Demand response in Ontario is the practice of reducing or eliminating electricity use during periods of high system demand, in exchange for an incentive or a lower electricity cost. For commercial and institutional buildings, the practical question is which program fits the facility and whether the mechanical and electrical systems can curtail load reliably when an event is called. This article sets out the programs administered through the Independent Electricity System Operator (IESO) and Save on Energy, their eligibility rules, and the engineering considerations that determine whether a building can participate without compromising comfort, safety or code compliance.
TL;DR
- Demand response lets Ontario customers cut consumption at peak times, which reduces the electricity the grid must produce and can defer new generation capacity.
- The main routes for businesses are the annual Capacity Auction, the Industrial Conservation Initiative (ICI) for large consumers, and the Peak Performance Program for commercial and institutional HVAC load.
- Peak Performance generally requires a portfolio of at least 500 kW, with at least 75% of each facility’s proposed capacity coming from HVAC measures.
- Participation depends on controls, sub-metering and system design, so the engineering review should come before enrolment, not after.
Table of Contents
- What demand response means in Ontario
- Which programs are available
- The Industrial Conservation Initiative
- The Peak Performance Program
- Incentives and performance obligations
- Building loads that can participate
- Engineering considerations before enrolment
- Choosing between the ICI and Peak Performance
- Our perspective
- Engineering support for demand response projects
- FAQ
- Sources
What demand response means in Ontario
The IESO describes demand response as customers reducing or eliminating their energy use during high-demand periods, which lowers overall demand and the amount of electricity the grid needs to produce. The consumer moves from being a passive user of power to an active participant who adjusts consumption in response to market conditions and pricing, a shift the IESO sets out in its demand response brochure.
The same brochure positions demand response as a strategic alternative to building new generation capacity, a cost-effective way to maintain reliability. The Ontario government has also noted that demand response is spurring innovation in smart thermostats, energy management software and communication technologies.
For a building owner, this translates into two distinct value streams. The first is a direct incentive paid for verified load reduction during events. The second is a reduction in electricity charges, which is how the ICI operates. Both depend on the same underlying capability: the building must be able to shed a measurable amount of load on short notice.
Which programs are available
Ontario offers several routes, and eligibility differs by customer type and size. The table summarizes the programs most relevant to commercial, institutional and industrial facilities.
| Program | Who it suits | Core mechanism |
|---|---|---|
| Capacity Auction | Businesses | Annual auction in which participants commit to reducing demand when called |
| Industrial Conservation Initiative (ICI) | Medium and large businesses and facilities | Lower Global Adjustment charges for reducing demand during peak hours |
| Peak Performance Program | Commercial and institutional facilities | HVAC-focused curtailment during summer events, paid on performance |
| Peak Perks | Residential customers and small businesses with fewer than 50 employees | Smart thermostat enrolment |
A property developer, a commercial contractor or a property manager will usually be choosing between the ICI and Peak Performance, or considering both where the building’s profile allows. Single-family homeowners and very small businesses are directed to Peak Perks, which is outside the scope of an engineering design engagement.
The Industrial Conservation Initiative
The ICI applies to Class A customers. According to the IESO’s ICI backgrounder, customers are incentivized to reduce demand during the top five peak hours of a 12-month base period running from May 1 to April 30, which lowers their monthly Global Adjustment charges according to their contribution to those peaks. The customer’s Peak Demand Factor is calculated from its percentage contribution to the top five Ontario peak hours, and those hours typically fall in summer, when system demand is highest.
Eligibility generally centres on manufacturing and industrial sectors with monthly peak demand above 500 kW, with specific rules for customers based on average monthly maximum hourly demand thresholds. The same backgrounder is the reference for the current thresholds, and a facility close to the boundary should confirm its classification against it.
The operational difficulty of the ICI is that the peak hours are known only after the fact. The IESO publishes a Peak Tracker to help Class A participants anticipate potential peak hours within the current base period. The IESO has also stated that a more transparent prediction process should help customers anticipate possible peaks, and that more accurate prediction and reduction during the top five peaks can lower a Class A customer’s Peak Demand Factor and Global Adjustment charges, as set out in the backgrounder FAQs.
The consequence for design is that an ICI participant needs a load-shedding plan that can be executed on a day’s notice, repeatedly, for the entire season. Manual procedures are workable for some industrial processes, but commercial buildings with many zones generally benefit from automated sequences.
