Texas should spark us to innovate

It's a black-swan event that should scare us. Texas and adjacent states were rocked by three days of record-setting cold that froze the apparatus of energy production, leading to four million outages and dozens of dead this past week. Could something like this happen in Canada? Actually, yes.

Canadians, like our American neighbours, have approached electrical grid innovation with a “we'll get to it later” mentality. The Texas experience reminds us that we need to be agile innovators.

THE TEXAS PROBLEM: DEMAND EXCEEDED SUPPLY

We've always expected electrical supply would meet our needs. As jurisdictions focus on such renewables as wind and solar, it is critical to consider the demand side. What happens if the sun doesn't shine or the wind doesn't blow? Factor in a climate crisis that can test hVAC systems with deep freezes or intense heat waves, and what happens if supply falls short of demand?

RELIABILITY IS PARAMOUNT

electrical grid operators have provided reliable electricity for nearly 150 years. but when your focus is reliability, it becomes risky to innovate. We need a grid in this tangled industry where flexible supply and responsive demand can exist simultaneously. To do so, the energy industry must support an environment that allows innovation.

Across North America, there are programs to motivate energy users to be more “responsive,” adjusting demand to meet shortfalls in supply. however, adoption levels are low — about five per cent, on average — because the costs appear to outweigh the benefits. (Ontario leads with a 10 per cent participation rate). In Texas, 35 per cent of its energy supply went off-line. It needed a 35 per cent participation rate on the demand side to avoid blackouts. Their five per cent rate fell far short.

If Canadians wish to avoid a similar shortfall, our grid must become more responsive. how can we make a business case for this?

MAKING THE ECONOMICS WORK FOR MATCHING SUPPLY, DEMAND

One measure is to increase the reliability of responsive energy programs. In these programs, grids incentivize energy users to reduce usage during expensive periods, leading to lower demand. Such programs exist in deregulated markets, such as Alberta's and Ontario's, and in Canada's regulated markets.

recent events give some cause to pause, however. In Alberta, the grid operator (the Alberta electrical System Operator) is seeking comments about proposed changes to its Coincident Peak demand program, and in 2019, it cancelled a possible demand response program. In Ontario, last year's Global Adjustment hiatus (a pause in its largest energy program), added an extra year to rOI for energy storage and load-shifting projects. These events demonstrate the uncertainty of market conditions. While there may be financial benefits when innovating an energy program, investors want the security of stable pricing.

The industry's complicated nature needs to be addressed. In Alberta, for example, there are nearly 6,000 generators that can connect to the grid — useful additional capacity. but connecting to the grid is complicated, time-consuming and costly. An energy user could spend a year and up to $50,000 applying for their peak demand program, and still be refused. Capable industry participants across North America are hungry to participate but are discouraged by current market rules.

don't forget the little guys, and homeowners! To create a more responsive grid, operators need to stop picking winners and let the market regulate itself. I've often wondered: Why do our regulated utilities require a minimum 5MW load to participate

LET'S PLAY BY THE RULES WE PROPOSE TO OUR CHILDREN: EVERYONE IS WELCOME, THE RULES ARE FAIR, AND WE SHARE.

(this is a huge amount of energy — think auto-plant size). Why is the peak demand program in Alberta limited to natural gas generators? Why are only large businesses allowed to join Ontario's largest peak demand program? Many companies with IoT devices or homeowners with smart appliances can represent that same volume — why exclude them? Ontario is a leader, having invested $10b in smart meters. This is great, but Ontario is not using that data.

CONNECT THE DOTS TO SECURE OUR FUTURE, AVOID CATASTROPHES

Across Canada, we need to innovate and create an environment where supply and demand can meet in real time. The market needs to become far more responsive to future-proof us. The industry needs to open the game to everyone who wants to participate. Make a set of rules and stick to them — providing the security and confidence to invite investment. Finally, make the rules clear. responsive demand will increase participation and remove barriers to innovation.

Let's play by the rules we propose to our children: everyone is welcome, the rules are fair, and we share.