by Stephen Kishewitsch
On December 16 Ontario Energy Minister Bob Chiarelli issued a directive to the Ontario Power Authority, together with the Independent Electricity System Operator, to procure 50 MW worth of electricity storage capacity by the end of 2014. The directive followed on the call for the inclusion of storage in the latest version of the Long-Term Energy Plan, also issued in December under the title “Achieving Balance.” The OPA and IESO responded jointly at the end of January with a proposed framework.
The proposed framework sets a two-stage process, with the IESO leading the first phase of the procurement for 25 to 30 MW worth of ancillary services, consisting of five to eight different solutions ranging in size from 2-8 MW each. At the request of the Minister the total amount to be procured by the IESO in Phase I has been increased to 35 MW. See the conversation with Kim Warren, this issue, for an explanation of how that affects the procurement.
This is to be followed by a Phase Two led by the OPA for the remaining capacity. Phase two is currently scheduled for the first or second quarter of this year, and will be “designed to address the emerging issues of the evolving electricity system as described in the Long Term Energy Plan (LTEP). It will focus on areas that can provide the best long-term benefit to the ratepayer while allowing maximum opportunities for storage suppliers to demonstrate their technologies.” Consideration will be given to remote communities to further reduce their reliance on diesel generation.
The Framework is available online.
Phase 1
As the IESO explains, Phase 1 will be designed to engage a diverse portfolio of storage technologies in order to learn about the various services that storage solutions can provide, the value of these services in system operations and how storage can best be integrated into the electricity markets.
The initiative builds on the Alternate Technologies for Regulation RFP, a pilot procurement, under the heading “Alternative Forms of Regulation,” that the IESO used recently to secure ten megawatts of regulation services. That procurement, announced in December 2012, resulted in contracts with three different service providers, using three different technologies:
• Demand-side management, with a response time of milliseconds, from ENBALA Power Networks, through operational flexibility offered by ENBALA’s partners in business and industry. (See articles on ENBALA’s system titled “IESO selects first commercial grid-balancing services” and “Toronto company’s system fine-tunes grid balance,” in earlier issues of IPPSO FACTO.) ENBALA has about half of its contracted 4MW underway; it includes the chillers at Sunnybrook Hospital. “That’s been really quite successful,” comments IESO Chief Operating Officer Kim Warren. “In fact it’s nice to see a hospital get a revenue stream while providing this service.”
• Flywheels from Temporal Power, together with NRStor, providing two MW of regulation service by ensuring fast-response energy for grid balancing. The flywheels are built and on site, and expected to be operational shortly.
• Battery storage provided by Renewable Energy Systems Canada Inc. (RES Canada) in southwestern Ontario, and expected to be in service around October.
The new RFP, with lessons learned from that experience, was issued March 12. There was a briefing session for respondents in a webinar on March 24, the proposal deadline is April 28, and project selection is scheduled for June 1. Kim Warren comments on the RFP and what has been learned from the process in a separate article in this issue.
Phase I will seek storage solutions that, in addition to providing ancillary services, address system needs (e.g., surplus baseload generation management, thermal limits, power quality, Loss of Load Expectation). Suitable locations around the province are also identified, in four “envelopes:”
1. Transmission Connected Resources in Uncongested Areas – Southern Ontario
2. Transmission Connected Resources in Uncongested Areas – Northern Ontario
3. Transmission Connected Resources in Congested Areas
4. Distribution connected projects supplying grid services
The RFP, available on MERX, breaks these down into further detail.
Key elements of the contracts are to include:
• Fixed (capital costs) and operating (variable costs) paid by IESO-administered markets and recovered via uplift
• Targeted 5 year term
• Ability to substitute contract service payment streams to new/evolving ancillary services or markets that may be developed by IESO during the term of the contract
• Ability to consider other public funding revenue streams (e.g. Smart Grid funding) to prevent duplication of payments for same services
• Requirement for data sharing among IESO, OPA and the OEB to ensure cooperative learning
• Suppliers will submit offers and receive dispatch instructions
• Terms will be included in the contract structure providing flexibility, should a capacity market, locational pricing or some other market rules be implemented. These terms will allow for the contract to be dynamically adjusted as the market evolves.
The Ontario Energy Storage Alliance (OESA), formed in 2012 and recently renamed Energy Storage Ontario (ESO), submitted a proposed draft storage RFP to the OPA and IESO. In an email, ESO Executive Director Robert Stasko comments, “Our members were very pleased that energy storage was singled out for an early RFP as part of the LTEP. The 50 MW is probably a good number to start with, such that we can collectively learn how best to move forward with a more substantive storage procurement sometime down the road and after we gain from the initial experience with the 50.
“The split between the IESO and the OPA also seems appropriate as one is needed in the short term and one is more longer term. As I understand it both the IESO and the OPA expect to vet the proposals for best value propositions but in a wide range of applications across the Ontario grid. This is my speculation – but I suspect they will be looking for a broad distribution of projects geographically, contractually and technologically. That is how we will best learn what works, where and how.
“We made the case [in their draft contract] that contractual simplicity for both delivery of support services and for subsequent compensation payments would be ideal. We also felt that an even playing field for all would be the best way to incent new projects – such that LDCs and private storage service providers would be treated the same.
“One final thought – the 50 MW was a directive from the Ministry, but in our view it need not be the upper bound. The IESO identified several locations on the grid that could benefit from storage, and the approximate size needed in each case. The totality was much more than 50 – more like 125 as I recall. If after the responses to the RFP are evaluated and there is a compelling business case for a basket of projects that collectively exceeds 50 MW – we would suggest that 50 should only be the lower limit.”
Under the December 16 Directive, the OPA/IESO framework is also expected to address “the main regulatory barriers preventing storage from competing in the energy market on an equal footing.” The OPA/IESO procurement framework identifies some in a general way:
• Applicability of certain rates and charges (e.g. Demand charges, Debt Retirement Charge, Uplift fees)
• Licensing requirements
• Gaps in the application of Safety Codes under certain conditions (Electrical Safety Authority).
The Framework notes that the OEB’s Smart Grid Advisory Committee, of which both IESO and OPA are members, is to provide a more complete report on regulatory barriers to storage and potential solutions by end of June.