Demand Response (DR) is being embraced worldwide as an effective way of lowering the wholesale cost of power and reducing the need to build additional capacity. In some cases, it’s even possible for DR to become a source of new revenue for participating organizations. For those organizations looking to proactively manage their energy consumption and costs, participating in a demand response program might make perfect sense.

As you consider incorporating DR into your energy cost management strategy, you have choices to move forward. By design, demand response programs enable participating organizations to reduce their consumption of electricity, typically during times of the year and day when electricity consumption has proved to be relatively high. Since a reduction in demand achieves the same goal as an equal increase in supply – but without the accompanying pollution or greenhouse gas emissions associated with many types of generation – demand response is a cleaner and more cost effective option whose time has come in Ontario.

Demand response is a flexible resource that provides significant benefits for participants and for system reliability. The Ontario Power Authority’s suite of Demand response programs offer organizations a number of scenarios in which they could participate:

Demand Response 1 – The Voluntary Peak Shedding Program
Demand Response 2 – The Contractual Load Shifting Program
Demand Response 3 – The Contractual Peak Shedding Program

Tell Me More About the Suite of Demand Response Programs

Demand Response 1 – The Voluntary Peak Shedding Program
This program achieves the voluntary reduction of electrical consumption by targeting high-value hours through curtailable load, or the amount of electrical demand (kW) that a facility is able to reduce at will by turning off lights or equipment or raising temperature set points, for example. In this scenario, these hours are identified using the Independent Electricity System Operator’s (IESO) three-hour pre-dispatch pricing signal. The IESO is the organization responsible for directing the operation and maintaining the reliability of the electricity grid in Ontario.

Each month, the OPA sets a minimum allowable strike price. Participants in the DR1 program would submit their monthly strike price offer to the OPA. This then becomes the price that triggers the organization to reduce its load. This price must meet or exceed the monthly minimum price posted by the OPA.

Revenue for these program participants combines their submitted, OPA-approved strike price and the certified megawatt hours (MWh) of load reduction.

Activation of DR can happen anytime when the three-hour pre-dispatch price (as posted by the IESO) is equal to or greater than the OPA participants’ approved strike price.

The OPA must be notified if the participant organization intends to provide load reduction. Are there any other performance obligations? None, other than to be ready to respond at least once a season (provided an opportunity exists to do so).

Here’s a sample calculation for DR1

A company participating in the DRI program delivered five megawatts (MW) of demand reduction for the maximum number of hours in a year at the floor price.

The annual average floor price that year was $105.50 per MWh.

There were 350 hours during the year when the IESO three-hour pre-dispatch price exceeded the seasonal floor price.
Therefore, the annual revenue would look like this

5 MW x 350 hours x $105.50 = $184,625.

The total then would be $184,625. or $36,925 per MW of curtailed demand.

DR 1 Program Documentation

• DR 1 Program Rules
• DR 1 Program Contract
• DR 1 Program Application and Forms