Relating to accelerating…

Relating to accelerating adoption of DERs to achieve maximum utilization of existing infrastructure and minimum cost of service:
The ministry should consider dynamic electricity pricing in the form of Locational Marginal Prices (LMPs) to which DER assets can be exposed. Some of the merits of DER facing LMPs are as follows:

1. Compensation - For DERs to proliferate, they must be sufficiently compensated to provide a sound value proposition to their owners. Further, DER compensation needs to be aligned with the value provided to the electricity system in order to achieve minimum cost of service. Dynamic prices offer opportunities for participating DERs to realize outsized compensation times when outsized need exists within the electricity system, thus aligning incentive and provided a vector for better returns on flexibility assets than exist today.
2. System Cost - Alternative models for DER participation require central dispatch via utility control infrastructure. One of the main arguments to the potential of DERs to drive minimum cost of service I often hear from utilities is that building the telemetry and control infrastructure is too cost prohibitive. However, today's DER assets have inherent connectivity and intelligence. With a robust, accurate and value aligned price signal, these assets can be programmed to respond autonomously to the needs of the grid, preventing the need to invest significantly in command and control infrastructure. There is of course some investment required to building the pricing model, but investment of a significantly lesser magnitude.

Of course, we do not want to expose consumers to dynamic price risk directly, however there are solutions to this. First, consumers may have the option to opt in to such a rate class so that only those consumers with a high degree of load flexibility via DERs (risk protection) would choose to participate. Those consumers would thus unlock better returns for their flexibility assets and add more value to the electricity system, while non flexible consumers remain protected via a regulated price plan. Second, there could be a retail layer between the consumer and the dynamic price. The goal of the retailer in this case could be to optimize the deployment of customer sited DERs such that they can minimize the fixed price they pass through to consumers. In this way consumers are protected against price risk, and retailers are incentivized to maximize DER utilization in order to minimize their rates and win business from their competitors. The inclusion of a retail layer also supports the stated goal of consumer choice in the electricity system. Consider the below article on retail choice 2.0 and how this has evolved: https://www.utilitydive.com/news/retail-choice-innovation-octopus-energ…

Further, as has been discussed in recent letters to the OEB, the ministry should consider the merits of total expenditure capitalization in the rate base. The existing model of Capex only in the rate base drives an inherent bias to poles-and-wires based solutions and detracts from the potential of DERs which intentionally reduce utility capex. The ministry may consider a variety of other performance based regulatory policies which may better align incentives around DER deployment and operation, as described in the attachment.