The IESO has launched a consultation process on how to meet the province’s anticipated capacity requirements for power over the next 5 years. A key part of the Market Renewal Program, this consultation process will examine the proposed Transitional Capacity Auction (TCA). The IESO expects that the Incremental Capacity Auction (ICA) will run at the end of 2022 to serve a capacity need in 2025 and could well meet much of the capacity requirements from that date onward. However, this consultation focuses on the period from 2020 to 2024. During that time, the TCA may provide some experience with auction management that could be valuable in developing the ICA. Some market participants, including many members of APPrO, have doubts about whether the ICA as presently conceived is likely to achieve the high expectations set out for it. “I don’t think anyone can say if it will be the most efficient or effective way to meet capacity requirements,” said one observer.
The IESO noted in its March 7 presentation that, “By 2023, there is a significant need for additional capacity - beyond the capacity already committed by regulated rates and long-term contracts. IESO is confident that Ontario has a robust asset base and strong interconnections that will ensure we can meet our system needs without having to procure new resources through long-term contracts.”
With respect to the TCA, Bonnie Hiltz of the Sussex Strategy Group notes that “the IESO has said that in the first phase, it would specifically target dispatchable non-obligated generators. In later phases, it plans to bring in imports, as well as capacity coming off contract, or incremental capacity available from existing facilities that may be dispatchable or self-scheduling.” Her overview of the TCA proposal to date is available at sussex-strategy.com, March 11, this location.
The design of the TCA is modeled on the IESO’s Demand Response Auction (DRA) which has shown signs of fostering a reasonably successful market for Demand Response. See “Participation up, costs down in 4th Demand Response auction,” IPPSO FACTO, February 2019. The TCA will include generation resources as well as DR. The first Transitional Capacity Auction is scheduled for December 2019.
Proposed timelines for the TCA Phase 1 are shown at right, and the timelines anticipated for the broader process leading to the ICA are shown in the chart at the top of this article. The IESO released the High Level Design for the Incremental Capacity Auction on March 22. See article at this location.
For more information, readers are encouraged to visit the IESO’s web page devoted to the consultation on Meeting Ontario’s Capacity Needs.
* The details presented are for illustrative purposes only and are subject to change.
ICA features not in TCA
• Individual capacity qualification
• Minimum hours of dispatch
• Seasonal co-optimization
• Rebalancing auctions
• New build requirements (siting, forward period requirements, security, multi-year commitment, etc.)
• Market power mitigation
• Delisting requirements
• Enhanced obligations, assessment and non-performance implications