By Kristyn Annis
Chair, Energy Storage Canada
Partner, Border Ladner Gervais, Toronto

February 19, 2024

The last three years have seen utility-scale energy storage systems proliferate in Canada like never before. A recent white paper published by Energy Storage Canada, the nation’s leading industry organisation for all things energy storage, concluded that anywhere between 8,000 MW to 12,000 MW of energy storage potential would optimally support the net-zero transition of the Canadian electricity supply mix by 2035. In addition to helping jurisdictions meet their net-zero goals, energy storage is key to increasing grid reliability, efficiency and resiliency.

In Canada, which is a federation, the ten provinces have constitutional jurisdiction over energy that is within their respective borders. As the industrial revolution took hold, the provinces put in place Crown corporations to manage the provinces’ respective electricity grids. In British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick and Prince Edward Island, the Crown continues to own the provincial vertically integrated utility, meaning that transmission, most distribution, and generation are centrally managed, with some involvement of independent power producers. This allows provincial governments to execute on provincial energy policy expeditiously in ways that legislative authority cannot. While the degree of control exerted by the provincial government with a vertically integrated Crown corporation is almost absolute, provinces with an open market also continue to exert a high degree of control over the energy sector as a manner of provincial policy.

Ontario

Ontario is Canada’s most populous province with more than one third of the country’s population. The province has approximately 38,193 MW of installed capacity,[1] with summer peaks that range from 21,000 MW to a historical high of 27,005 MW.[2] In Ontario, the Independent Electricity System Operator (IESO) is responsible for managing the electricity sector. The IESO delivers key services including managing the power system in real-time, planning for the province’s future energy needs and enabling conservation. The IESO takes direction from the Minister of Energy, which is generally issued by way of letter.

After at least a decade of surplus energy and relatively flat demand, the IESO now predicts a steady average increase of net energy demand of two per cent year-on-year, culminating in a 208 TWh demand in 2043, for a total increase of 60 TWh and summer peaks forecast to reach 31,500 MW.[3] Driven by electrification of certain sectors of the economy, increased economic activity, population growth and the retirement and refurbishment of Ontario’s nuclear facilities, which provide more than half of Ontario’s baseload power, the IESO predicts a capacity shortfall in the mid-2020s.

To help meet this shortfall, the IESO has initiated a series of procurements, and stated their intent to issue future procurements well into the 2030s. The IESO’s very public signal to the market that it intends to carry out continual procurements is a game-changer for the marketplace and the energy sector in Canada. Such transparency enables developers to plan their investment pipeline, thereby optimising assets, use of capital and creating efficiencies in the energy buildout. The IESO also broke ground by focussing on energy storage in its recent procurements. Storage has a unique role to play in the electricity sector, acting as both load and supply, and capable of providing a host of grid reliability services. These services are commonly referred to as ancillary services and include grid regulation, reactive support and voltage control services, reliability must-run and black start capabilities. Utility-scale storage is optimised by charging during off-peak hours (when the grid is powered primarily by nuclear and hydro in Ontario and therefore low-emitting) and injecting energy back into the grid during peak hours.

Given Ontario’s need for capacity (ie, MW available to provide energy when needed, as opposed to energy into the grid), the IESO focussed their first and second procurements on filling this need. The IESO issued the largest storage-based procurement in Canada in February 2023 with the Expedited Long-Term 1 RFP (the ELT1). The ELT1 resulted in a total of 739 MW of utility-scale storage being procured, with in-service dates in 2026.[4] The weighted average price for successful proponents was approximately CAD836/MW. The ELT1 also included a non-storage category for natural gas-fired power stations. Notably, the IESO failed to meet the capacity it had allocated for ELT1 in the non-storage category and only two gas plants ended up with a contract. The weighted average price for such resources was more expensive than storage, at CAD1,093/MW. In addition to the ELT1, the IESO contracted with a private developer (comprised of an Indigenous partner and non-Indigenous partner) for the Oneida Battery Storage Project, which will add another 250 MW (1000 MWh) of battery storage by 2025. With only 54 MW of storage currently installed in the Ontario grid, the ELT1 alone represents a 434 per cent increase in Ontario’s future storage capacity.[5]

The IESO initiated the Long Term 1 RFP (LT1) on the heels of ELT1. The LT1 is intended to procure competitively up to 2,518 MW of year-round capacity services, of which 1,600 MW are targeted to be procured from energy storage facilities, and 918 MW are from natural gas facilities. The target for natural gas facilities includes the leftover capacity from ELT1. The bid submission deadline was 12 December 2023 with contract awards expected to be announced in May 2024. The IESO is currently seeking comments on the design of Long Term 2 RFP (LT2), which is expected to focus on energy (MWh) rather than capacity, to compliment the additional storage capacity that is coming online from ELT1 and LT1.

