By Travis Lusney, Power Advisory LLC
Recently, the North American Electric Reliability Corporation (NERC) published an update to their Long-Term Reliability Assessment and identified Ontario (along with ERCOT) as being jurisdictions that are projected to have reserves fall below the Reserve Margin Level. One interesting point raised by NERC is that ERCOT is less of a concern compared to Ontario despite having a lower available reserve margin. The primary reason for this conclusion is that while ERCOT has a higher supply need, there is also a significant queue of projects that are preparing to build (i.e., have completed the required connection procedures with the system operator to be allowed to connect at their selected point of interconnection).
Ontario on the other hand has no queue forming (see figures). In other words, ERCOT has a number of market participants that are in the process of building to address the supply need while Ontario has ceased development completely. Market design uncertainty (i.e., abandonment of ICAs), political interference (e.g., cancellation of contracts), and social acceptance (e.g., gas-plant fiasco) all raise barriers to development and limit the access to capital required to construct or rebuild supply resources needed to address Ontario’s supply need.