On March 12, 2014, the IESO issued an RFP to procure 35 MW of energy storage resources. This procurement follows on the commitment made by the government in the long-term energy plan and the Minister of Energy’s more recent request to the IESO and the OPA. The Minister requested that the IESO and OPA design a process to procure 50 MW of energy storage by the end of 2014 and conduct an independent study assessing the value of energy storage for Ontario as well as review the regulatory barriers to storage’s participation in the Ontario electricity market.
The IESO and the OPA collaborated in designing a framework for the procurement of 50 MW of storage, which they submitted to the Minister at the end of January. The recent RFP relates to Phase I which will be led by the IESO and which will seek to procure up to 35 MW of regulation service and/or reactive support and voltage control from grid energy storage facility operators. Phase II will be launched later this year and will procure the balance of the 50 MW. This second phase will be led by the OPA and will focus on meeting future capacity needs and may include considerations for remote communities.
This procurement, which signals Ontario’s intent to become a leader in the growing energy storage space ― the sector reportedly attracted over $1 billion in investment in the last two years and is projected to grow to $30 billion over the next decade ― is notable in several respects. First, the IESO designed the procurement to facilitate participation by a diverse portfolio of storage technologies. The IESO has stated that a principal objective of the procurement is to test and learn about various services that storage can provide, the value of these investments in operations and how they can best be integrated into Ontario’s electricity market. The IESO is procuring storage to provide ancillary services, but the procurement has been designed to allow storage technologies to demonstrate other attributes including: shifting energy from low demand periods to high demand periods; adding MW capacity to the system; aiding in electricity ramp (up or down); aiding in utilizing surplus baseload generation more effectively; aiding and managing transmission constraints; providing contingency response and energy reserves; and, smoothing/firming out the output of intermittent generation resources. As such, while the IESO has provided some examples of potential storage technologies ― i.e., pumped hydro, compressed air energy storage, stationary batteries, flywheels and thermo energy ― the procurement does not limit the types of storage technologies that may participate.
Another notable feature of the procurement process is that it is being designed so that procured storage resources can be subsequently integrated into the IESO market. The IESO has cautioned that contract structure should not distort the effective integration of storage resources into the market. Therefore, contract terms will be relatively short and contracts will be designed so that contract revenues can be replaced with market revenues.
Finally, the procurement timeline is relatively short. The deadline for submitting proposals is April 28, 2014 and the IESO anticipates selecting providers by June 1, with contracts to be concluded by June 30, 2014. A more detailed RFP timeline can be accessed on the IESO’s website.