Utility-scale storage is increasing in the rest of Canada as well, especially when considered in relative terms to the current assets online in each province…

By Justin Rangooni
Executive Director, Energy Storage Canada
February 7, 2024

After years of consistency, in the next three decades, Ontario’s energy sector and its electricity grid are expected to undergo a substantial transformation, which, of course, leaves a lot of room for innovation. While all types and technologies of energy storage are seeing substantial innovation in their composition and application, long-duration energy storage (LDES) is perhaps seeing more than others because there are far fewer instances of LDES assets having been deployed or connected to major grids, apart from pumped hydro.

LDES for the future

Yet, long-duration storage technologies are poised to be one of the critical technologies supporting the changes to Ontario’s grid as the province, like many regions, prepares to secure two or three times its current generating capacity and meet its ambitious decarbonisation goals. Changing the blend of resources supplying energy to the province, with an emphasis on non-emitting resources – including renewables like wind, solar, and hydro, new grid-scale and small modular nuclear assets, and emerging resources like hydrogen and geothermal – is going to be a major challenge. As we electrify heating and transportation, the frequently simultaneous demand for charging EVs or powering heat pumps is going to drive unprecedented levels of peak electricity demand that will compound the strain on our power grids.

As Ontario brings on more generation capacity and electricity demand reaches new levels, the province will require a greater variety of energy storage resources to ensure Ontario has the power it needs, when it needs it. Long-duration assets – broadly defined as assets capable of discharging energy for a period of ten or more hours – will be a key component of this mix. In fact, a recent report commissioned by Energy Storage Canada (ESC), and prepared by Dunsky Energy & Climate Advisors, identifies a minimum of six gigawatts (GW) of +10-hour duration energy storage starting in 2032, could mitigate potential supply, planning and deployment risks and achieve savings between $11bn–$20bn compared to Ontario’s current transition plans.

Policies to back it up

Fortunately, in recent years the Government of Ontario worked closely with the Independent Electricity System Operator (IESO) to adopt an ambitious approach to regulatory and market reforms to enable the deployment of energy storage resources (ESRs). The province achieved a major milestone last summer with the IESO’s procurement of over 880 MW of energy storage capacity, the largest in Canada – and as the initial stage of an ultimately 2,500 MW addition, one of the most ambitious such initiatives anywhere in North America. A 2022 report commissioned by ESC indicates the province could need as much as four to six gigawatts (GW) of short-duration storage – generally defined as assets capable of discharging energy for six hours or less – as part of Ontario’s path to net zero.

Energy storage resources (ESRs) are important for Ontario’s future grid because they can all, regardless of duration, intake power during times of high generation, store it, and then discharge that power to the grid at periods of high demand. This alleviates stress on the system and reduces costs. ESRs comprise a wide range of technologies, durations, and lifespans, from familiar hydroelectric dams to lithium-ion batteries and a wide array of emerging designs like compressed air and molten salt. These assets will be essential in reducing incidences of surplus baseload generation (SBG) – moments when the province’s power resources are generating more than can be consumed or economically exported – ensuring that electricity can be used to power the province’s growing, energy-intensive industrial and natural resources sectors. These grid-scale batteries will also act as ‘Non-Wires Alternatives’ (NWAs), relieving transmission constraints at a fraction of the cost – and time – of constructing traditional poles and wires expansions.

Collectively, batteries and other energy storage resources are helping reduce the need for natural gas-fired generation capacity and accelerating the pace at which the province can achieve an emissions-free power system. Most energy storage resources are also capable of supporting the provincial grid during extreme weather events, including ‘black-start’ functionality that can bring the lights back on in the event of a system-wide power outage. However, as Ontario brings on more non-emitting generation, particularly intermittent resources (such as wind or solar), and peak demand reaches new levels, the province will need a more substantial inventory of LDES resources to ensure its grid continues to be reliable when the wind isn’t blowing, and the sun isn’t shining.

