Ontario grid operator proposes regulation market role for batteries

Ontario’s Independent Electricity System Operator (IESO) has published a proposed market design that would allow battery storage to provide regulation service, the second-by-second balancing that keeps system frequency close to 60 Hz.

Regulation is currently provided by generators with automatic generation control (AGC). The IESO said in an Oct. 15 design memo that, according to its 2026 Annual Planning Outlook, “additional regulation capability is needed in every hour of the year.”

Under the proposal, batteries registered as dispatchable single model storage resources could provide regulation while also participating in the energy and operating reserve markets. The IESO would remove a current restriction, which applies to all resources, that sets operating reserve offers to zero in hours when a resource is scheduled for regulation.

State of charge

To keep batteries able to respond in both directions, the IESO’s scheduling tools would reserve stored energy and charging room around each battery’s regulation commitment. In the day-ahead and pre-dispatch timeframes, the reservation would cover one hour of scheduled regulation capacity. In real time, it would cover 10 minutes.

Resources would submit regulation offers by 9 a.m. Eastern prevailing time before the day-ahead market and receive hourly schedules by 10 a.m., with selection based on reliability. The IESO said cost-based selection “will continue to be investigated” as regulation supply grows.

The design would also lift the 100 MW per-minute ramp-rate limit for storage during hours in which a battery is scheduled for regulation, and it would introduce a monthly performance factor based on how closely a resource follows its regulation setpoints. The IESO would keep its existing bidirectional regulation signal, not split it into separate up and down products.

Only transmission-connected batteries would be eligible. Distribution-connected resources, compressed air and pumped hydro storage are outside the scope of this phase.

The IESO plans to introduce battery regulation in the second phase of its Storage and Co-located Hybrid Integration Project, planned for 2028, after the first phase establishes a single storage resource model with state-of-charge management in 2027 to 2028. Settlement, make-whole payment and market power mitigation designs will follow, with an updated design due in the first quarter of 2027. Feedback on the memo is due Oct. 30.

The IESO expects Ontario to have more than 3,500 MW of battery storage by 2030, following its E-LT1, LT1 and LT2 procurements. The most recent, LT2’s first capacity window, procured 640 MW of eight-hour storage in June, including a 200 MW/1,600 MWh Neoen project near Dryden in northwestern Ontario due online in 2030. The 250 MW/1,000 MWh Oneida project, Canada’s largest operating battery at the time, began commercial operation in May 2025.