Ontario Announces Series of Procurements to Meet Ontario's Growing Energy Needs
On December 11th in response to a request from the Minister of Energy, the Independent Electricity System Operator (IESO) released an Interim Resource Adequacy Update entitled, Evaluating Procurement Options for Supply Adequacy, A Resource Adequacy Update to the Minister of Energy. Importantly, the report confirms an emerging system need of 5 TWh of new electricity supply between 2029-2031, growing through the 2030s, and outlines the organization’s updated procurement approach to secure new energy resources to address that need for new power.
New Procurement Targets
As currently proposed the IESO will conduct a series of competitive procurements targeting approximately 5,000 MW of new non-emitting generating resources from both transmission-connected and distributed energy resources (DERs). Eligibility will include wind, solar, biofuels, hydro – plus hybrid facilities – that can meet the procurement performance criteria.
The IESO is also considering how its long-term procurements could enable the participation of existing wind and solar facilities willing to repower.
The table below outlines the targets and timelines for these long-term procurements:
It is noteworthy that the IESO also indicated it would develop a mechanism for long lead-time projects to participate in the upcoming procurements. The IESO will consult on a framework that allows for a proponent seeking to develop an asset with long lead times to compete in an earlier procurement (e.g. LT2) but come into service at a later date (e.g. COD 2034) competing in a “like-for-like” process.
Transmission Expansion & Constraints
While no specific transmission lines were mentioned in the IESO’s update, these supply additions will need to be supplemented by transmission build-out to ensure adequate infrastructure to move electrons where they are most needed. Expect the IESO to release updated plans in the future on how the buildout will be coordinated with future procurement activities, likely including northern Ontario to align with references on the use of Crown Land access.
Given the energy need identified and operating profile of energy producing resources (i.e., energy provided at all times, not just at peak), the IESO noted that the deliverability testing constraints from LT1 may not be the same for future procurements.
Updated Planning Outlook
In its report, the IESO also provided a snapshot of its next Annual Planning Outlook, expected to be released in Q1 2024, by showing two new updated energy forecasts:
Targets for the next procurement will be informed by these updated energy needs, possibly to be adjusted upwards in the future to account for a range of risks and uncertainties.
The IESO noted that capacity needs are expected to grow significantly in the next decade. As such, the IESO has left the option open that it could deploy complimentary capacity procurements in the future.
An Ongoing Role for Natural Gas
The IESO report reiterated that natural gas will continue to play an important role as a transitional resource to enable the build-out of Ontario's non-emitting fleet. The IESO states it continues to work with federal agencies and authorities to inform achievable Clean Electricity Regulations that will support a net-zero economy by 2050.
Minister Highlights Importance of a Diverse, Affordable, and Reliable Electricity System
To underscore the trajectory of the energy system in Ontario, Energy Minister Todd Smith was the keynote speaker at a luncheon hosted yesterday by the Empire Club of Canada. The Minister referenced updated resource adequacy needs and outlined the numerous initiatives underway to enable the vision for a reliable, affordable, and sustainable energy system as outlined in the Powering Ontario’s Growth report released in July.
Specifically, the Minister detailed how Ontario plans to grow investment in the grid through new nuclear assets (refurbishments, SMRs, and newly built large-scale assets), natural gas, hydrogen, storage (BESS and LDES), waterpower, biofuels and biomass. The Minister mentioned not only resources required at the bulk system level – including transmission – but also the important role of LDCs and DERs. More detail on this latter front is expected to be contained in the report and recommendations that will soon be tabled by the Electrification and Energy Transition Panel.
Next Steps
Additional details about the IESO's updated planning assumptions and procurement strategy will be provided at the upcoming 2023 Annual Planning Outlook webinar and the Long Term 2 RFP webinar on December 13th. Sussex will be participating in both consultations and will circulate additional details to clients to support their decision-making as market details evolve.
