IESO Energy Storage Advisory Group Recommendation Report Summary and Commentary

Date: January 21, 2019
For parties interested in: Energy Storage and innovation in Ontario

CONTEXT
• Independent Electricity System Operator (IESO) released “Removing Obstacles for Storage Sources in Ontario” report1 on December 19, 2018 based on consultation with its Energy Storage Advisory Group (ESAG).
• The report focuses on identified obstacles and mitigating strategies to help ensure fair
competition of energy storage resources in the Ontario electricity market.
• IESO makes a series of recommendations to support the mitigating strategies in the report; recommendations are for the IESO as well as the Ontario Energy Board (OEB) and the Ministry of Energy, Northern Development and Mines (MENDE).

BACKGROUND
As outlined in their Long-Term Energy Plan (LTEP) Implementation Plan, the IESO established the ESAG to “Identify potential obstacles to fair competition for energy storage with other technologies in the delivery of services and, where appropriate, propose mitigation strategies” 2. The ESAG3 was launched in April 2018 to advise, support and assist the IESO in evolving policy, rules, processes and tools to better enable the integration of storage resources within the current structure of the IESO-administered markets (IAM). The objectives of the ESAG are to:

• Support the IESO’s work to identify obstacles to fair competition for energy storage
resources;
• Provide input to the IESO’s work plan and/or list of priorities to address storage related issues and opportunities; and
• Advise, consult and coordinate discussions on issues which may affect storage participation in the existing IAM.

Energy Storage Advisory Group
The ESAG met monthly to identify potential barriers to energy storage, develop criteria and principles for assessment of the barriers, and finally develop mitigating strategies to the barriers. The ESAG and IESO identified thirty-five (35) obstacles to energy storage’s fair competition in the Ontario electricity market. The identified obstacles were sorted by the IESO based on those that were in scope (and would have a mitigation strategy developed) and those obstacles that were out of scope for the LTEP implementation plan objective.

Criteria for Identified Obstacles and Principles for Mitigating Strategies

The IESO applied criteria to each identified obstacle to determine if a barrier was in scope to develop a mitigating strategy. The main criteria question was:
• “Is storage prevented from, or burdened in, competing with other technologies in the
delivery of services that they are otherwise capable of providing?”
A “yes” to this criterion implies that the issue under consideration is an obstacle and warrants mitigation. If the answer to the main criteria was not clear, the IESO applied two additional test questions:

1) Are Ontario’s electricity market rules, codes and regulations able to accommodate the evolution and competition of new technologies such as storage resources? and
2) Is the treatment of storage resources, with respect to regulatory and market charges
consistent with the intent of those charges?

A “No” to either of these testing questions implies that the issue is an obstacle and warrants mitigation. Of the 35 obstacles identified by the ESAG, 15 were determined by the IESO to be in scope and appropriate to develop mitigating strategies for. A summary of the obstacles identified can be in a table at the end of this client note.
Mitigating strategies were developed under the guidance of the Market Renewal Program (MRP) Guiding Principles. The MRP is a comprehensive enhancement to Ontario’s wholesale electricity market design, addressing known issues with the market design. The principles of MRP are:

• Efficiency – lower out-of-market payments and focus on delivering efficient outcomes
to reduce system costs
• Competition – provide open, fair, non-discriminatory competitive opportunities for
participants to help meet evolving system needs
• Implementability – work together with our stakeholders to evolve the market in a
feasible and practical manner
• Certainty – establish stable, enduring market-based mechanisms that send clear,
efficient price signals

Find the full report in PDF format here.