Effective use of Distributed Energy Resources to enhance grid efficiency and reliability

1. Effective use of Distributed Energy Resources to enhance grid efficiency and reliability by Paul Grod, President Rodan EnergyAPPrO 2012 Canadian Power Conference

2. About Rodan • Leading provider of smart grid solutions to power producers, distributors and consumers • Engineering and metering for grid connections • Largest IESO Metering Services Provider • Distributed energy (generation and power reduction) aggregator for residential, industrial, commercial and institutional sectors. • Largest Canadian DR provider ≃ 300MW of DR under management

3. Background on DE • Distributed Energy (DE) refers to the capability to rapidly have loads (consumers of electricity in the power system) and generators react to the needs of the power system • Includes demand response, distributed generation, regulation, renewables integration, ramp • DE can provide a whole new degree of freedom to operators of the power system (both system operators and distribution system operators). • DE can cost effectively address electricity supply constraints (past York DR; future Central and Downtown Toronto) • Solid Smart Grid infrastructure is necessary to employ DE resources

4. Smart Grid – what is it? • Reliable and fast-adapting power grid • Rapidly matches supply and demand • Combines computing and communications to manage/automate two-way flow of electricity • Integrates: • Renewable (intermittent) energy • Distributed Energy (Distributed Generation & Demand response) • Home & Business automation (e.g. smart thermostats & appliances) • The internet of electricity systems

5. Smart Grid – why do we need it? • Robust Smart Grid (SG) infrastructure is critical to integrating DE • The SG is key to a sustainable energy economy and Ontario’s clean energy future. • What is a sustainable energy economy? • Environmentally sustainable • Reliable • Economically viable

6. DE Opportunities PrimaryFrequencyResponse GridBalance $800 M Local Voltage/VAR Control $1000 M Opportunity to Lead Renewables Integration(Solar/Wind) $1200 M DistributionRelief $500M Happening Now HVTransmissionRelief Well established SynchReserve $250 M Speed of Response Ramp $600 M Curtailment(TraditionalDemandResponse) Local Effects System Wide

7. Why Do We Need Distributed Energy? • Ontario power system has plenty of supply (right now) • But much of that supply is relatively inflexible • Nuclear, must run hydro, wind, solar … • We are retiring some supply that is flexible (e.g. coal) • We have a highly stressed distribution infrastructure • DE can also respond to low or negative pricing as an net energy consumer (varying production or energy storage) Using DE for a range of services (including Regulation, ramp, wind integration, local distribution support, etc.) is a highly cost effective source of flexibility

8. Why Use Distributed Energy? • Cost effective way to supply flexibility • Improves efficiency of generation fleet (Regulation, Spin, Non-spin, wind integration) • Maximizes available generation for energy and capacity • Cost effective way to supply capacity • Leveraging existing DE resources has much lower marginal cost than procuring new generation • DE events can be cost effective alternatives to building new infrastructure or can meet short term contraints until new infrastructure is build. • Cost Effective way to manage energy • Price responsiveness, over time, encourages usage to optimize at cost effective times

9. Leveraging existing resources Water Distribution Facility Commercial Building Refrigerated Warehouse Wastewater Treatment

10. DE Enhancing Reliability & Efficiency • Addresses system constraints - A number of regions in Ontario, including Toronto, face electricity system‐based challenges over the 2015 – 2017 period including the need for: • Additional area supply capacity • Infrastructure renewal • Supply diversity to mitigate against low probability but high impact events • Takes time to develop DE resources (albeit much quicker than traditional generation or transmission infrastructure) • There are potential challenges and opportunities with interconnecting DE into spot and grid networks

11. Unique Challenges to DE&SG • Biggest challenge remains a disconnect among policy/regulatory (Ministry/OEB), delivery channel (LDC), integrators/vendors, and agencies (IESO/OPA) • Significant implementation risk if smart grid becomes disjointed (technology and/or policy), uneconomical or poor consumer uptake • Increasing politicization of energy policy lead to short sighted decisions which are expensive to fix

12. Public Policy Recommendations • Provide for continuity of DE programs (including DR3 and Peaksaverplus) well beyond 2014. • Develop additional DE programs that leverage distributed resources, including distributed generation, that are properly funded with long-term (10-20 year) time horizons. • Consider DSM/DE as a fundamental resource in the power system, and adjust the planning process to provide a target supply role for DSM/DE for all ancillary services, just as is done with other system resources. • Form a DSM/DE task force with a mandate to: • Define the long term role for DSM/DE in the power system • Relentlessly remove inter-agency and procurement barriers • Establish short, medium and long term goals for DSM/DE participation. • Ensure that the Transmission Operator and LDC’s economic interests are aligned such that procuring DSM services that lower operating costs or defer capital costs is encouraged.

13. Conclusion • Renewables, the smart grid and distributed energy (including DR) are the killer apps of a sustainable economy • Ontario has been a NA leader in smart grid investment • Political risk is real and a clear long-term roadmap is critical • Need for better coordination between government, utilities and integrators/aggregators • Long-term financial and planning commitment required to develop distributed energy resources

14. Enabling tomorrow’s Smart Grid today Q&A Thank you! Paul Grod, President & CEO RODAN ENERGY SOLUTIONS INC.165 Matheson Blvd. East, Suite 6 Mississauga, ON L4Z 3K2 (905) 625-9900 x225 paul.grod@rodanpower.com www.rodanenergy.com