The Peak Performance Program
The Save on Energy Peak Performance Program is the route most relevant to office buildings, retail, schools, hospitals and similar facilities. Its program requirements describe a program that acquires HVAC-focused demand-response capacity from commercial and institutional facilities during the summer. Participants coordinate curtailment through enrolled Contributors, which are the facilities that actually reduce load.
Two requirements shape project planning:
- Aggregation. Participants generally must aggregate at least 500 kW. For 2026, smaller portfolios may enter with a plan to scale.
- HVAC share. At least 75% of each facility’s proposed Contributor Capacity must come from HVAC measures.
The second requirement is the reason the program is a mechanical engineering matter as much as an energy procurement one. A building whose HVAC plant is oversized, poorly zoned or controlled by standalone thermostats may be unable to demonstrate a credible, repeatable HVAC reduction. A building with a well-designed variable air volume arrangement, a central plant with staged chillers and a modern building automation system can usually do so with modest additional work.
Event timing
The IESO’s demand response page lists Save on Energy activation windows for the June 1, 2026 to May 30, 2027 period that range from 11:00 a.m. to 7:00 p.m. EST. These are the hours during which a building must be capable of holding a reduced HVAC load. For an occupied office, that coincides with peak occupancy, which makes pre-cooling strategies and zone-level setpoint control the central design tools. The official page should always be consulted for the schedule that applies to the current season.
Incentives and performance obligations
Under the program requirements, participants receive a performance incentive based on Peak Demand Savings. For 2026, a one-time enabling incentive of $20/kW may also be available for eligible Contributors that require equipment or services to participate. Participants must submit performance and metering data and follow the event protocols.
The metering obligation has direct design consequences. Savings must be demonstrable, so the building needs metering at a granularity that isolates the curtailed loads from the remainder of the facility. Retrofitting sub-metering into a finished electrical room is considerably more expensive than allowing for it at the design stage, which is a recurring argument for engaging the engineer early on new construction and major renovations.
It is also prudent to treat incentive levels with realism. In its response to stakeholder feedback dated October 16, 2025, the IESO recorded that stakeholders in the Commercial HVAC demand response program considered the proposed incentive levels possibly not competitive enough to attract early adopters. A business case should therefore be built on the building’s own measured load profile and on avoided operating cost as well as on the headline incentive.
Building loads that can participate
The program requirements list a broad range of eligible measures. A project team assessing a facility will typically inventory the following:
- Central air conditioning and rooftop units
- Chillers and cooling towers
- Variable air volume (VAV) systems
- Smart thermostats and zone-level temperature control
- Demand-controlled ventilation
- Heat pumps
- Lighting controls
- Process-load curtailment
- Battery storage discharge to offset HVAC load
- Curtailment of non-critical building systems
Not every item on this list suits every building. The assessment should distinguish between loads that can be reduced without affecting occupant health or building operation and loads that cannot. Ventilation is the clearest example: reductions must remain consistent with the ventilation requirements of the Ontario Building Code, so curtailment strategies that rely on reduced outdoor air should be verified against the applicable ventilation rates. Our guides on ventilation rates in Ontario and demand controlled ventilation address those code limits and the control strategies that respect them.
Engineering considerations before enrolment
A facility that intends to participate should complete a structured review before signing an enrolment agreement. The following areas are the ones that most often determine feasibility.
Mechanical systems and controls
The first task is to establish how much HVAC load exists, how it is distributed, and how it is controlled. Load calculations verify whether the installed capacity matches the actual building requirement; an oversized plant offers more apparent curtailment but may cycle poorly. Controls must allow setpoint adjustment, equipment staging or fan speed reduction from a central point or on an automated signal. Where controls are fragmented, the upgrade scope should be priced as part of the enrolment decision. Facilities planning electrification should note that commercial heat pumps alter both the load profile and the curtailment options, and the wider HVAC design considerations in Ontario apply to any such change.
Electrical distribution and metering
Curtailment is only valuable if it is measured. The electrical design should provide metering points for the curtailed loads, adequate communications to the control system, and protection coordination that remains valid when load is shed or restored in blocks. Restoring a large HVAC load simultaneously at the end of an event can produce a rebound that stresses the service, so staged restoration should be designed in. Installations are subject to the Ontario Electrical Safety Code and inspection by the Electrical Safety Authority, and the distribution arrangement is covered in our power distribution design guide.
Emergency power, storage and temporary power
Battery storage discharge is an eligible measure, which makes storage a candidate for facilities with limited HVAC flexibility. Storage and generation connected to a building must be designed so that they do not compromise life safety systems or the emergency power arrangements the Ontario Building Code requires. Facilities with standby generation should keep the demand response strategy and the emergency power design coordinated, so that curtailment sequences never interfere with systems that must remain available. Sites under construction that need interim supply should consider temporary power design separately.
