Distributed Energy Resources

Distributed energy resources (DERs) are electricity-producing resources or controllable loads that are directly connected to a local distribution system or connected to a host facility within the local distribution system.

DERs can include solar panels, combined heat and power plants, electricity storage, small natural gas-fuelled generators, electric vehicles and controllable loads, such as HVAC systems and electric water heaters. These resources are typically smaller in scale than the traditional generation facilities that serve most of Ontario demand.

Distributed Energy Resources are located within local “distribution” systems.

Growing Impact Leads to New Challenges and Opportunities

Technological advancements, climate change policies, and growing consumer opportunities are leading to an increase in DERs across North America. For example, more than 2,000 MW of distribution system solar generation has been installed in Ontario.

Distribution-connected Contracted Electricity Supply

Contracted Supply at Distribution Level

Source: Progress Report on Contracted Electricity Supply, First Quarter 2019.


Output from DERs offsets the need for supply from the province-wide system. This is creating new opportunities and challenges for the electricity sector.

DERs can offer greater customer choice – the IESO has heard from some communities, through the regional planning process, a preference for DERs to address regional demand growth or to replace aging assets. DERs may also present opportunities to optimize overall system investments and provide a range of grid services.

However, increasing DERs creates a more decentralized electricity system and changes the traditional dynamic between local distribution systems and the province-wide transmission system. This creates a need to understand the impact on the transmission-distribution interface, which the IESO, local distribution companies, and other stakeholders are exploring through the Grid-LDC Interoperability Standing Committee. Collaboration is required to ensure the IESO can effectively forecast and have visibility of DER activity, benefit from the provision of reliability services, and explore opportunities to incorporate them into electricity markets.

Gaining Experiences With DERs

The IESO has initiated innovative pilot programs and procurements that are fostering innovation and leading to lessons learned regarding DERs, including:

  • A local Demand Response (DR) Pilot in the Brant area aimed at better understanding the capabilities of DR to provide services as alternatives to transmission line solutions for meeting local-area capacity needs.
  • The potential to aggregate residents who use solar and storage is being explored through PowerStream`s POWER.HOUSE project in the York region, which is funded, in part, by the IESO`s Conservation Fund.
  • Two phases of an energy storage procurement that is exploring how batteries, flywheels and other storage technologies can offer ancillary services to support increased reliability and efficiency of the grid, and provide capacity value and price arbitrage through responding to market signals.
  • A number of DER-related projects that are being supported through the IESO’s Conservation Fund