On February 8, 2022, Ontario’s Independent Electricity System Operator (“IESO”) presented a webinar on its intent to launch a Request for Proposal (the “LT I RFP”) to procure at least 1,000 MW in fall 2022 to address multiple reliability needs. Based on a directive from the Minister of Energy, the IESO has been instructed to seek resources that can be in service between 2026 and 2028 as part of the IESO’s broader Resource Adequacy Framework.

Background

The LT I RFP forms part of a broader Resource Adequacy Framework under which the IESO aims to address a capacity need in Ontario set to emerge in the mid-2020s. The forecasted capacity gap arises from a combination of factors, most notably the retirement of the Pickering nuclear plant, the refurbishment of other nuclear generating units, and expiring generation contracts for certain existing facilities.

The LT I RFP will aim to procure at least 1,000 MW of new and incremental capacity from both existing and new-build supply and storage resources that can enter service between 2026-2028 for a seven- to ten-year period. To address both global system needs and more localized transmission security needs, the LT RFP I will seek to acquire capacity preferably in the transmission zones east of Toronto and in southwestern Ontario.

Proposed Eligibility Requirements

Each proposal must confirm that:

1.  the subject resource can provide at least 1,000 MW of new capacity with a minimum of 4 hours of consecutive energy duration, based on system needs;
2. the proponent must be a fully dispatchable (i.e., able to dispatch electricity on demand at the request of IESO through generators, hybrid generators, or storage resources that are directly connected to the transmission or distribution system) Market Participant (as defined in the IESO Market Rules); and
3. all permits are in place and all regulatory requirements are met at the commercial operation date.

Proposed Rated Criteria

Each eligible proposal can earn points for desirable resource attributes or technical characteristics, if the subject resource:

1. is able to deliver 8 or more consecutive hours of energy;
2. is located in areas of greatest system need, such as southwestern Ontario or East Toronto;
3. is able to ramp up or down quickly;
4. is a quick-start resource;
5. has a larger operating range; and
6. has the technical capability to provide one or more ancillary services.

The IESO has indicated that as the design of the LT I RFP process continues to be refined through stakeholder feedback, some of these rated criteria may become mandatory requirements.

Stakeholder Engagement

The IESO is inviting stakeholders to participate in the design of the LT I RFP, including providing feedback on whether the revenue mechanisms in the contracts should be structured as energy market “collars”, contracts for difference, or price adders. The IESO also plans to engage with stakeholders to determine how to value and monetize Environmental Attributes (“EAs”), along with other revenue streams.

Stakeholders may provide feedback on the term length of the procurement contracts, the timelines of the LT I RFP process, and the proposed mandatory requirements and rated criteria. Stakeholders are invited to provide comments by February 15, 2022.

 In connection with the LT I RFP, the IESO intends to issue a draft request for qualifications (“RFQ”) by February 28, 2022 and complete community engagement on the RFQ prior to March 31, 2022. A final RFQ will be issued by June 30, 2022.

Our team at McCarthy Tétrault continues to closely follow the development of the LT I RFP, as well as the IESO’s Resource Adequacy Framework generally. If you would like more information about electricity regulation in Ontario, we are here to help.

Please contact Reena Goyal, Mitchell Lui, or any other member of the Power Group at McCarthy Tétrault with any questions or for assistance.