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Empowering investors: Exploring paths to scale distributed energy resources


Staff member
Mar 19, 2024
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Distributed energy resource (DER) technologies are fast-tracking around the world and have the power to transform Ontario’s electricity grid. We know that scaling DERs will add tremendous financial value for utilities, ratepayers, and investors. Following recent advancements, it’s clear regulators in Ontario are starting to catch up.

Ontario’s Independent Electricity System Operator (IESO) continues to support DER projects through its Grid Innovation Fund. This includes a $4.8 million project with BluWave-ai and Hydro Ottawa that gives utilities better visibility on EVs as distribution system assets. The IESO just launched another round of grid innovation funding targeting transportation and heating and cooling projects that make the province’s electricity grid more efficient.

Programs like this are sure to bring in promising new tech and investment. While frameworks and markets develop, we need such innovative financing models to mobilize capital into DERs. Impact investors, entrepreneurs, and project developers can scale them up and maximize their benefits, laying a foundation to bring in more traditional private lenders.

That’s why TAF began exploring how we could support demand-side DERs last fall, through robust frameworks that will enable them to succeed across the GTHA. De-risking those investments in technologies that are proven but still new to the market will depend on a blend of innovative financing structures, providing sufficient incentives for entrepreneurs to buy into projects that are first-of-a-kind in this region. TAF has been considering a suite of innovative mechanisms, including:

  • Recoverable grants that allow project promoters to recover a portion of their investment if a project fails;
  • Convertible grants that can be transformed into equity of debt if specified performance conditions are met;
  • Provisions to convert parts of a debt balance to a grant under pre-determined conditions.

TAF’s recent grant-like non-dilutive funding agreement with Optiwatt, a software company administering a managed EV charging program through its app, shows this principle in practice. It’s a prudent tailor-made investment to help a promising DER demonstration project succeed. It also de-risks and enables DER adoption at scale by local utilities and the province, which can pass hundreds of millions in savings from avoided or deferred “poles-and-wires” expansion directly to ratepayers.

As regulators and utilities are starting to catch on, creating more favourable conditions for investment, it’s time for private lenders to take notice too. We’re seeing DERs as a market with high potential for both carbon reduction and financial returns.

We know DERs are proven, ready to scale, and fundamental to an efficient and affordable grid gearing up to support economy-wide electrification. TAF’s latest GTHA Carbon Emissions Inventory and IESO’s recent Annual Planning Outlook show the urgency for implementing these solutions. Regulators and operators can go further and faster by adopting climate mandates and embracing innovation. In the meantime, investors of all types should seek opportunities to support DERs. If you’re exploring this space or scaling your DER solution, get in touch.
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