Accelerating Growth in Hydrogen Energy Through Electricity Rate Options

The Ministry’s proposal features three options that would promote growth in Ontario’s low-carbon hydrogen economy.

Under option 1 of the proposal, the rules for the Industrial Conservation Initiative (ICI) would be amended to adjust the eligibility criteria such that all hydrogen producers with an average monthly peak demand of above 50 kilowatts would become eligible to participate. Hydrogen producers’ facilities would be able to qualify for ICI in the first year of operation with a peak demand factor determined based on a deemed consumption profile, using a method yet to be determined by ENERGY. At the end of the first year, their global adjustment (GA) charges would be reconciled based on actual consumption pattern. To ensure other consumers would not be adversely impacted, hydrogen producers may be required to place a security deposit for their facilities’ first year of operation with the Independent Electricity System Operator (IESO) or their Local Distribution Company (LDC).

Under option 2 of the proposal, businesses would be able to co-locate hydrogen electrolysers at electricity generation facilities to make use of curtailed generation. The developer for the hydrogen production facility would be required to be a separate legal entity from the one that owns or operates the electricity generation facility. The hydrogen developer would be required to pay the electricity generator for the electricity supply. It is yet to be determined whether and how the generator would be required to share the revenue with other consumers. Potential regulatory amendments and/or amendments to electricity generator’s contracts may also be necessary.

Under option 3 of the proposal, the interruptible rate pilot currently under development with the IESO would include a dedicated stream for hydrogen producers, which could take into account their unique circumstances and the importance of the hydrogen sector. Under the proposed pilot, participants would be given advance notice by IESO to reduce demand over a fixed number of hours, several times per year.

In 2021, the Ministry posted a proposal on the Regulatory Registry that included an Interruptible Rate Pilot:

https://www.ontariocanada.com/registry/view.do?postingId=39687&language=e

The Ministry is working with IESO to develop a high-level design for the proposed interruptible rate pilot. Such a pilot would support low-carbon hydrogen production by offering large electricity consumers such as hydrogen producers reduced electricity rates in exchange for reduced consumption during system or local reliability events. Following initial developmental work, the Ministry intends to consult with stakeholders later this year to determine design details as well as the timing for the potential roll out of the proposed pilot, subject to the approval of any potential regulatory amendments.

The design of options under consideration may be subject to change or further refinement after considering feedback from the registry posting and stakeholder consultations.