GUEST SUBMISSION: Ontario’s Independent Electricity System Operator (IESO) recently announced plans to invite an entirely new category of energy entrepreneurs into its electricity contract market – small scale generators. This move can be expected to stimulate competition while significantly widening the options available to energy consumers.

Responses to the IESO’s first webinar on the new Local Generation Program were enthusiastic. The wide range of proponents is seen as an indication that there will be no shortage of willing participants once the program is operational in 2026. There’s no doubt the initiative aligns with provincial policy: the Local Generation Program was authorized by a directive from the minister of energy in late 2024. 

Colin Anderson, president and CEO of the Association of Power Producers of Ontario, sees no conflict with other supply programs. “Given the size of the demand increase that the IESO is forecasting - a 75 per cent increase by 2050 - Ontario will need to employ an . . . 'all of the above' approach to generation,” he said.

This initiative may be more transformative than appears on the surface. Instead of simply being passive recipients of bulk electricity at pre-set prices, many consumers in Ontario could soon be able to economically generate their own power, manage significant grid interactions and/or participate in community-based energy hubs that make the grid more efficient. 

With such a program for local generation, the profit motive can be expected to drive a multitude of creative initiatives intended to find pockets of underused capabilities and remarket them as high value services.

The supply technology is changing, the options for customers to interact with the grid are changing, and the market is changing. Therefore, the grid must also change.

Distributed energy resources to play key role

Distributed energy resources (DERs), which include local generation, are viewed by many in the industry as being among the most promising categories of new energy technology.

They have been growing rapidly in markets from Europe to Australia to North America. Because DERs are located close to the end users, they are typically able to respond very precisely to local customer needs, and to real time market conditions, all without incurring the power loss in transmission and transformation that are characteristic of large scale resources located at great distances from most consumers.

Employing a wide range of technologies that leverage local and regional advantages, DERs may include installations such as solar panels, combined heat and power, demand response, biomass, and geothermal resources, often teamed up with battery banks and electric vehicle charging stations. 

In the United States, innovative companies are aggregating thousands of DERs into virtual power plants (VPPs), providing power services comparable to major new generation projects. While VPPs can’t be expected to replace all of society’s needs for wholesale generation, recent research finds that they could take a bite out of the need for new infrastructure, building critically needed power capacity relatively quickly and economically, and with smaller environmental footprints than some of their potential large scale competitors.

Could local generation collectively represent a sleeping giant about to awaken, offering attractive new resources, just when society is seeking large investments in new capacity that can deliver environmentally responsible energy services at reasonable prices? Ontario’s new program will be an excellent way to find out.

The IESO expects to start signing contracts under Ontario’s new local generation program in 2026. The contracts will not include power produced for one’s own consumption (behind the meter) because the IESO has an electricity demand side management suite of programs that covers behind the meter generation. The IESO is still consulting on many of the detailed terms.

DERs, like those anticipated in the Local Generation Program, offer readily available business opportunities that when appropriately deployed, could well make the electricity system more efficient, contribute to energy affordability for consumers and support environmentally responsible local economic development.

They may be part of a worldwide trend toward energy grids that are more participatory and community-based. They could help improve Ontario’s energy self-reliance, and might incidentally add to the popularity of the current Ontario government.

Ontario is not the first jurisdiction to clear a path for DERs, but it appears committed to doing so in a systematic way that could significantly alter how Ontarians produce and consume energy.