The Power to Connect: Advancing Customer-Driven Electricity Solutions for Ontario
The EDA's vision paper, "The Power to Connect: Advancing Customer-Driven Electricity Solutions for Ontario," proposes a new way forward for Ontario's electricity system that recognizes consumers as drivers of change and places local utilities at the centre as they leverage new technologies to deliver high-quality electricity services. It envisions local utilities owning, operating and integrating small-scale clean energy and storage systems, also known as distributed energy resources (DERs), right into their local systems to better meet consumer needs while augmenting the bulk power grid.
The electricity grid is undergoing significant transformation to become clean, distributed and intelligent. This is evident in the disruptive triggers associated with technology and innovation, changing market demands, and regulatory and policy shifts. Declining costs of distributed energy resources (DER), digitalization, data analytics, rising customer empowerment, and climate change policies challenge the status-quo.
Local Distribution Companies (LDCs) have a unique opportunity to be at the vanguard of grid transformation by deploying enabling technologies and developing a service platform that provide new innovative offerings to customers and DER providers. The Ontario Energy Board has recognized the changing role of LDCs: “The nature of electricity distribution has been changing for the past decade and will continue to change. Distribution companies have acted as a delivery route for power from the grid to consumers. In the future they will act more as a service platform offering services such as balancing, power quality, storage, and redistributing power from users connected to their systems.” (EB-2015-0043 Rate Design for Commercial and Industrial Customers, OEB, 2015).
LDCs are the incumbent owners and operators of Ontario’s electricity distribution grid that interfaces with and integrates the transmission system and customers. By leveraging their existing customer relationships, expertise, brand recognition, and knowledge of their local distribution networks, LDCs are uniquely positioned as the most efficient and cost-effective service provider to lead the transition to a cleaner, more distributed and more intelligent grid.
The purpose of this paper is to present the EDA’s vision for the future role of LDCs, and in turn allow LDCs, government, agencies and interested other parties to better prepare for the challenges and opportunities that will arise in the rapidly changing energy landscape.
Business as usual is no longer an option as it does not sufficiently reflect policy goals and customer demands. This is true not only for LDCs, but for all players in the electricity market. The LDC’s traditional “poles and wires” model will become increasingly inadequate as the level of DER rises and markets become more competitive and complex. The changing energy landscape requires all market players to adapt new strategies to resolve challenges and position themselves for future growth. The roles and responsibilities of LDCs, as well as the government and its agencies, the Independent Electricity System Operator (IESO) and the Ontario Energy Board (OEB), must evolve in response to changing market conditions and market demands as DER penetration increases.
Ontario shares common goals with other jurisdictions to address climate change and facilitate the penetration of cost-effective DER. Ontario’s Climate Change Action Plan includes conservation, energy efficiency and fuel switching to reduce the use of fossil fuels and increase the use of clean electricity and clean fuels. The IESO’s Ontario Planning Outlook (OPO) reports electricity demand outlooks driven by different levels of electrification as a result of policy choices on climate change. The higher demand outlooks assume 2.4 million EVs on the road by 2035, which translates into 8 TWh of incremental energy (OPO2, IESO, September 2016). LDCs are critical to enabling DER in Ontario’s energy system and to cost effectively satisfy increased demand for electricity through electrification of transportation and fuel switching.
While LDCs across Ontario are proactively innovating and expanding their capabilities within the current regulatory framework, a more flexible regulatory environment will be essential for LDCs to keep up to date with rapidly evolving market conditions. Moreover, public and worker safety and customer reliability will continue to be a priority as LDCs connect DER across their networks.
There will still be a need for considerable investment in traditional distribution infrastructure, hence regulatory reform must be prudently balanced in order to ensure cost-effectiveness. One of the key challenges will be developing fair and transparent rules to achieve the appropriate balance between traditional regulated investments and those that enable and accelerate the development of new, competitive markets.
The EDA sees the LDC of the future as significantly different from current LDCs in three key dimensions: 1) The extent to which an LDC provides a DER enabling platform; 2) The degree of DER ownership by an LDC, and 3) The degree of control and operation of DER.
Specifically, the EDA sees the LDC of the future playing a key role in Ontario’s energy transition as a Fully Integrated Network Orchestrator (FINO). As a FINO, the LDC of the future will potentially enable, control and integrate DER within its distribution service territory. Each LDC will evolve to a FINO at a different pace and to a different degree and there will need to be significant collaboration amongst LDCs related to DER enablement, control and integration as they evolve to become FINOs over the next 10 to 15 years and beyond.
To realize the Power to Connect vision, the EDA intends to:
- Engage members on the Power to Connect vision.
- Engage the Ministry of Energy in its development of the 2017 Long-Term Energy Plan.
- Organize a working group to develop a plan to guide the Power to Connect vision.
- Collaborate with external stakeholders on definitions, guiding principles, and essential regulatory changes to realize the Power to Connect vision.
- Investigate regulatory changes and alternative regulatory frameworks that will incentivize LDCs to integrate DER, where doing so brings economic and/or system efficiencies.
- Develop a cost-benefit analysis framework for evaluation of DER and DER enabling technologies.
- Facilitate collaboration amongst LDCs, third party DER providers and energy solutions vendors to accelerate efforts for cost-effective deployment of DER and enabling technologies.
- Work with the OEB and IESO to develop a process that will monitor the responsiveness of the regulatory framework to the energy grid transformation.
For More Information:
Vice President, Policy, Government and Corporate Affairs
1 877 262 8593