Independent Electricity System Operator
IESO Announces Results of Demand Response Auction
The Independent Electricity System Operator's (IESO) second annual demand response auction has resulted in both increased participation and prices for demand response capacity that are 12 to 17 percent lower than those achieved in 2015.
The auction is an annual competitive process through which demand-side resources are selected to be available to reduce their electricity consumption, as needed, during the summer of 2017 and winter of 2017/18.
In recent years, DR has helped reduce peak demand on summer days by as much as 1,200 megawatts (MW). The auction marks the latest milestone in the IESO's ongoing efforts to expand Ontario's DR capabilities and transition multi-year, contract-based DR to a more cost-effective, competitive market-based platform. This structural change facilitates the entry of new DR suppliers and provides the IESO with greater flexibility to respond to changing system conditions and needs.
This is the second DR auction that the IESO has held, with the first one held in December 2015. For the auction, participants were required to submit their demand reduction capacity (in MW) and their offer prices for the summer and winter periods.
The successful DR providers will be integrated into the electricity market along with generators and will help provide capacity to ensure the province's energy needs are met during peak hours.
Twenty-one organizations were registered as DR auction participants prior to the auction, an increase of five participants over last year's auction. The clearing price for the summer commitment period is $331.33/MW-day, and for the winter commitment period is $299.48/MW-day. This is a reduction of 12 percent for the summer and 17 percent for the winter commitment period when compared to the 2015 DR auction, reflecting good competition between existing resources and new entrants.
Proponents included high-volume transmission-connected industrial, commercial and institutional users, as well as local distribution companies and consumers whose facilities are connected to low-voltage distribution systems and whose contributions are managed by an aggregator. For the first time, residential homeowners, participating through an aggregator, were eligible to take part in the auction and were successful in being selected.
Additional information about the auction is available at http://www.ieso.ca/Pages/Participate/Demand-Response-Auction/default.aspx.
"We are pleased with these results and the downward trend in pricing we are seeing," said Bruce Campbell, President and CEO of the IESO. "These results reinforce the benefits for Ontario electricity customers of emerging market-based platforms and the value of the work that the IESO is initiating to improve the efficiency of the market and introduce a capacity auction for all resources."
The DR auction is facilitating the entry of new DR suppliers and provides a transparent and cost-effective way to select the most competitive providers of DR, while ensuring that all providers are held to the same performance obligations.
The next DR auction will be held in December 2017, for delivery of DR capacity between May 2018 and April 2019. In the future, demand-side resources will have the opportunity to compete, through a capacity auction, against other capacity providers such as generation and imports to cost-effectively meet Ontario's electricity needs.
About the IESO
The IESO manages the province's power system so that Ontarians receive power when and where they need it. It plans and prepares for future electricity needs and works with its partners to guide conservation efforts.