PROCURE FLEXIBILITYNuclear

Must Run Hydro

Wind

MW

Nuclear

Nuclear Maneuver

Must Run Hydro

Wind

Gas Generation

MW

Wind Maneuver

Some ILM examples

Northern York Region: York Energy Center 400MW simple cycle plant was built in

2012

Prior to construction, a 20 MW demand response resource was not permitted to grow and was terminated in favour of a peaking generator

Estimated DR capacity for York Region is 50MW

Maintaining and growing the DR capacity and reducing the size of the peaking generator accordingly could have saved ratepayers approximately $100,000/MW/year.

Would have meant net savings of ~$5M/year

Some ILM examplesDR and EE save PJM Ratepayers $11.8B in 2013/14

“Based on actual auction clearing prices and quantities and the make-whole MW, total RPM market revenues for the 2013/2014 delivery year were $6,708,567,045. If no DR or EE had been offered into the auction, total RPM market revenues for the 2013/2014 delivery year would have been $18,535,847,876, a difference of $11,827,280,831 compared to the total based on actual results.”

- PJM Market MonitorAnalysis of the 2013/2014 RPM Base Residual Auction Revised and Updated, September 2010

UNITED KINGDOM

National Grid Short Term Operating

Reserves (STOR)

Response time: < 20 minutes

USA: ERCOT

LaaR program for both responsive

reserve and non-spinning

reserves. Instantaneous and 10

minute response.

NORDPOOL

Multinational power exchange provides

Regulation and Spinning Reserves

USA: PJM

Synchronized Reserves and

Regulation programs require 10

minute and 4 second response,

respectively

CANADA

Atlantic Provinces

Fast-acting DR to balance intermittent wind

AESO LssI: Frequency responsive

instantaneous DR resources

GERMANY

The country’s four TSO jointly operate

three A/S markets including “negative”

secondary and tertiary reserves

AUSTRALIA, NEW ZEALAND

Both the NEM and NZEM feature

frequency response markets open

to DR (e.g. FIR/SIR; FCAS)

Some ILM examplesDemand Response provides power grid support around the globe

Source - EnerNOC

Creating a level playing field for DR

DR requires capacity payments (like generation) to be successful

Needs a long term commitment with meaningful financial incentives Today’s 400MW took 6 years of committed development from

aggregators making significant investments in ON

Long term, it should be deployed and utilized based on market mechanisms.

Creating a level playing field for DR

IESO and OPA recognize that DR can play many valuable roles in the power system Shave the peaks and fill the valleys by quickly and cost-

effectively reducing peak consumption and bringing demand “on” when there is surplus generation

There are opportunities to evolve existing unit commitment and other IESO mechanisms to allow DR participation

Capacity payments critical as energy prices are unlikely to ever be sufficient to induce DR (in Ontario the price signals are both suppressed and far too small)

“Programs leading to markets” use significant scale programs to gain experience and then

evolve market rules Provide IESO/OPA authority to procure ILM resources as

required and cost-effective.

Recommendations/next steps to greater ILM use

1. Establish goals for ILM as a distinct resource in the LTEP.2. Maintain momentum and confidence in ILM as a resource.

a) Remove the OPA’s 500MW limit on DR3 to demonstrate continued momentum and commitment to DR as an important system resource.

b) Empower the IESO to dispatch new DR3 and related ILM resources in a new and meaningful way based on IESO market mechanisms.

c) Procure ILM first (provided it is cost-effective) in any regional energy plans.

d) Remove barriers for DR participation (e.g. transmission connected loads cannot participate in DR3; and municipalities cannot use standby generation for peak shaving).

3. Programs leading to markets for new applications. a) Direct the OPA/IESO to engage with stakeholders to expand DR

participation in markets.b) Direct (and fund) the OPA/IESO to engage in programs to gain experience

with highest value ILM applications, leading to market rule changes to support a level playing field for DR.

Q&A

Thank you!