The Electricity Distributors Association, representing Ontario's distribution utilities, proposes to integrate small-scale power sources, storage and demand response to deliver high-quality electricity services for customers using Ontario's electricity system.
The association acknowledges the growth of local distributed energy resources that are shared between the customer and the utility and work in tandem with the existing bulk power grid, it said in a newly released report Navigant Consulting prepared for the group with the help of more than 50 Ontario utility CEOs and many other sources. The association's press release, issued Feb. 2, is headed, "Report sees Ontario consumers driving tomorrow's electricity system."
The report, "Power to Connect: Advancing Customer-Driven Electricity Solutions for Ontario," concludes distributed energy resources will be key to achieving a more resilient system and alleviating cost pressures, the association said in the press release. Membership in the association includes large utilities such as the newly formed Alectra Inc. and Hydro Ottawa Holding Inc. plus many of Ontario's smaller electric distribution utilities.
The purpose of the "vision paper" is to enable the association's member utilities to better prepare for challenges and opportunities in Ontario's rapidly transforming system, according to the report's fact sheet.
"The local utility of the future will be more than just a distributor of electricity," the fact sheet said. "Over the next 15 years, utilities will also operate fully integrated energy networks with two-way power flows by enabling, owning or controlling small-scale [3-kW to 50-kW] power generation and storage technologies, known as DERs."
Customers will take active roles to contribute to a more flexible and sustainable grid, the fact sheet continues. Utilities will provide "intelligent platforms" for customers to "plug-n'-play" assets such as microgrids, energy storage, demand response and electric vehicle chargers. Utilities will aggregate and coordinate these assets by sending pricing signals and dispatching resources and may even become full-scale network operators.
As "enablers, integrators and orchestrators of DERs," the utilities will have access to new revenue sources such as platform transaction fees, electrical vehicle charging services, data management services and energy management services, the report said.
The report provides examples where innovations and projects toward this vision are already occurring. It then recommends local utilities engage the Ministry of Energy and collaborate with each other and third-party energy solutions vendors to deploy enabling technologies. The report also urges the utilities to work with the Ontario Energy Board to develop regulations that would provide incentives for DER integration.
As owners and operators of Ontario's electricity distribution network, the local utilities are well suited to manage the evolutionary shifts in generation, delivery and consumption of electricity. Declining costs of DERs, digitalization, data analytics, rising customer demand for services and climate change concerns are fueling this evolution, the report said.
The report emphasizes the value of local distribution utilities as links between the transmission grid with its bulk energy resources and individual customers. Coordination between the Independent Electricity System Operator and local utilities will be needed to enhance effective use of DERs alongside centralized generation, especially as the grid decentralizes. Also, coordination among local utilities requires the grid operator.
"The IESO's role and responsibilities must evolve in response to changing market conditions and market demands as DER penetration increases," the report said.
The local companies can provide real-time visibility and interaction with customer-sited and distribution-level DERs. Utilities can leverage existing customer relationships, brand recognition and knowledge of their local networks to collaborate with third-party vendors that offer innovations and new products.
Local utilities can also collaborate with one another, and through their diversity, share unique experiences and lessons learned from many innovative projects they are already pursuing. They could accelerate their efforts by sharing services and participating in joint ventures, the report suggests.
The paper provides a timeline over the next two years for the association to deploy initiatives such as organizing a working group to plan and guide the "Power to Connect" vision, engaging the provincial government in supporting grid modernization, pushing for regulatory changes, developing cost-benefit analyses, and other tasks.
A key challenge will be to change Ontario's regulatory structure to allow local utilities to adapt and innovate, the report said. Local utilities find it difficult to get approval for distribution system modernization investments to address future customer needs beyond present day operations.
"Regulation must allow for some risks to enable investments in new technologies," the report said. "If LDCs [local distribution companies] are compensated for implementing DER solutions that maximize value in the system, whether it be through incentives or cost recovery, economies of DERs can be achieved earlier and LDCs can earn revenue."