First-of-its-kind research in Ontario answers critical questions about the gap between economic and achievable DER potential as the province seeks to integrate DERs into wholesale markets and address the needs of an electrified economy
In 2021, Ontario’s Independent Electricity System Operator (IESO) retained Dunsky to conduct Ontario’s first Distributed Energy Resources (DERs) Potential Study to identify the types and volumes of DERs likely to emerge in the province. The study looked at over 80 types of DERs – from a wide array of demand response (DR) measures to solar PV, distributed storage, grid-connected EVs (V2B and V2G) and a host of others – that are either available or likely to emerge in the next 10 years.
The study answers three questions:
- Technical Potential: How much DER capacity theoretically exists in Ontario?
- Economic Potential: How much potential is cost-effective from a system perspective?
- Achievable Potential: How much DER capacity is likely to be adopted by customers and DER developers given market conditions?
Dunsky, in collaboration with project partner Power Advisory and the IESO, established three scenarios that reflect current market conditions as well as different market, policy and technology pathways. Our results conclude that there is sufficient economically viable DER potential to meet 100% of Ontario’s anticipated growth in seasonal peak demand (under all scenarios), but that only about half of that is likely to be adopted under current market rules.
Overall, the analysis shows that demand response (DR) measures make up the bulk of the DER potential in the initial years, but that toward 2032, distributed generation, energy storage, EV smart charging and vehicle to building/grid (V2B/G) measures make up an increasingly important portion of the achievable potential. Beyond looking at peak demand contributions, the study also identified the role DERs can play in meeting emerging needs for energy, transmission capacity, distribution capacity and ancillary services in Ontario.
Additionally, our research found that for Ontario to harness the potential of DERs in the achievable scenario, barriers to adoption would need to be addressed and incentives expanded. Working with IESO staff and external stakeholders and communities, our recommendations to reach the full potential of the achievable potential scenario include:
- Target efforts on high-value high-potential DER measures: This includes residential and commercial/industrial DR measures in the short-term, and distributed solar and storage, as well as EV smart charging and V2B/G in the long-term.
- Continue with market enhancement efforts: The IESO should continue its efforts to facilitate participation of DERs as per its DER Roadmap including enabling DER aggregation and reducing size thresholds for market participation.
- Increase DER access to value-streams: DERs often do not receive commensurate compensation through existing rate structures or market payments. Increasing access to these value streams – in particular for capacity benefit and T&D deferral – can result in greater uptake and more optimal use of cost-effective DERs.
- Explore tailored DER procurements and programs: Programs and procurement should be considered for the high-value, high-potential DER measures identified in this study – particularly in circumstances where existing and planned market pathways are currently unavailable or insufficient.
- Pursue complementary activities: Additional actions are essential to realizing the potential revealed through this study. These include coordination between regulatory bodies and utilities on a DER framework, adapting and enhancing data and information collection from DERs, testing DER capabilities through pilots and demonstration projects, and integrating DERs via advanced planning and management systems.
The study provides Ontario’s system operator, regulator, policymakers, utilities and other stakeholders with rigorous, expert analysis to define and execute on their DER strategies. Our results confirm that DERs can supply a significant portion of the province’s energy needs, but that comprehensive action must be taken to address barriers to DER adoption.
The outcomes and insights from the study serve as critical inputs to the IESO’s DER Roadmap, which sets out the vision expanding market participation for DERs, developing pathways for DERs to serve as non-wire alternatives (NWAs) and enabling transmission-distribution coordination. Additionally, the results of the study are being used to inform long-term system planning and the assessment of decarbonization pathways for Ontario’s grid.
As economies across North America encourage the electrification of heating and transportation to meet their decarbonization goals, DERs such as distributed solar PV, battery storage, and peak load mitigation technologies are needed to ensure stability and mitigate the impact of increased electricity demands on the grid.
In the past five years, Dunsky has conducted over 20 DER potential studies across Canada and the US. We provide our clients with research and analysis needed to make investments and policy or business decisions with confidence, including information to help ensure a stable, decarbonized electricity grid.
The full study can be found on the IESO’s website, including Volume I: Results and Recommendations, and Volume II: Methodology & Assumptions.
About Dunsky Energy + Climate Advisors
Founded in 2004, Dunsky supports leading governments, utilities, corporations and others across North America in their efforts to accelerate the clean energy transition, effectively and responsibly.
With deep expertise across the Buildings, Mobility, Industry and Energy sectors, we support our clients in two ways: through rigorous Analysis (of technical, economic and market opportunities) and by designing or assessing Strategies (plans, programs and policies) to achieve success.