DR Auction Information Webinar · DR Working Group meetings •DR Pilots sub-group of the DR Working Group was also created and met three times to discuss program design •DR Pilot

DR Auction Information Webinar October 10, 2014

Introduction

• The purpose of this presentation is to provide background on Demand Response at the IESO and an overview of DR Auction development that has recently started with our DR Auction Stakeholder Engagement meeting on October 1, 2014

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What is Demand Response?

• Demand Response is an end-use customer’s reduction in electricity consumption in response to economic signals or power grid needs

• Demand Response is important because it is another competitive resource, used to maintain balance in the power grid

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Overview of DR Initiatives

1. Migrate OPA DR3 contracts to the IESO, bridging the time between contract expiration date to the delivery date of the DR auction

– In place for March 2015

2. Design Demand Response Pilot Program to test capabilities of DR participants to deliver energy into the IESO administered markets

– RFP to acquire capacity needed to participate targeted for Q1 2015

3. Design a Demand Response Auction to procure DR resources using a market-based mechanism

– Delivery targeted for mid-2016

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1. DR Migration into IESO

• In the 2013 Long-Term Energy Plan, the Minister of Energy transferred the responsibility of Demand Response initiatives in Ontario from the OPA to the IESO

• IESO has created a transitional program, Capacity Based Demand Response (CBDR), to migrate the OPA’s DR3 contracts to the IESO – provide the opportunity to seamlessly manage the operation and

settlement of capacity-type demand response resources – allow for design changes through an open consultation process

without the need to renegotiate contracts – give demand response providers experience working within the

administration and operation of the market

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1. DR Migration into IESO

• Participation in Capacity Based Demand Response is open only to participants who had DR3 contracts in place at the time of the Minister of Energy’s letter transferring responsibility for DR from OPA to IESO

• Capacity Based Demand Response for each DR Account terminates on the next delivery date of the DR Auction after the expiration date of the respective OPA DR3 contract. All OPA DR3 contracts expire by 2018, completing the transition to the IESO DR Auction

• CBDR will be in service March 2015

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1. DR Migration into IESO

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2. DR Pilot Program

• Demand Response Pilot Program will seek to: – Expand opportunities for DR to participate in the IESO

Administered Markets – Realize greater value and economic use of DR resources

• Pilot Program participants will deliver their load

reduction into IESO market services that are already in place

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2. DR Pilot Program

• Load Following – Investigate ways to make DR resources price responsive on

shorter notice than DR3, and for shorter periods of time (hourly and 5-min)

• Unit Commitment

– Allows load following resources to commit in advance to a load reduction in real time

– Allows consumers to compete with generators in both the Day-Ahead Commitment Process (DACP) and the 3 hour-ahead pre-dispatch commitment processes

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2. DR Pilot Program

• DR Pilot Program has been a discussion topic in several DR Working Group meetings

• DR Pilots sub-group of the DR Working Group was also created and met three times to discuss program design

• DR Pilot Program RFP – Target to issue RFP in Q1 2015 – ~100 MW in total size – ~2 years in length, end date will coincide with the delivery

period of a future DR auction

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3. DR Auction

• Demand Response Auction is the market mechanism to replace expiring OPA DR contracts, plus procure new DR MW – Competitive platform to allow for the selection of demand

response resources – DR providers submit offers for the capacity that they are able to

provide in the target year • A DR Auction is the subject of a Stakeholder

Engagement that began Oct 1, 2014 with a target DR delivery date of mid-2016

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Auction Characteristics

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Pre- Auction Determine number of MWs required

Pre-Auction report posted Qualifications to participate

Auction Process Bids from qualified resources are submitted by

a submission deadline

Clearing Price Bids are stacked in price from lowest to highest

Clearing price determined by the bid value to fulfill the MW requirement All successful participants receive the clearing price

3. DR Auction

Topics for Discussion:

• MW Requirement • Participant Qualification • DR Capacity Qualification • Pre-auction Reporting • Forward Period • Commitment Period

• Auction Mechanics • Delivery into Energy Markets • Monitoring & Compliance • Settlement • Cost Allocation • Prudential Security

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3. DR Auction

• Started October 1, 2014 with a Stakeholder Engagement meeting

• Stakeholder Engagement meetings will be approximately 3 weeks apart

• 2nd DR Auction meeting scheduled for October 20, 2014 • Targeting December 15, 2014 for a draft High Level

Design • Targeting January 2015 for finalized High Level Design • Targeting June 2016 Delivery Date

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3. DR Auction

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Illustrative DR Auction Project Timeline

Summary of Timelines

• Demand Response – DR3 Transition to Capacity Based Demand Response

• March 2015

– DR Pilot Programs • RFP – Q1 2015

– DR Auction • Stakeholder Engagement – Begins October 2014 • Delivery Date Target – Mid 2016

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Information

• Questions can be sent to [email protected]

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