The Power to Connect: A Roadmap to a Brighter Ontario
Building upon our 2017 vision paper, Power to Connect: Advancing Customer-Driven Electricity Solutions for Ontario, this new paper identifies current challenges and barriers to the evolution of LDCs, through an assessment of current policy, legislation and regulations. The paper also outlines steps Ontario’s policymakers can take to best serve the interests of our evolving industry.
Key highlights of Power to Connect: A Roadmap to a Brighter Ontario
- Alignment with Ontario’s Long-Term Energy Plan in its focus on customers, cost-effective electricity, greenhouse gas (GHG) emissions-reduction targets, and the evolving role of LDCs;
- Solutions mapped to Ontario’s goals of prioritizing conservation, innovation and a more flexible regulatory framework;
- A roadmap to facilitate LDC leadership in enabling, integrating, owning and operating distributed energy resources (DERs) to better meet customers’ needs.
The Electricity Distributors Association (EDA) recognizes that its industry is in transformation and that the roles and responsibilities of Local Distribution Companies (LDCs) are evolving rapidly from the simple ‘poles and wires’ businesses of the past. For this reason, the EDA’s vision paper entitled The Power to Connect, Advancing Customer-Driven Electricity Solutions for Ontario (“Vision Paper”), released in February 2017, outlined a robust vision for the role of LDCs that supports the industry landscape of the future.
Given that LDCs are confronted with greater demand for the integration of distributed energy resources (DERs), such as distributed generation resources, load control and other technologies, such as solar, wind, energy storage, electric vehicle (EV) charging infrastructure, fuel cells, demand response (DR), and conservation and demand management (CDM), the Vision Paper proposed a framework for LDC transformation through three dimensions:
1. DER-enabling Platform – development of an intelligent platform for DER integration in distribution systems;
2. DER Integration – LDC ownership of DERs; and
3. DER Control and Operation – optimize and coordinate usage of DERs.
LDCs that embrace an evolution in respect of these three dimensions will ultimately become Fully Integrated Network Orchestrators (FINOs) which actively manage DERs within their network and provide greater value and services to their customers. This report builds on the foundation set by the Vision Paper by identifying the challenges and barriers for the evolution of Ontario’s LDCs towards becoming FINOs through an assessment of current policy, legislation, and regulations including the Ontario Government’s 2017 Long-Term Energy Plan (LTEP) and provides input for implementation considerations.
The 2017 LTEP and the Vision Paper are strongly aligned. Both documents place a focus on electricity customers and the need to provide cost-effective electricity while meeting greenhouse gas (GHG) emissions reduction targets set by the province in an evolving energy landscape. And, both documents envision changing roles and responsibilities of LDCs in conjunction with the deployment of DERs.
Like many North American jurisdictions, Ontario is reaching an important inflection point. Advancements and cost reduction of distributed generation, EVs, and other smart grid technology, coupled with aggressive GHG emissions reduction targets mean that LDCs will experience increased penetration of DERs within their networks. If unplanned and uncoordinated, customers may be exposed to increased costs and lower reliability. Alternatively, strategic planning and an alignment of the policy and regulatory environment could lead to benefits for customers, such as decreased costs, increased control, and improved reliability.
Five underlying themes have been identified that hinder LDCs from fully transforming to FINOs. Within the context of Ontario’s statutory framework, these are:
- Updated Rules and Provisions: Rules and provisions governing LDCs have not been updated to reflect an increase of DERs within distribution networks (e.g., priority access); there is a need for clearer definition with respect to the services provided by certain DERs (e.g., energy storage); and LDCs’ licences are restricted to distribution services limiting their ability to operate DERs;
- Augmented Distribution Planning: DERs increase complexity of distribution planning; there is a need for additional guidance with respect to rate-basing DERs and deployment of smart grid; and the current Ontario Energy Board (OEB) Renewed Regulatory Framework for Electricity (RRFE) scorecard evaluates LDCs based on a traditional utility model;
- Uncoordinated Centralized Procurement: Centralized procurements of electricity resources (e.g., distributed generation, etc.) do not necessarily align with LDC planning and LDCs do not have a requirement to serve load;
- Perception of LDC Capabilities: LDCs will transition to FINOs with different trajectories, and therefore a range of LDCs must be accommodated within Ontario’s statutory framework; and
- Pricing and Rate Design: Current wholesale electricity prices do not accurately reflect the locational cost and value of electricity demand and supply, which in turn does not allow full benefits of DERs to be realized.
To address these issues, the following nine high-level solutions have been identified:
- Leveling the playing field for DERs;
- Improved definition of DERs and potential services;
- Improving distribution system plans (DSPs) through investments in grid visibility;
- Remove restrictions on LDC ownership of resources;
- Guidelines for rate-basing of DERs and DER-enabling assets that are consistent with DSPs;
- Coordinating and decentralizing procurement of resources and DERs;
- Allowing LDCs to control and operate DER assets;
- Shared services of LDCs with respect to control and operations; and
- Eventual development of distribution locational marginal prices (LMP+D).
A PROPOSED IMPLEMENTATION TIMEFRAME IS PROVIDED BELOW:
In summary, proposed solutions identified within this paper are in line with Ontario’s goals and objectives of achieving greater value for electricity customers and GHG emissions reductions, including:
- Provides options for customers and helps achieve GHG emissions reductions through the adoption of new technologies (e.g., EVs);
- Provides guidance to LDCs who in turn will provide customers with choices to manage electricity costs, and will improve the deployment of energy storage and EVs;
- Augmented planning will help ensure investments are right-sized to meet customers’ needs (e.g., active visibility and control of resources would also inform distribution planning with respect to when resources should be maintained, retired, or replaced);
- Improves economic sustainability of LDCs;
- Better alignment of procurement activities will help reduce costs to customers overall;
- Allows a mechanism for LDCs to invest in non-wires alternatives that are the best and most cost-effective option to meet local needs;
- More efficient use of resources could help reduce costs to customers;
- Reduces costs to customers through shared services that will also be designed to optimize distribution assets; and
- More efficient prices and rates will appropriately incent investments and provide input into distribution system planning.
Like many other segments of the economy, the electricity sector is undergoing a transformation given the potential for new technologies and services. The most transformative companies in today’s economy not only leverage new technologies but have re-defined how services are provided to customers and maximize the latent value of existing infrastructure. Uber is the most obvious example of this new type of entrepreneurship – they are the largest new provider of taxi services without owning any taxis. Likewise, LDCs should maximize the latent value of resources within their networks (e.g., energy storage system that helps customers mitigate electricity costs may also be able to provide grid services cost-effectively, benefitting electricity consumers more broadly).
The EDA’s Vision Paper provides a goal for LDCs that want to become active facilitators in a transformed electricity market, one that puts customers first and maximizes the utilization and value of electricity assets. This companion report has identified the challenges and barriers and can be used as a roadmap for consultation activities going forward through its proposed recommendations and solutions to facilitate LDCs transforming to FINOs.
The Power to Connect Vision Paper 2
For More Information:
Vice President, Policy, Government and Corporate Affairs
1 877 262 8593