Toronto: The Ontario government is considering moving away from a prescriptive approach to managing the electricity sector and allowing market forces to influence a wider range of choices. Ontario Minister of Energy Bob Chiarelli, speaking at the APPrO 2014 conference on November 18, said that a closer look at the province’s procurement methods including working on a capacity auction “means government re-evaluating its role in the electricity system, while maintaining our strong commitment to a reliable, clean and affordable system.”
Minister Chiarelli went on to say, “I think we are all aware, in the past our government’s own supply mix decisions were highly prescriptive. And there was certainly a time and place for that level of oversight. But, that time has passed. In fact, we are contemplating a future where the IESO runs a capacity auction to secure firm resources, unconstrained by Government’s pre-determined supply mix objectives. For example, rather than directing procurement from specific types of resources such as hydro, solar, wind, and gas, the IESO could instead procure based on metrics such as: emissions; system benefit; price; involvement of demand-side resources, or indeed a combination to meet the megawatt requirements being procured.”
This kind of approach is in fact implicit in the Long Term Energy Plan and consistent with other current initiatives in the Ontario power sector, Chiarelli said. As an example, he noted that, “IESO current Market Rules that constrain generators’ ability to supply external markets beyond Ontario’s borders will need to be reviewed, just the same as we are reviewing the cost-effectiveness and technical ability of our interties to support longer term electricity trade agreements with our neighbours.”
The Minister hastened to reassure members of the industry and others that the changes he has in mind would not damage existing mechanisms that are important to maintain in Ontario: “These types of procurement changes will not occur overnight and will certainly include robust consultations.
However, this forward thinking will inform our Government’s approach when looking at our own market and procurement systems and determine if they are appropriate for the years ahead. And we want to be perfectly clear here. While we are exploring the concept of capacity auctions, the Government has not abandoned its commitment to renewable and green energy generation.”
Minister Chiarelli took pains to stress the point: “I want to assure each of you that our Government will not rush into a new procurement model; and we are committed to robust consultations – but we are resolved to look for efficiencies and cost-saving opportunities, including by adjusting our procurement and contracting approach. … with any change we undertake, we will first ensure robust industry and stakeholder consultation.”
The Minister highlighted the potential benefits from further development of energy storage in the province and cited examples in which Ontario is a world leader in developing power technology:
• nuclear power in scale and technology
• renewable energy
• transitioning out of coal
• innovation
• our smart grid
• our diverse supply mix
• our clean system
• system operations and management
• demand management
• storage technology
• and the reliability of our transmission system.
He concluded with further reassurance to the industry: “As a government, we will continue to work to provide stability, predictability and sustainability for our business and sector partners, and for a reliable, clean, and affordable system for our ratepayers.”
For a copy of the full text of Minister Chiarelli’s remarks readers may contact APPrO or the Minister’s office.