Energy Storage Canada’s report is the first to go beyond speculating the potential use cases for LDES technologies to research the potential scope of investment for Ontario as the province decarbonises, with new modelling from Dunsky Energy & Climate Advisors, which illustrates the specific advantages that investment in LDES assets can provide.

Challenges ahead

Using the IESO’s Pathways to Decarbonization (P2D) study from December 2022 as a baseline, Dunsky analysed the likeliest risks in those scenarios, quantifying the cost of falling short in our planning, procurement, construction, and import objectives compared to the alternative cost of procuring LDES assets. Evaluating the technical readiness and value proposition of LDES as a ‘guardrail’ for Ontario’s economic growth and decarbonisation journey, Dunsky found that a minimum of six GW of LDES capacity would be economically beneficial starting in 2032.

However, compared to most short-duration energy storage technologies procured in Ontario to date, LDES technologies generally have long lead times for development, meaning that to ensure the assets are available when we need them, we need to start planning now. Again, Ontario is making progress ahead of many other regions in acknowledging the importance of looking ahead if the province is to capitalise on LDES technologies. Last month, the province’s Minister of Energy, Todd Smith, issued a letter to the IESO instructing them to continue working with proponents of the province’s most advanced LDES initiatives, the pumped hydro 1,400 MW Meaford and 400 MW Marmora projects.

As Dunsky’s report makes clear, the development of these two projects should just be the start of a much larger capacity addition over the next decade. As the province’s grid undergoes a massive transformation and modernisation in the coming decades to meet its energy needs, integrating new assets in new ways, the importance of pursuing innovative solutions and technologies, such as long-duration energy storage, will become increasingly important. While 2032 is eight years away, the time to act is now.

What needs to be done

To that end, Energy Storage Canada is calling on the IESO to make a formal commitment this year to initiating a procurement process in 2025, with a six GW target. Critical factors such as the availability of Canada’s Clean Technology Investment Tax Credits (ITCs) for projects completed prior to 2032, the extensive lead time necessary for prospective proponents to develop positive relationships with Ontario municipalities, to develop equitable and beneficial partnerships with the province’s First Nations communities, and secure supply chain commitments in a competitive global market, all demonstrate the need to begin the process now.

Energy Storage Canada and our members look forward to continuing the work with the Ministry of Energy and the IESO to further develop the innovative research related to long duration energy storage, and all storage technologies. The integration of LDES has the potential to build on Ontario’s energy storage advantage, ensuring the province continues to have a reliable, sustainable, and flexible energy supply in the decades to come.

By Anthony Capkun

February 6, 2024

A new report released by Energy Storage Canada (ESC) illustrates “the substantial potential of [long duration energy storage a.k.a. LDES] to contribute to the realization of the [Ontario]’s economic growth and energy transition objectives”.

Conducted by Dunsky Advisors, “Long duration storage opportunity assessment: a critical component in growing Ontario’s clean energy economy” suggests that deploying up to 6 GW of LDES starting in 2032 could be a cost-effective solution to mitigating potential supply, planning, and deployment risks on Ontario’s pathway to net-zero.

“[…] Ontario is already recognized as a national and global leader in energy storage,” said Justin Rangooni, ESC’s executive director, adding that the Independent Electricity System Operator “needs to capitalize on that momentum and continue future-proofing our energy system by making a clear commitment to procuring cost-saving [LDES] resources.”

As a group of technologies, ESC says LDES will play a critical role in decarbonizing Ontario’s existing supply and scaling up non-emitting generation by integrating intermittent renewables, hydroelectric and baseload nuclear, while providing a source of reliable capacity during low-generation, high-demand periods.

The report finds LDES can help protect against potential development risks and vulnerabilities in IESO’s “Pathways to decarbonization” scenarios while optimizing the performance of small modular reactors (SMRs), grid-scale nuclear, blue and green hydrogen assets, and other emerging resources.

To allow for long lead times, the report encourages IESO to commit to a competitive LDES procurement by 2024, and launch a competitive process in 2025.

“Accelerating the development and deployment of long duration energy storage offers the best pathway to full decarbonization for Ontario, Canada, and the world,” said Julia Souder, CEO, LDES Council.