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How the pandemic has changed Ontario's electricity outlook

July 23, 2020  |  Article
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So what does all of this mean? First and foremost, the IESO continues to find that existing and available resources can meet Ontario’s capacity needs until the mid-2020s. To acquire these resources—which could include generators coming off contract, demand response, and imports—we are moving forward with a capacity auction this December. Initially planned for June, the auction was postponed while we waited to better understand the impacts of the pandemic. As we’ve said before, capacity auctions will provide a platform for various resources to compete on a level playing field, helping to meet Ontario’s electricity needs at lowest cost.

Further down the road, a capacity gap will emerge in the mid-2020s. While capacity auctions have proven to be effective, they are not appropriate for all resource types, or in situations where risks or circumstances act as barriers to participation – feedback we consistently heard from stakeholders. To better understand developers’ needs and explore cost-effective procurement alternatives, we remain committed to engaging stakeholders in the future on potential procurement tools.

More information about updates to the Annual Planning Outlook that were presented at our latest stakeholder engagement meeting are available online.

All in all, our experience in the last five months has shown again that Ontario’s electricity system has the tools needed, through a responsive electricity market and diverse supply mix, to effectively manage significant changes—whether that’s extreme weather or a pandemic. For this I thank all of you across the sector who have contributed.

Peter Gregg, President and CEO, IESO

Let me begin by saying I hope you and your families are keeping healthy, safe, and cool. This has been an unusual summer in many ways, and I can’t recall the last time we had such persistent hot weather.

Weather of course is the largest factor influencing electricity demand, and with air conditioners across the province running full tilt, peak electricity demand has reached levels we haven’t seen since 2013. We’re also seeing higher peaks because of the Industrial Conservation Initiative (ICI) hiatus. The ICI typically sees large consumers across the province reduce their electricity use during peak periods, but this year the program has been suspended to allow businesses to focus on recovering from COVID-19.

The system has responded well, with Ontario’s generators, consumers providing demand response, and imports all rising to the occasion—a great demonstration of how our system is designed to manage risk, maintaining reliability even in the face of unpredictable circumstances.

Looking ahead, it’s because of recent developments, and new uncertainties stemming from COVID-19 in particular, that we have updated our supply and demand outlooks for Ontario’s electricity sector.

Since January, when the IESO released its Annual Planning Outlook – our long-term demand forecast and resource adequacy assessment – the world has changed quite dramatically. The uncertainties associated with COVID-19, the economy, extreme weather and Ontarians working from home, are changing earlier assumptions about future supply and demand conditions.

Due to uncertainty around how quickly the economy is going to recover, we looked at two scenarios in re-assessing our supply and demand forecast for the next six years. The first can be characterized by a slower recovery, with demand not expected to reach 2019 levels until the end of 2025. In the second scenario, based on a shallower downturn and a less dramatic impact from the pandemic, demand is expected to reach 2019 levels by 2022.

Both scenarios considered new risks that could impact the performance and availability of Ontario’s supply mix in the coming years, such as higher outage rates at generating facilities and potential nuclear refurbishment delays.