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Ontario Energy Storage Basics: What is the Industrial Conservation Initiative, and Why Does it Matter?

August 8, 2019

For commercial and industrial (C&I) energy consumers in Ontario, Canada, the biggest energy cost driver is the Global Adjustment (GA) charge, a line item on the electricity bill that appears along with hourly energy market charges. For some customers, the GA can represent as much as 85% of total annual electricity costs.


This cost is only controllable for customers that are designated as Class A and participate in the Industrial Conservation Initiative (ICI). Through the ICI, Ontario’s electric grid operator, the Independent Electricity System Operator (IESO), encourages large C&I customers to contribute to efforts to improve the reliability and efficiency of the electric grid.


For Class A facilities, GA charges are based on average peak electricity demand during the five one-hour periods when the electric grid saw its highest levels of demand throughout the year. This creates an opportunity. If you can anticipate when the grid is likely to reach its highest demand levels and reduce your facility’s demand from the grid before it occurs, you can reduce your facility’s GA charges for the following year. Those that reduce their average peak demand by 1 MW will save more than $500K in GA charges in the following year.


Reducing demand during these periods results in smaller, and easier to manage, peak demand levels on the grid, thereby reducing the need to build expensive new electricity infrastructure to prevent outages during these periods. The IESO estimates that ICI participation reduced peak demand by more than 1,400 MW in 2017.


Only certain facilities can qualify as Class A customers, and eligibility varies based on industry and energy consumption:

  • All facilities with an average monthly peak demand of 5 MW or higher are automatically considered Class A customers, and have the option to opt-out if they choose
  • All facilities with an average monthly peak demand of 1 MW or higher are eligible to be designated as Class A, but those between 1 MW and 5 MW need to opt-in to participate
  • Manufacturing facilities and certain agricultural businesses with an average monthly peak demand of 500 kW or higher are also eligible, and also need to opt-in to participate (assuming their average peak demand is lower than 5 MW)


The IESO provides this example showing how average monthly peak demand is calculated:


These thresholds pertain only to individual facilities. Organizations with multiple facilities cannot combine average monthly peak demand across multiple buildings to qualify as a Class A customer.


As GA costs have risen in recent years, the ICI has received more attention. For years, eligibility for Class A customers was limited to facilities with at least 5 MW in average monthly peak demand. Then, in 2017, the Ontario government lowered the threshold to 1 MW for all customers—and 500 kW for manufacturers and select agricultural industries—extending the incentive to many more of the province’s largest energy consumers.


In recent years, predicting when system peak events occur has become more difficult. As noted in a previous article, the IESO’s model for predicting peak demand levels on the grid missed two of the five events that factored into GA charges last year.


In addition to predicting system peak events, ICI participants need to minimize their consumption from the grid during these periods. Some facilities are able to accomplish this through energy reduction alone, such as shutting down non-essential lighting or other equipment, or re-scheduling maintenance that requires downtime for energy-intensive equipment.


This is also why so many Ontario businesses have adopted energy storage. Installing an energy storage system enables these customers to store the lowest-cost electricity on-site and consume it at times when relying on the grid is most expensive, including when GA charges are calculated. This also eliminates the need to reduce energy consumption, providing access to power for critical equipment during these periods.


Whether through energy reductions or storage—or even a combination of the two—Ontario businesses have had success in tackling GA charges through this approach. Last year, Ontario C&I energy consumers participating in Enel X’s system peak predictor program saved nearly $13 million on GA charges alone.


Today’s Ontario businesses face some of the highest electricity costs in North America. Thanks to the ICI, they have options to protect themselves from these costs.