Electricity Market of Tomorrow

Ontario’s wholesale electricity market was designed in the late 1990s and opened in 2002, when the electricity landscape looked very different from today. The elimination of coal-fired units, the integration of renewable resources, the increase in small-scale, local generation, the growing role of electricity consumers demand-side resources, and the emergence of new technologies like energy storage have dramatically – and permanently – changed the dynamics of Ontario’s electricity system.

As the sector changed, it became apparent the market needed to evolve. Over the years, the IESO and its stakeholders have worked diligently to make incremental improvements to different aspects of the market. However, more foundational market changes are required to enable the IESO to manage today’s grid while preparing for tomorrow’s.

Ontario is now in a stable supply situation that is expected to continue into the 2020s, making this an opportune time to identify and explore much needed market design changes. Once fully implemented, these enhancements will yield significant benefits to the province.

The IESO’s Market Renewal program is an ambitious, coordinated set of initiatives that will result in a fundamental redesign of Ontario’s electricity markets. When fully implemented, it will result in a more efficient, stable marketplace with competitive and transparent mechanisms that meet system and participant needs at the lowest cost. It will also help prepare Ontario for the future by creating an improved framework for incorporating new and emerging technologies.

Market Renewal comprises three categories: Energy, Capacity and Operability. When the work is complete, the program will:

  • Improve the way Ontario acquires supply resources to meet our medium- and long-term needs;
  • Enable us to more cost-effectively schedule and dispatch resources to meet demand as it changes from hour to hour and minute to minute; and
  • Increase flexibility, enabling us to more efficiently manage unexpected short-term changes on the system, like those that can be caused by variable generation.

To prepare for the electricity sector of tomorrow, the IESO is working with stakeholders to pursue fundamental and enduring changes to Ontario’s electricity market through the Market Renewal project.

The IESO has been working with stakeholders since early 2016 to lay the foundation for this redesign of the market, which is expected to result in lower costs for consumers and new opportunities for market participants and other energy sector players.

The estimated benefits of Market Renewal significantly outweigh estimated implementation costs. Net benefits are expected to reach approximately $3.4 billion over the 10-year study horizon. Cost savings will be achieved through better utilization of existing assets, greater competition among existing and new resources, and a more flexible procurement process that is better aligned with system needs.