In all likelihood Ontario’s generating capacity will need to be shored up in some way by 2021. The latest projections of supply from the IESO show a capacity gap likely beginning in 2020. It remains to be seen whether the gap will be covered by new generation, imports, demand reduction or a combination of the three.
The primary cause of the capacity gap is the retirement of the Pickering nuclear station, combined with a series of planned short-term outages at other nuclear stations. As shown in the chart below, reactors at both the Darlington and Bruce stations will be out of service undergoing refurbishment during the years following 2020. It may be challenging to identify sources of new generation to fill this expected capacity gap. Investors in new generation would have to contend with the risk that they would have difficulty competing at certain points in subsequent years given the likely return to service of the refurbished reactors which tend to have low marginal operating costs.
“Nuclear refurbishment will be the defining challenge for the power sector over the next 15 years,” said Michael Lyle, Vice President of Planning, Law & Aboriginal Relations, at the IESO. Speaking at the APPrO 2015 conference on November 17, he warned that due to various kinds of uncertainty it is necessary to be cautious about making long term commitments to new capacity. He suggested that it might be wise to delay large procurements and that the focus might shift to relatively short term solutions for addressing the capacity gap.
The IESO points out that the capacity gap is a moving target, subject to a lot of uncertainty. The date on which it will start, and its size, could change significantly as circumstances develop.