Ontario's Market Renewal Program for Electricity Transformation

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Ivey's Annual Electricity Workshop highlighted the need for Ontario's Market Renewal Program (MRP) to adapt to the changing energy landscape. The MRP aims to optimize electricity supply, scheduling, and pricing to support the transition to a more diverse and sustainable energy mix. Key features include a Day-Ahead Market, Enhanced Unit Commitment, and Locational Pricing, all working towards lowering costs and facilitating the integration of emerging energy resources. The program is crucial for ensuring efficient operation and reliability as Ontario decarbonizes its energy sector.

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OCTOBER 16, 2023 Ivey Annual Electricity Workshop 2023 Market Renewal Program Stephen Nusbaum, Director MRP Implementation

Ontarios Changing Market Existing market was designed when Today and into the future Energy markets and solutions are well established Supply is increasingly distributed and variable Energy markets were new Dominated by traditional forms of generation Consumers are more active and engaged in the market Mostly passive consumers Focus on a real-time energy market price for efficient dispatch and to drive investment Other products such as capacity and enhanced ancillary services have emerged as distinct products, vital for efficient operation and to manage uncertainty Greater opportunities (and need) for coordination with neighbouring markets Interaction with neighbouring markets focused on energy imports 2

Market Renewal Program Overview Market Renewal Program (MRP) will improve how we supply, schedule and price electricity, enabling the wholesale market to reliably and cost-effectively support the sector transformation Ontario's supply mix has changed dramatically over the past twenty years and is set for another seismic change with decarbonization The growing complexity and diversity of supply options in the future increases the need for the wholesale market to support efficient dispatch of resources and signal the necessary investments needed to support system reliability 3

MRP Scope: Key Market Features New Market Features Benefits Day-Ahead Market New market to commit energy resources the day before operation through a financially binding day-ahead commitment process, reducing operational risks for the IESO and market participants Enhanced Unit Commitment Enhancements to resource scheduling process (occurs 3-24 hours before operation) to ensure optimal mix of resources are scheduled to meet system needs at lowest cost Locational Pricing Introduces locational pricing to ensure the price of energy at any point in the province transparently reflects global and local system constraints Replaces uniform price for suppliers (Hourly Ontario Energy Price) with Locational Marginal Prices for dispatchable resources and Ontario Zonal Price for all other consumers These new features will work together to lower costs to consumers by a conservative estimate of $975M over the first 10 years. These changes are also essential to creating the platform needed to efficiently integrate emerging resource types such as DERs, storage, and hybrids. 4

MRP Journey 2017 2018 2019 2020 2021 2022 2023 2024 2025 Detailed Design High-Level Design Implementation Implementation activities: Market Rule and Market Manual revisions IT solution development Test planning and execution Internal IESO readiness Contract amendments External market participant readiness Three initiatives: Day-Ahead Market Single Schedule Market (LMP) Enhanced Real-Time Unit Commitment Develop details to support: Tool development Process redesign 5