Ontario's draft lets a transmission battery sell energy, reserve and frequency control in the same hour - the pay formula is blank, and a factory feeder is out
On 15 October 2026 the IESO published a design memo for Phase 2 of its storage program. A dispatchable transmission battery could offer frequency control while also selling energy and operating reserve. Offers are due at 9:00 AM Eastern, with the hourly schedule back by 10:00 AM. Day-ahead, the design holds back one hour of stored energy for that job. In real time the spare is 10 minutes. Settlement is deferred. A battery on a local distribution feeder is outside this draft.
A business in Ontario that is pricing a battery will meet a new draft from the grid operator. The draft is not about the box on the factory wall.
On 15 October 2026 the Independent Electricity System Operator (IESO) published Memo 1.0, Regulation Service Design. It sits in Phase 2 of the Storage and Co-located Hybrid Integration Project. The memo calls that phase SHIP2. It is a design. Market rules and market manuals come later, and the memo says those outside changes will be shown to stakeholders.
The job is specific. A battery registered as one dispatchable unit, able to charge and to discharge, could sell regulation while it also sells energy and operating reserve. The memo says that today a resource's operating-reserve offers are set to zero in any hour it is scheduled for regulation. The draft lifts that block.
Three words, in buyer English. Energy is the power sold in the interval. Operating reserve is capacity held so the operator can call it. Regulation is the fast correction that keeps the grid near 60 hertz. The memo says that correction can come as often as every four seconds, inside the five-minute dispatch interval. Hertz is the speed of the electrical wave.
Analogy: the battery is a water tank with three jobs. Selling energy is the tap you open. Operating reserve is water you keep ready for a call. Regulation is a small nudge, as often as every four seconds, so the pressure stays near the mark. The draft says how much water stays back so the nudge can still run. It does not say what the nudge pays.
The spare water is the part you can measure. For the day-ahead market and for pre-dispatch, the design holds back stored energy equal to one hour of the scheduled regulation capacity, both above and below the resting level. The memo calls those headroom and footroom. The spare is sized for a bad hour: the signal sits at full regulation up while the battery is already discharging, or full regulation down while it is already charging. In real time the spare drops to 10 minutes of that same regulation capacity. The memo says the 10 minutes includes charging and discharging losses. It also says the 10 minutes gives the scheduling tool time to move the battery, and covers a telemetry fault.
The offer clock is printed. Regulation offers go in by 9:00 AM Eastern Prevailing Time. The IESO sends the hourly regulation schedule back by 10:00 AM. Those hours then limit what the battery can offer as energy and reserve into the day-ahead market. If more batteries offer regulation than the system wants, the draft picks on reliability, not on price. The memo says a price-based pick was considered and is still being studied.
One limit moves. While the battery follows its regulation setpoint, the draft takes off the 100 megawatt-per-minute ramp cap. The energy target underneath would slide from one dispatch to the next across five minutes. The memo says that slide waits on an IESO software update. It is not a switch a project can use this week.
Who is in. A dispatchable battery that can follow an automatic generation control setpoint and can send the telemetry. The memo says this design enables transmission-connected batteries. A battery on the local distribution wires, the usual place for a factory or a warehouse, is not in SHIP2. The memo says that would take further internal work and coordination with distributors. Compressed-air storage, pumped hydro and other technologies on the dual registration are not in this design either.
The pay is not in this memo. Settlement, make-whole payments, the economic operating point and market-power checks are left for a later version. The memo says an updated design, covering those topics and the feedback from the October 2026 session, will be shared at a stakeholder session in the first quarter of 2027. That session is another design meeting. It is not a date a battery starts earning. The memo also says regulation for batteries goes live after Phase 1 goes live. It prints no calendar day for either phase.
Global Adjustment, for a storage unit that provides this service, is to be treated in line with Ontario Regulation 429/04. The memo names the regulation. It does not restate a rate.
The memo cites the IESO 2026 Annual Planning Outlook for one line: more regulation capability is needed in every hour of the year. This note did not open that outlook. It carries no megawatt figure from it.
A score is sketched. Each month the operator would compare actual output with the requested setpoint, second by second, and turn the miss into a percentage of the regulation capacity. The memo says a smaller miss is better. It does not print the percentage that counts as a pass.
Good: A public date, a public split between the transmission grid and the local feeder, a public clock at 9:00 and 10:00, a public spare-energy rule of one hour day-ahead and 10 minutes in real time, and a plain statement that the pay design is not in this memo.
Bad: No go-live date. No dollar rate. No pass mark on the score. A distribution battery, including one beside a factory, is named as out of scope.
Ugly: Reading this draft as a cheque for a rooftop battery. Treating the one-hour spare as the size of the battery you buy. The hour is energy held back so regulation can run. It is not the whole tank. Treating the first quarter of 2027 as a payday. That date is the next design meeting.
Soft next step: if a quote for an Ontario battery puts regulation income on the first page, ask which wires the box sits on, and whether the pay rule is in a contract or still in this draft. Then a short consult at Sovryn Energy /consult if you want that line read against the quote.
Source: IESO, 15 Oct 2026 - Enabling Resources Program, Storage and Co-located Hybrid Integration Project, Regulation Service Design, Memo 1.0. Primary for the 15 October date, the SHIP2 scope (a dispatchable single-model battery providing regulation while it sells energy and operating reserve, and the current block that sets operating-reserve offers to zero during regulation hours), regulation as often as every four seconds inside a five-minute interval to keep frequency near 60 Hz, the one-hour day-ahead and pre-dispatch holdback of regulation capacity as headroom and footroom, the 10-minute real-time holdback including charging and discharging efficiency, offers by 9:00 AM Eastern Prevailing Time and schedules by 10:00 AM, reliability-based selection with a price-based pick still under study, removal of the 100 MW/min ramp limit during regulation hours pending an IESO tool update, transmission-connected batteries in scope and distribution-connected batteries outside SHIP2, dual-model storage outside this design, settlement and make-whole pay left for a later version, Global Adjustment treated in line with Ontario Regulation 429/04 with no rate restated in the memo, regulation go-live after Phase 1 with no calendar date, a monthly performance score with no printed pass mark, the memo's citation of the 2026 Annual Planning Outlook for regulation capability in every hour with no megawatt figure in this memo, and the next design session in the first quarter of 2027. This note did not open the Annual Planning Outlook.