Markets and Programs

Participants in Ontario’s wholesale electricity market reflect a wide range of businesses and interests in the energy sector. Recognizing these different needs, the market offers a variety of programs that allow for a diverse and strong participant base. The IESO operates a real-time energy market in which electricity demand and supply are balanced and instructions are issued to dispatchable generators and loads every five minutes. For each five-minute interval, the IESO collects the best offers from generators and loads to provide the required amount of electricity and publishes the market clearing price. Generators, large energy consumers and traders can offer into the operating reserve (OR) markets and receive payment for providing energy on call, if extra supply is needed in the real-time market. Prices in the OR market are set every five minutes. This market offers a means to mitigate the price risk associated with congestion on an intertie. Congestion on an intertie can lead to a price difference between the intertie zone clearing price and the Ontario market clearing price. Transmission rights are not a guarantee of physical transmission of energy. The Day-Ahead Commitment Process (DACP) was created to address reliability needs in Ontario’s power system in 2006. While final dispatch and market clearing prices continue to be set in the real-time market, suppliers of energy can commit the availability of their resources one day in advance, which allows the IESO to better manage system reliability – particularly during periods when the system is strained.

On September 5, 2008 the IESO Board approved the implementation of an Enhanced Day-Ahead Commitment Process (EDAC), which will deliver changes to the existing Day-Ahead Commitment Process. It is designed to enhance the efficiency of the electricity market through the advanced scheduling and commitment of resources required to provide electricity on a daily basis. The EDAC project is underway and is expected to be fully operational by the second half of 2011. A key addition to the market is the increasing role of demand response. Large volume consumers can participate in the market, by either indicating how much electricity they plan to consume at what price or even offering Operating Reserve in the market. Currently, there are 13 facilities operating as dispatchable load in the market, offering a potential 700 MW of demand response. Distributors, aggregators, and large industrial loads can all play an important role in helping to reduce energy use during critical peak periods. The Emergency Load Reduction Program provides incentives to consumers to provide demand response and help the IESO avoid the use of control actions. Given that large fossil-based generators typically require long and costly start-up processes, they are often unavailable to meet the supply gap that occurs when there is a sudden increase in Ontario demand or decreases in supply. To address this issue, the IESO introduced the Spare Generation On-line (SGOL) program, which offers generators a guarantee of start-up and minimum costs (for a specified minimum run-time) to encourage generators to start-up their facilities earlier in the day, even when market prices are lower than their operating costs. In order to ensure the reliable operation of the IESO-controlled grid, the IESO contracts for a number of services that cannot be provided through the market. These include the Emergency Demand Response Program, black-start capability, regulation service, reactive support and voltage control. The IESO is also counterparty to one reliability must-run contract. The IESO's Market Evolution Analysis and Research (MEAR) group provides analytic support for market evolution and other regulatory initiatives. They do so through economic and econometric analysis in addition to education and outreach.