Is there room for new players in the demand response sector in Canada?

Situation in Ontario

The market has been structured in Ontario since 2002: Independent Electricity System Operator (IESO) centralizes and organizes exchanges between demands and supplies of electricity to operators.

To encourage customers to reduce their electricity consumption during peak demand, IESO has set up demand response auctions: either large consumers, or aggregators of smaller C&I or residential customers, will offer MW avoided, imported, generated or stored.

For summer 2021, nearly 900 MW of new capacity will be provided by 21 large consumers or aggregators such as Enel X, Rodan or Voltus Energy.

Well structured and with new entrants, the market in Ontario is likely to concentrate in the coming years.

Situation in Quebec

In Quebec, Hydro-Québec (HQ) is the only operator, in a monopoly situation, under the supervision of the Régie de l'Énergie. Demand is growing, and while energy stocks are large, power is not.

HQ must purchase power in winter on the UCAP spot markets, where the prices are expected to increase from $ 20 / kW in 2020 to $ 116 / kW in 2025. HQ's approach is, therefore, to reduce demand for power from customers thanks to demand response programs: hourly tariff, power demand management program for customers or aggregators grouping together small C&I customers, and the launch of a subsidiary (Hilo), which, thanks to smart homes for residential customers (C&I to come later), will fetch 14MW of demand response in 2021 and up to 600 MW per year in 2028.

However, this subsidiary, which has just been launched, is in an unregulated portion of the market. The next hearings at the Régie de l'Énergie, in early 2021, could open the door to more competition.