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Released April 17, 2025 | SUGAR LAND
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Written by Jill Sampson for Industrial Info Resources--The Independent Electricity System Operator (IESO) of Ontario is changing how it delivers key services in its power markets at the end of April. The Market Renewal Program (MRP) is set to modernize Ontario's electricity market through changes in how it supplies, schedules, and prices electricity. The MRP is also meant to support the integration of an increasingly diverse and decentralized mix of resources. IESO announced that it is on track to launch the renewed market on May 1, 2025.
Click the image at right to see a map of Ontario's generation points.
The MRP move to a nodal location-based market structure is meant to improve how generators schedule, get paid and manage transmission congestion. The current system relies on a two-step process that first provides a province-wide price, then second, adds in the physical constraints and re-runs the model to adjust generation and manage physical transmission constraints. This results in an-after-the-fact "out of market" congestion settlement that can be more related to fuel type and costs than congestion. This was less important historically when most of Ontario's generation profile was heavily weighted to centralized nuclear and hydroelectric generation, but as efforts to decentralize and diversify generation with natural gas, solar, and wind, the market needs to adapt to level the playing field across the fleet.
The new MRP design will be similar to other nodal market structures (PJM, MISO, SPP) that allow for day-ahead scheduling at each generator node, with the settlement price is calculated by the difference between the real-time and day-ahead operations. This will allow the current marginal clearing prices and hourly Ontario energy prices to be replaced with locational marginal pricing (LMP) and optimize generation dispatch based on congestion pricing mechanisms. Similarly, with congestion calculated and published by IESO in both the day-ahead and real-time markets, the need for a separate congestion settlement will not be needed. This change also allows for greater certainty in generator commitments as they bid in, get cleared, and follow the pre-established day-ahead schedules.
The MRP will also introduce enhanced real-time unit commitments (ERUC) that will build in transparent ways for Ontario's generation resource mix of non-quick start nuclear generators, constrained hydroelectric dams and quick-start generation to be optimized 24 hours a day. ERUC will be calculated by using the cost of bringing an offline unit online, the cost of each additional megawatt-hour for already generating units, and the cost to keep a unit in a ready state, but not actively putting power to the grid.
On the demand/load side of the equation the IESO will continue to use a load weighted LMP across the province, despite the current concentration of load in greater Toronto. Loads will have the option of using the day-ahead market to lock in the cost of power, or opt to take a calculated Ontario Zonal Price settlement price. IESO is also adding new financial transactions in the market to provide additional day-ahead liquidity and allow hedging against constraints at the cross-boundary interchanges with Quebec and the U.S.
The IESO's new annual forecast anticipates that electricity demand in Ontario will grow 75% by 2050, higher than the 60% previously forecast. Industrial and data center growth are the primary drivers of new demand; however, increasing population growth and electric vehicle production and use also contribute to the projected load growth. Ontario is betting this change to its electricity market will help meet the generation needs of the future. Industrial Info is tracking 36 greenfield generation and storage projects worth $15.05 billion. Subscribers to Industrial Info's Global Market Intelligence Power Project Database can click here to see details about the Oneida battery energy storage system (BESS) set to come online in April 2025 and click here to see the report on Hagersville's BESS scheduled for later in 2025. Ontario is also building hydrogen-ready dual-fired natural-gas generation in Courtright. (See project report.)
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).
Click the image at right to see a map of Ontario's generation points.The MRP move to a nodal location-based market structure is meant to improve how generators schedule, get paid and manage transmission congestion. The current system relies on a two-step process that first provides a province-wide price, then second, adds in the physical constraints and re-runs the model to adjust generation and manage physical transmission constraints. This results in an-after-the-fact "out of market" congestion settlement that can be more related to fuel type and costs than congestion. This was less important historically when most of Ontario's generation profile was heavily weighted to centralized nuclear and hydroelectric generation, but as efforts to decentralize and diversify generation with natural gas, solar, and wind, the market needs to adapt to level the playing field across the fleet.
The new MRP design will be similar to other nodal market structures (PJM, MISO, SPP) that allow for day-ahead scheduling at each generator node, with the settlement price is calculated by the difference between the real-time and day-ahead operations. This will allow the current marginal clearing prices and hourly Ontario energy prices to be replaced with locational marginal pricing (LMP) and optimize generation dispatch based on congestion pricing mechanisms. Similarly, with congestion calculated and published by IESO in both the day-ahead and real-time markets, the need for a separate congestion settlement will not be needed. This change also allows for greater certainty in generator commitments as they bid in, get cleared, and follow the pre-established day-ahead schedules.
The MRP will also introduce enhanced real-time unit commitments (ERUC) that will build in transparent ways for Ontario's generation resource mix of non-quick start nuclear generators, constrained hydroelectric dams and quick-start generation to be optimized 24 hours a day. ERUC will be calculated by using the cost of bringing an offline unit online, the cost of each additional megawatt-hour for already generating units, and the cost to keep a unit in a ready state, but not actively putting power to the grid.
On the demand/load side of the equation the IESO will continue to use a load weighted LMP across the province, despite the current concentration of load in greater Toronto. Loads will have the option of using the day-ahead market to lock in the cost of power, or opt to take a calculated Ontario Zonal Price settlement price. IESO is also adding new financial transactions in the market to provide additional day-ahead liquidity and allow hedging against constraints at the cross-boundary interchanges with Quebec and the U.S.
The IESO's new annual forecast anticipates that electricity demand in Ontario will grow 75% by 2050, higher than the 60% previously forecast. Industrial and data center growth are the primary drivers of new demand; however, increasing population growth and electric vehicle production and use also contribute to the projected load growth. Ontario is betting this change to its electricity market will help meet the generation needs of the future. Industrial Info is tracking 36 greenfield generation and storage projects worth $15.05 billion. Subscribers to Industrial Info's Global Market Intelligence Power Project Database can click here to see details about the Oneida battery energy storage system (BESS) set to come online in April 2025 and click here to see the report on Hagersville's BESS scheduled for later in 2025. Ontario is also building hydrogen-ready dual-fired natural-gas generation in Courtright. (See project report.)
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).
