Thursday, September 23, 2021
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Demand Response FAQ

Over the past few years, Edgecom Energy has gained a lot of experience as a Demand Response Aggregator in the Independent Electricity System Operator (IESO)’s Demand response program – now called the Capacity Auction. In this time, we have also received and answered a wide variety of questions from our customers relating to the program and how it works. Below you’ll find a selection of these questions and answers:

Why should I consider participation in the IESO’s Capacity Auction, formerly known as Demand Response program?
Participants are paid to be available to help the IESO balance the grid during times of high stress. This program allows you to generate profits from your flexible energy use in a no-cost, no-risk manner. Unlike other programs offered by the IESO, the Capacity Auction generates additional revenue for your company as opposed to savings.

Who can participate in the Capacity Auction Program?
Currently, there are 4 classes of assets that are deemed eligible to participate in the Capacity Auction: DR resources, non-contracted generation resources, system-backed capacity import resources, and storage resources. DR resources are loads that can curtail their demand from the grid when needed and include physical hourly demand response (HDR), virtual HDR and dispatchable loads. Generation resources are pretty self-explanatory and include assets like natural gas generators and small wind turbines that are not currently under contract. System-backed capacity import resources are broader and include capacity received from neighboring jurisdictions like Quebec or Michigan. Finally, storage resources are a particularly interesting asset class and include battery systems and compressed air facilities just to name a few.

What kind of payments can we receive?
Availability payments are calculated from the capacity auction market clearing price per MW and typically end up being between $45,000 and $55,000 per year per MW of commitment.

If we do get called on to curtail, how long does a curtailment event last?
The length of a curtailment event is 4 hours, you will receive an Activation Notice approximately 2.5 hours in advance of the event.

How do we determine how many kW’s we can comfortably commit to the capacity auction?
By granting Edgecom Energy access to your electricity interval data, we will at no cost to you, review your interval data and provide you with a report that highlights your current opportunity and past performance for both the capacity auction/DR program and the ICI program. This report will outline the kW amount you can comfortably commit.

What happens if we can’t deliver what we committed to?
You will have to pass a performance test for each of the summer and winter periods. Failing to pass a test may result in removal from the program and a loss of any potential availability payments. If you pass the test and receive a standby call for the next day but know you won’t be able to deliver your committed kW, you must let us know right away and we will remove your bid from the auction with no penalty and you will forego availability payments for that month.

Do you include a pulse counter in your agreement?
Yes, we include the installation of a pulse counter in our agreements. The data recorded on this meter is hosted live on our portal. Your baseline and curtailment target are then overlaid on the IESO’s 5-minute data, again visible in real-time on our portal.

What makes your offer better than others?
Transparency, you will know precisely what percentage of the total IESO payments are coming your way. Our percentages are very favorable.

What is the difference between the ICI program and the Capacity Auction, formerly known as the Demand Response Program?
In the ICI program, the IESO does not call curtailments - you need to make your own peak predictions or use a service like pTrack™. This program generates savings which are reflected in your GA (Global Adjustment) charges the following year. Typically, savings come in around $600,000/MW curtailed, spread over 8-15 curtailment events per year.

In the Capacity Market, the IESO calls curtailments when the Hourly Ontario Energy Price (HOEP) hits a critical threshold or if there's an emergency on the grid. This program generates revenue in the form of cheques paid out twice per year. Payments are directly related to the market clearing price and are usually around $55,000/year. Participants can expect 2-3 curtailment calls per year on average.

What is Alectra's Non-Wires Alternative?
Alectra’s Non-Wires Alternative (NWA) is a local demand response demonstration project. It allows Alectra to gauge if they can count on DR resources for certain distribution and transmission needs instead of building new poles and wires. This pilot is set to run for two years in a small demonstration area in Richmond hill and Markham.

What’s the difference between the Capacity Market and NWA?
Although the programs are similar, there are a few key differences between the IESO’s Capacity Auction and Alectra’s NWA. For starters, the activation payments are much higher in NWA. Alectra also aims to make more calls than the Capacity Auction, up to 10 compared to the 2-3 calls of the Capacity Auction. However, it’s key to note that facilities cannot participate in both programs at the same time.

Why is Demand Response now called the Capacity Market?
Back in 2019, the IESO evolved the Demand Response Auction (DRA) into the broader, more competitive Capacity Auction. By opening up the program to more resources, the IESO is able to acquire capacity in a cost-effective manner due to increased competition. This also allows them to respond to changes in supply and demand by having more resources at their disposal. Modifying the name also serves to better reflect the resource types that can participate as the list has expanded beyond traditional demand response resources. The Capacity Auction currently allows participation of eligible resources, including existing and available demand response resources, energy storage systems, dispatchable generators that are off contract as well as system backed imports.

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