Interoperability and Non-Wires Alternative Demonstration

Lead Proponent

Independent Electricity System Operator (IESO)

Project Background

The IESO and delivery partner Alectra Utilities undertook the Non-Wires Alternatives Demonstration project to explore market-based approaches to securing local energy and capacity services from DERs. The Demonstration focused on using DERs as non-wires alternatives (NWAs), which are resources that provide electricity services as alternatives to traditional infrastructure investments. The Demonstration took place in the southern York Region in Ontario, including municipalities/townships of Vaughan, Markham and Richmond Hill.

The objective of the project was to investigate newly proposed, advanced, whole-system operation and market models for a smart grid, high Distributed Energy Resources (DER) future. The project focused on:

• Development of an interoperability framework, assessing division of grid functions, transmission-distribution coordination requirements, technical feasibility, and cost-benefit.
• Design of a Non-Wires Alternative (NWA) market for third party service providers that is interoperable with participation in the IESO’s wholesale markets, on a demonstration basis.
• Development of communication and dispatch protocols for IESO, local distribution companies, DERs and aggregators, and deployment of information and communication technology infrastructure needed, for demonstration purposes.
• Demonstration of new distribution-level functions and coordination with wholesale-level functions.

Results

The project was successful and met its primary objectives. The project introduced various new concepts, mechanisms, and processes for operating a market, showcasing the potential benefits of employing DERs as substitutes for traditional infrastructure. The results and findings support the achievement of the overall objectives for the project.

• The economic value of DERs, both as a local resource and as an alternative investment to traditional distribution, transmission, and generation infrastructure, was found to be net positive in most scenarios evaluated.
• Average DER portfolio performance was high (81-91%), but there were over/under deliveries by different DERs.
• Processes for improving coordination between transmission and distribution operations and wholesale and local markets were explored.
• The project demonstrated a streamlined approach to procuring services from DERs to enable local pricing and participation by customers, businesses, and communities that is aligned with electricity system needs.
• The demonstration’s rules and contracts documentation have informed other Ontario pilots with different approaches.
• Findings support potential for ‘stacked services’ opportunities for DERs, assuming sufficient penetration of DERs in a given service area to support energy needs
• The project showed that auctions are a promising mechanism to secure local capacity and local energy services, including local reserve, from DERs.

As the energy transition progresses and the penetration of DERs continues to rise, there is likely to be an increased focus on refining local market design and enhancing operational coordination. This demonstration project provides a promising local market option as system operators, regulators, policy makers, DER participants, and other stakeholders consider a broad set of strategies to advance integration of DERs in electricity system to support the energy transition as an alternative or deferment for traditional electricity system infrastructure.

Benefits to Canada

The Demonstration generated multiple benefits across several dimensions, including:

• Market Enabling: The project demonstrated a DSO facilitating local services and ways to coordinate these services with the wholesale market, paving the way for potential new market opportunities.
• Cost Reductions: The key potential economic benefits of enabling DERs to participate in multiple services across the electricity grid is the reduction in the cost of DERs providing each individual service. If DERs can provide services at lower cost, they may contribute to lowering overall electricity system costs. Similarly, enabling participation of additional smaller scale DER resources may translate to increased competition, thereby also contributing to lowering overall electricity system costs.
• Energy Transition: Better integration of DERs into the electricity system supports the broader energy transition towards a cleaner economy. DERs, such as electric vehicles, battery storage, and heat pumps, can support a smarter grid, where DSOs actively manage services and coordinate with the IESO.
• Customer Choice: Utilizing DERs for electricity services presents a new option for consumers, providing an additional way to manage their energy bills. Allowing customers the flexibility to both consume and provide services can foster a more inclusive and dynamic electricity market landscape.

Next Steps

While the Demonstration has come to an end, its dedicated webpage for stakeholder engagement remains active on the IESO's website. This resource hub hosts all key project documents, ensuring ongoing accessibility for interested parties.

The project produced several whitepapers that provide in-depth analysis and insights that guide understanding and implementation of effective market mechanisms for DERs and coordination models among DSOs, DER participants, and system operators. The Demonstration’s rules and contracts documents can serve as references for designing and informing similar projects in the future.

The outcomes of the Demonstration are expected to help inform the IESO’s and the broader sector's strategies for integrating DERs. The Demonstration was included on the IESO’s DER Roadmap, and the IESO-hosted Transmission-Distribution Coordination Working Group (TDWG) has made use of the Demonstration’s outputs to inform its discussions and ongoing work.