BY Rodney Doyle, EirGrid plc
ON August 1, 2019
Originally published in APEx Newsletter Volume XI – September 2019.
Ontario has achieved a major milestone in its Market Renewal program – the completion of three Highlevel Designs that lay the foundation for a more dynamic and efficient energy market. By 2023, Ontario will have replaced its uniform pricing system with locational marginal pricing, while also implementing a Day-Ahead Market and Enhanced Real-time Unit Commitment.
This renewed market will not only deliver significant levels of market efficiency and customer savings, it will also allow us to better address the changes that we are all experiencing: integration of storage and other emerging technologies, changing real-time operations and shifting boundaries between the wholesale market and the distribution level.
Ontario is relying on the best practices in other markets and on our own experience in administering electricity markets over the past 17 years. Over the last decade, we have been dealing with the phase-out of all of our coal-fired generators (which provided about 25% of Ontario’s capacity before 2014), the build-out of a large quantity of combined cycle gas generators and intermittent resources and the ongoing refurbishment of our nuclear fleet.
This rapid changeover in our supply mix means that the majority of our energy supply is emissions free but it has also introduced changes to our operations. Dealing with large supply swings from our variable generation fleet and forecast errors have become an all too regular occurrence for our operators. We know that we are not alone in managing a large intermittent fleet and an early focus for us was to ensure we could dispatch these resources.
Even with dispatchability in place, we still needed to find ways to increase flexibility from our existing fleet. To address this flexibility needs, we developed and implemented a quick market-based solution. To that effect, we are leveraging our 30-minute Operating Reserve (OR) product. During times when we are expecting large changes from our variable generation fleet, we have the ability to acquire additional MWs to assist us with the real-time operational challenges. Since our OR products are co-optimized with energy we have found an efficient and transparent market solution for our flexibility concerns. After our renewed energy market is in place, we will continue to assess our flexibility needs and explore what additional enhancements are needed.
In addition to our energy market changes, Ontario is taking a close look at ways to meet our resource adequacy needs going forward. Our plan had been to launch capacity auctions for our incremental resource needs in 2022. While stakeholders are broadly supportive of our energy market changes, that same level of support was not present for the transition from a centralized contracting model to capacity auctions. At the same time, our updated long-term planning forecast began to convey that, over the next decade, we have enough energy to meet provincial demand and a limited need for new capacity.
This presents us with an opportune time to engage on a broader level with stakeholders to explore a number of different ways to meet resource adequacy going forward. This conversation will be guided by Ontario’s commitment to competition and creating an environment that gives businesses confidence to invest in the Province.