Power system studies
Where a project adds storage, large controlled loads or on-site generation, a power system study confirms short-circuit levels, coordination and protective device settings against the new operating modes. This is particularly relevant for industrial participants who combine ICI strategies with new equipment.
Choosing between the ICI and Peak Performance
The two mechanisms operate on different logic. The ICI rewards avoiding the handful of hours that determine a customer’s Peak Demand Factor, and the saving appears as lower Global Adjustment charges over the following year. Peak Performance pays for verified reductions during scheduled summer events. A facility’s eligibility is decided first by size and sector: a manufacturing or industrial site with monthly peak demand above 500 kW is a candidate for the ICI, while a commercial or institutional building with significant HVAC load is the target of Peak Performance.
A practical sequence for the decision is as follows:
- Confirm the customer’s classification and demand profile against the ICI backgrounder.
- Inventory curtailable loads and estimate the kilowatts each could shed.
- Test whether HVAC accounts for at least 75% of the proposed capacity at each facility.
- Identify control, metering and communication gaps and estimate the cost of closing them.
- Compare incentive potential with the capital cost and operational risk.
The IESO’s own materials are the authority on whether a given customer may combine programs, and that question should be settled with the IESO or the program administrator before commitments are made.
Our perspective
In our practice, the projects that perform well in demand response are those where the curtailment strategy was designed alongside the building systems rather than layered onto them afterward. We see three recurring issues. Controls are often installed to maintain comfort at a single setpoint, with no provision for a controlled, temporary departure from it. Electrical rooms rarely include the sub-metering needed to prove a reduction. And ventilation strategies are sometimes proposed without verifying them against the Ontario Building Code.
Our recommendation to developers and property managers is to treat demand response readiness as a design criterion in the same way as energy efficiency. For new construction, that means specifying zone-level controls, metering and communications at the outset. For renovations, it means assessing the existing plant honestly, including what can be shed without affecting occupants, before any enrolment target is set. The incentive is useful, but the lasting benefit is a building that can be operated flexibly.
— Sanjay
Engineering support for demand response projects
FutureGen Consulting Inc. provides mechanical and electrical design for residential and commercial projects across Ontario, with more than 30 years of experience. For demand response readiness, the relevant services are HVAC system design, power distribution, power system studies, emergency power design and electrical construction cost estimation, delivered with permit-ready, engineer-stamped drawings and code compliance. If you are weighing enrolment for a new building or a renovation, our team can review the plant, controls and electrical service and set out what the building needs.
You can reach us through the services page to discuss the project.
FAQ
Who can join demand response in Ontario?
It depends on the program. The Capacity Auction is open to businesses, and the ICI is for medium and large businesses and facilities. Commercial and institutional facilities can join Peak Performance, while residential customers and small businesses under 50 employees with a smart thermostat can join Peak Perks.
How large must a building be for the Peak Performance Program?
Participants generally must aggregate at least 500 kW across their portfolio. For 2026, smaller portfolios may enter if they have a plan to scale. At least 75% of each facility’s proposed capacity must come from HVAC measures.
What is the difference between demand response and the ICI?
The ICI is itself a demand response incentive, aimed at Class A customers who reduce demand during the top five peak hours of the base period to lower Global Adjustment charges. Event-based programs such as Peak Performance instead pay for verified reductions during scheduled events.
Do I need an engineer to participate?
The programs do not require a stamped design in every case, but performance and metering data must be submitted, and equipment changes to controls, ventilation or electrical systems fall under the Ontario Building Code and the Ontario Electrical Safety Code. An engineer helps confirm that curtailment is feasible, measurable and compliant before enrolment.
When do demand response events occur?
Peak Performance events take place in summer. The listed Save on Energy windows for the June 2026 to May 2027 period range from 11:00 a.m. to 7:00 p.m. EST. Consult the IESO’s official page for the schedule that applies to the current season.
Sources
- IESO: Demand Response
- IESO: Demand Response, program listing and activation windows
- IESO: Demand Response brochure
- Government of Ontario: Long-Term Energy Plan, Chapter 5
- IESO: ICI Backgrounder and FAQs
- IESO: ICI backgrounder, prediction and Peak Demand Factor
- IESO: Peak Tracker
- Save on Energy: Peak Performance Program Requirements
- IESO: Response to feedback, Commercial HVAC demand response