Ontario's New 12-Year Electricity Demand-Side Management Framework: What You Need to Know 

The Ontario government has unveiled an updated framework for electricity demand-side management (eDSM) that promises to reshape the way the province approaches energy consumption, system efficiency, and sustainability. With a budget of $10.9 billion over the next 12 years, the new directive introduces several key changes that will impact residential, business, and First Nations programs. Below, we dive into the critical elements of this framework and what it means for Ontario's energy future. 

Executive Summary of the New Directive 

In essence, the new directive brings little surprise but a lot of clarity. It codifies and adds specific details to what many in the industry had anticipated. Among the most notable changes is a push for beneficial electrification, a strategy aimed at reducing emissions while minimizing the burden on Ontario’s electricity system. The focus will initially be on the residential sector, with the Independent Electricity System Operator (IESO) leading the charge. 

Here are some of the core features of the new framework: 

1. 12-Year Framework: The new directive will span 12 years beginning in 2025 and is broken down into 3-year plans. This allows for flexibility while ensuring long-term goals are met. 
2. Beneficial Electrification: A significant focus is placed on reducing emissions through beneficial electrification, with measures that support both residential and business customers. Interestingly, these programs won’t need to meet cost-effectiveness criteria. For the first time, the IESO may spend up to 20% of eDSM funding on beneficial electrification initiatives.
3. Residential Programs: Residential programs have been re-established as a crucial part of Ontario’s energy efficiency portfolio. These programs aim to reduce energy consumption through incentives and education, with a notable emphasis on heat pumps and solar + battery storage solutions, beginning in 2025. 
4. A Significant Budget Increase: With a $10.9 billion budget over the next 12 years, this framework’s funding is a substantial increase from the previous spending from 2021-2024. With up to $3.2 billion available every three years, the funding will support a variety of programs targeting different sectors, from residential to business to First Nations communities. 
5. Local Distribution Companies (LDCs) Role Expansion: LDCs will play an integral role in marketing and raising awareness for province-wide programs while continuing to offer local programs to address regional system needs. This represents a major shift in responsibilities, with LDCs receiving $30-50 million annually to participate in the delivery of programs that align with the larger goals of the framework. 

Key Objectives and Framework Details 

The framework sets out several guiding principles to ensure success: 

• Affordability and Reliability: Maintaining both affordability for consumers and reliability in the electricity system are core objectives. 

• Optimizing Customer Experience: A primary focus is improving the customer experience while ensuring efficient and cost-effective program delivery. 

• Integration of Electricity and Gas Programs: A "one-window" approach will integrate electricity and natural gas programs, making it easier for consumers to navigate available energy-saving programs. 

• eDSM and Behind-the-Meter Solutions: The scope of eDSM has been expanded to include a variety of activities that reduce peak demand and electricity consumption, such as energy efficiency, demand response, behind-the-meter energy generation, and distributed energy resources (DERs). 

Key Program Areas 

The framework includes targeted programs for different sectors of Ontario’s economy. Here’s a breakdown of what’s on the horizon: 

1. Residential Programs

• Residential Heat Pumps: These will be a key focus area, helping to reduce energy consumption and increase efficiency in homes across Ontario. These programs will launch in January 2025. 

• Energy Storage and Solar: A province-wide program for solar energy and battery storage is on the table, with a focus on reducing peak demand, especially in the summer months. 

• Demand Response: Programs that help homeowners reduce their energy consumption during peak periods will also be expanded. This includes initiatives like Peak Perks, which targets summer-peaking demand response. 

2. Business Programs

• Business Demand Response and DERs: These programs, which help businesses manage their energy consumption, will be expanded to incorporate new technologies and strategies. This marks a notable shift, as DERs are becoming an increasingly important part of the business energy mix. 

• Integration with Enbridge Natural Gas Programs: As part of the "one-window" approach, business programs will also be designed to complement natural gas energy-saving initiatives led by Enbridge, making it easier for businesses to access both electricity and gas programs. 

3. First Nations Programs

• Ongoing Support: First Nations communities will continue to receive targeted support, with a $27 million budget over each 3-year period. These programs are not required to be cost-effective but should address the unique needs and priorities of these communities. 

• Collaboration: The IESO will work closely with both federal and provincial entities to ensure that programs are tailored to the needs of Indigenous communities. This includes leveraging existing IESO Indigenous Energy Support Programs to deliver electrification solutions. 

4. Local Distribution Companies (LDCs)

• Expanded Role for LDCs: LDCs will receive funding to help raise awareness about provincial DSM programs, as well as to develop and deliver local programs that address specific system needs. The new role will be funded at $90-150 million per 3-year period. 

• Increased Funding for Local Programs: LDCs will see a significant boost in funding, allowing them to continue their work in energy efficiency while focusing on local distribution system needs. They will also be tasked with ensuring that the integration of local programs with provincial initiatives runs smoothly. 

Future Outlook 

Looking ahead, the framework is designed to be flexible, with periodic reviews to ensure goals are being met: 

• Mid-term Review: In 2030, the IESO will conduct a mid-term review of the framework to ensure the budget and impacts remain on target. A follow-up review will take place in 2036. 

• Achievable Potential Studies: To keep the programs aligned with actual needs, the IESO will conduct an "Achievable Potential Study" in 2026, and again in 2030, to assess the potential for demand response and distributed energy resources (DERs). 

• Annual Evaluation: The IESO will evaluate energy and peak demand savings annually to ensure that the programs are delivering the desired results. 

Conclusion 

Ontario’s updated energy efficiency and demand-side management framework is a significant step toward a more sustainable, affordable, and reliable energy system. With increased funding, an integrated approach to electricity and gas programs, and a focus on both residential and business needs, the directive lays the groundwork for a more energy-efficient future. 

As the province moves toward greater electrification and addresses the challenges of peak demand, the 12-year framework sets the stage for Ontario to meet its energy goals while maintaining a strong focus on customer experience and system efficiency. Whether you're a homeowner, business owner, or part of an Indigenous community, the future of energy in Ontario is looking brighter, with more resources and opportunities to manage energy consumption efficiently.