In a telephone interview, the IESO’s COO and Vice-President of Operations Kim Warren answered some questions and offered some insights on the current procurement for storage:
IF: People who follow the subject will recall that the framework the IESO and OPA jointly developed initially set a timeline of the third week in February for the issuance of its RFP. In the end, the RFP was just issued on March 12. Why did it take longer?
KW: Yes, it was our intention to issue the RFP by February 21. That timing was initially proposed by the storage community, in an earlier stakeholder session. We sent our framework for the RFP to the Ministry on January 31, as planned. After that, there were logistical issues, and things generally just took a little longer than anticipated. But the storage community still sees the timing as favourable, and they’re happy. It’s still an unbelievably aggressive timeline.
As a result, the other dates have been pushed back: there will be 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.
As to why: this has been one of the more complex arrangements we’ve ever had to manage. We issued an RFP for a fairness advisor for the procurement – look at that for comparison. We knew exactly what we wanted, we knew what was out there, the time period, everything. And we got a fairness advisor. Now we’ve put together an RFP on storage-type technologies, some of which we’re aware of, some of which we may not be aware of – we have no idea who may actually come to the door, what technologies they’re going to propose, where they might want to connect, how big they may be, or how expensive, what services they may or may not be able to supply, or at what cost. We’re trying to procure up to 35 MW of something, on a competitive basis, to provide value into a market that we’ve never seen before. And we have to do everything in a fair, open and transparent manner, yet we don’t know whom we’re going to do this with. We can’t craft the RFP based on just what we know. We have to craft it in a manner that meets the Minister’s directive to maximize the diversity of technologies. The hard part, and this is why it took a couple extra weeks, is that we have to be very careful in the language we use. In effect we needed to precisely define, in the RFP and contract language, something that cannot at this point be precisely defined. We had a lot of smart people trying to figure this all out.
IF: Initially the framework talked about procuring five to eight projects, for between two to five megawatts of storage each. That was when you were considering contracting 25 to 30 MW of storage, out of the total of 50 called for in the Minister’s Directive. He then called for 35 MW worth. Will those numbers change at all?
KW: There are four ‘envelopes’ [see the previous article on the framework of the procurement, for details].
We’re looking for about 20 MW or so in the first envelope (uncongested areas in southern Ontario), and about 5 in the others. Then, the first three envelopes are the 2 MW minimum. For the last envelope, the distribution-embedded, the minimum is half a MW.
Historically, to operate within the market, we had a 5 MW minimum. When we did the alternate technologies for regulation initiative we dropped that down to 2, and the storage community asked us to see if we could drop it lower and we did that, to .5 MW.
The idea is to maximize diversity in technologies, in order to maximize the learning opportunities. So for the upper limit, we’ve restricted projects to a maximum of 10 MW. Then between the 2 MW minimum in the first three envelopes and .5 in the fourth, we could end up with fifteen projects. I don’t know how likely that is but it’s possible.
IF: What different types of ancillary services do you think you could ultimately identify and want to procure?
KW: These are contracts for ancillary services, so they must provide certain services or they can’t get a contract. Typically they provide regulation or assist us in voltage control. So once we have that, we can try other things, like arbitrage, peak shaving, demand response, congestion management, and we will test all of these items out.
IF: What did the IESO learn from the earlier Alternative Technologies RFP, and how is that reflected in the present one?
KW: Just doing the work was a bit of an eye-opener. We had to lower the threshold into our tools – in the past, generators would complain about the noise, as they’d call it, in our dispatch signals – ‘you send us up, then you send us down, then you send us down, then you send us back up.’ They wanted us to smooth out those signals, send us every fourth signal instead of every one, that kind of thing. Minimize the chatter. Well, that’s the lifeblood for these kinds of technologies, so we actually want to maximize the chatter. That means changing our software, working on the metering, the validation, so that we’re paying for a product that we’re actually receiving. That took some effort.
IF: How do you see the role of storage evolving?
KW: I see tremendous value in storage for the province, and I think the OPA does too. The issue has always been cost, and value for the consumer. That’s why we’re taking the small steps, maximizing our learning. There are still opportunities for large-scale with the OPA’s large renewable framework. Over time costs will come down, with innovative technologies, new materials, new ways of manufacturing.
You have a consumer base out there that’s completely changing its consumption patterns. They have a better appreciation of price, need, the environment, they’re taking a more active role in how they consume. We don’t have a lot of flexible resources on the grid, and we’re adding more variability. And we have a consumer who’s moving away from traditional patterns. I think all that lends itself to what storage can do for us in the future.
We have about one-sixth the storage that New England does. We also have a 12,500 MW nuclear fleet, three times the fleet of anyone else in North America. Even after retirement at Pickering we’ll have more than twice anyone else. At the same time, much of our hydro is baseload. Then you add the wind and solar, with their variability. Based on that, I think Ontario is an obvious choice for storage – if it makes sense anywhere it makes sense here first. Everyone else around us has 600 to upwards of 1200 MW worth, and they’re moving ahead on more. California has decided to procure 1300 MW, and they’re not 50% nuclear like we are. I understand that some of these facilities were built forty years ago, and for significantly less than we may have to. But some of these facilities may be able to operate with us for decades, so they’re not just short-term solutions. I am a big fan of storage, I think it can do great things for this province.