DEMAND RESPONSE

In the IESO's wholesale market, large consumers of electricity have the ability to "respond" to changes in the market. For example, if demand is high and the price rises, these consumers may choose to cut back on their consumption to save money. This is known as Demand Response.

Demand response helps alleviate the need to expand generation capacity. At any one time, Ontario needs enough generation capacity to meet the highest levels of demand plus an additional 1,400 MW of reserve power that can be called on in case of an emergency. Demand response helps flatten these peaks.

The wholesale market offers a number of opportunities for large-volume users or large groups of energy consumers to shift their electricity use to off-peak periods:

Price response: When supplies of electricity are tight, the wholesale price is typically higher. This provides an incentive to large-volume users to reduce their consumption if prices rise. The market is structured so that consumers can agree to cut consumption at pre-determined price levels.

Reserve Power: The wholesale market also offers some creative solutions for providing reserve power. In the wholesale market, generators receive payments to be on call to provide reserve power. Large-volume consumers can also provide reserve power by agreeing to cut consumption if reserve power is needed. By allowing consumers of electricity to provide some of our reserve requirements, we reduce the need for additional generation just to meet peaks in demand.

Managing the way we consume energy is a low-cost and environmentally responsible approach to maintaining a balance between supply and demand. Investments in shifting consumption to off-peak periods and reducing overall demand are more cost-effective than financing the construction of new power plants.