It has been a busy and exciting year. As we start 2023, it’s an opportunity to look back and explore some of the most important themes and regulatory developments in the Ontario energy sector in 2022.
1. Meeting the Forecast Capacity Shortfall
In December, the IESO released its 2022 Annual Planning Outlook (“APO”), which accurately notes that this is a “pivotal point for the electricity system”, in part because of the need for new supply to meet a forecast capacity shortfall. This supply gap was the focus of much of the energy regulatory policy changes and actions over the past year, and will be again in 2023.
The year began with work continuing on design of various IESO procurement initiatives to meet the capacity needs, as identified in the previous year’s 2021 APO. The Minister of Energy directed the IESO, among other things, to undertake a Mid-Term RFP, and design a Long-Term RFP for at least 1000 MW.
In April, the IESO released its 2022 Annual Acquisition Report (AAR). The AAR highlighted the
need for additional supply to meet capacity needs in 2025 and 2026. As a result, on the same day, the Minister of Energy wrote the IESO requesting that it initiate an engagement on potential design to acquire further capacity, and examine options for cost-effective additional CDM, and report back by mid-July.
During the year, the IESO concluded the Medium-Term RFP and offered new contracts for five-year commitments to 6 existing facilities. As well, procurement directives were issued for the IESO to enter into contracts for the Lennox GS, Oneida Energy Storage LP project, Chapleau GS, as well as for increased funding for conservation program expansion.
The biggest procurement that the IESO worked on this year is the Long-Term RFP (LT-RFP). Due to the upcoming capacity need, the IESO decided to undertake not just the first LT-RFP, but also a separate Expedited LT-RFP (E-LT1 RFP) with contracts to be awarded by May 1, 2023, and project in-service dates beginning in 2025. An RFQ Process for this procurement was held, and 55 entities qualified to participate in the RFP. The IESO also created a Same Technology Upgrade Solicitation, with submissions due before the end of the year.
In recognition of the on-going work the IESO was doing on the feasibility of a moratorium on the procurement of new natural gas-fired generation, in late August the Minister of Energy asked the IESO to provide recommendations on eligibility of new natural gas generation projects. In October, the IESO issued its Interim Resource Eligibility Report, recommending that the 4,000 MW of new capacity targeted in the up-coming procurements, be made up of up to 1,500 MW of new natural gas generation, which its analysis says is required, and up to 2,500 MW of storage and other non-emitting resources. On the same day, the Minister of Energy issued a directive authorizing the E-LT1 RFP and Same Technology Upgrades Solicitation with resource eligibility requirements in line with the IESO recommendations.
In late September, the Minister of Energy announced that Ontario Power Generation (OPG) will extend the operations of the Pickering Nuclear Generation Station from the end of 2025 to September 2026, subject to regulatory approvals. Additionally, the company will undertake a feasibility assessment of the full refurbishment of the Pickering “B” units.
Also in the fall, the Minister of Energy asked the IESO to report back by the end of the year on a proposal to re-contract small hydroelectric facilities (<10 MW) with a target launch date of the end of July 2023.
2. Energy Transition and Pathway to Net Zero
The question of the energy transition and finding a path to net zero infused almost every energy regulatory discussion and decision this past year.
The Government for Ontario announced the formation of an Electrification and Energy Transition Panel. The panel is tasked with advising government on opportunities for energy sector to help prepare the economy for electrification and the energy transition, and to strengthen the province’s long-term energy planning process. To support the panel, the Ministry of Energy has commissioned an independent Cost-Effective Energy Pathways Study.
As previously requested by the Minister of Energy, the IESO issued its Pathways to Decarbonization Report in mid-December. The Report concludes that a moratorium on new natural gas generation is feasible beginning in 2027. The Report also modelled a full decarbonized electricity system by 2050.
The OEB has highlighted the energy transition in much of the policy work that it has undertaken, and it was a focus of its 2022 Policy Day.
Over the past year, there have been countless reports released regarding the role of the electricity sector in reaching net-zero, including from the Canadian Climate Institute, Electrifying Canada, Electricity Canada and Canadian Gas Association, and the David Suzuki Foundation. The Toronto Atmospheric Fund (Power Advisory) and Enbridge Gas (Guidehouse) also released their own pathways to net zero studies.
To help support many businesses and other organizations own GHG reduction commitments, earlier in the year, the IESO was asked by the Minister of Energy to engage stakeholders and assess options for the design and introduction of a voluntary Clean Energy Credit market in Ontario. The Government also undertook its own separate consultation. In late fall, as part of Bill 36, the Government introduced, and later passed, various legislative amendments that establish a framework for the IESO to create a Clean Energy Credit Registry. The Minister of Energy has asked the IESO to undertake necessary activities to launch the registry as early as possible in 2023.
At the Federal level, the Government of Canada launched a consultation on a planned Clean Electricity Regulation (initially called the Clean Electricity Standard). In the summer, it provided more information through the release of its Frame Document. A draft regulation is expected to be published in the new year.
The Government of Canada also provided details in its Fall Economic Statement of its planned Investment Tax Credit for Clean Technologies that will provide a refundable tax credit equal to 30% of the capital costs of zero-carbon electricity generation systems (e.g. solar, SMRs, wind, hydroelectric), stationary electricity storage systems that do not use fossil fuels in their operations (e.g. batteries, flywheels, compressed air storage, pumped hydro), low-carbon heat equipment, and industrial zero emission vehicle and related charging equipment. The Federal Government also announced a Tax Credit for Clean Hydrogen.
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