IESO’s 2024 Capacity Auction Results

December 11, 2024
By 
Travis Lusney & Brady Yauch & Greg Peniuk

The Independent Electricity System Operator (IESO) announced on December 5, 2024 that it procured 2,122 megawatts (MW) of capacity for summer 2025 and 1,525 MW for winter 2025-2026 through its 2024 Capacity Auction (CA). The amounts procured were higher than the IESO’s pre-auction targets of 1,600 MW of supply for summer 2025 and 1,000 MW for winter 2025-2026.

In southern Ontario, the clearing prices for the 2024 CA were $332.39/MW-day for the summer and $139.00/MW-day for the winter – both lower than last year’s southern Ontario clearing prices of $367.41/MW-day and $146.96/MW-day, respectively. For the second year in a row, summer CA prices in the Northwest and Northeast zones were lower than the rest of the province, clearing at $195/MW-year in the 2024 auction.

Figure 1: DR/Capacity Auction Historical Results

Figure 2: DR/Capacity Auction Historical Results

The CA is continuing to clear a greater amount of MWs to meet the province’s capacity needs. Since the start of the Demand Response (DR) Auction in 2016, the capacity cleared for the summer has increased from less than 400 MW to over 2,100 MW and from 400 MW to over 1,500 MW in the winter.

Most of the cleared capacity in the 2024 CA will participate as a DR or storage resource. This category continued to grow by nearly 100 MW for the summer season even as the clearing price decreased. Growth in DR capacity compared to the 2023 CA was due to aggregators increasing their cleared capacity and several new industrial and institutional load customers clearing 4 to 10 MW each.

Participation from large thermal generation also increased with the re-entry of three existing facilities totalling 70 MW. Summer import capacity approached the 700 MW maximum limit, comprising 400 MW from Hydro Québec and 289 MW of resource-backed imports from New York. The New York import, “GB II New York LLC” appears to have the same owner as the oil-fired Oswego Harbor Power Plant, which cleared as “Oswego Harbor Power LLC” in the 2023 CA.  

Figure 3: Summer Cleared Capacity by Type

Power Advisory Commentary

Higher capacity quantity and lower clearing prices compared to the 2023 CA demonstrate that the CA is successfully encouraging new resources to enter the market and retaining resources that might otherwise retire. While prices decreased compared to last year, an upward trend relative to the 2019-2021 period remains clear. In the latest Annual Planning Outlook, the IESO indicated that the summer target capacity may reach 1,800 MW in the next obligation period. Given the high participation in the 2024 CA and tighter supply conditions Ontario is experiencing, the IESO may consider further increasing the target capacity above 1,800 MW in future auctions.

Summer imports consistently reach the maximum capacity allowed in the auction. It is unclear how much the IESO intends to raise the import limit in the CA, particularly if import capacity from Québec is incremental to the 600 MW of summer capacity Hydro Québec is expected to provide under a long-term agreement.

Auction dynamics will increasingly be driven by contract expiry, generation retirement decisions, and other IESO procurements. The IESO has indicated that future auctions will enable wind and solar capacity to participate, providing an option for variable generation which has reached the end of their contract. The IESO’s Medium-Term (MT) series of procurements is designed to offer more post-contract price certainty than the CA, with new contracts for up to 5 years of capacity. Generator participation in future CAs, and as a result clearing prices, depends on the outcome of the MT procurements.

Power Advisory continues to believe that more transparency on auction participation (e.g. resource type, uncleared bids, and/or anonymized offer curves) would be beneficial for market participants and public engagement in the overall planning process. During the Market and Planning Data Engagement, the IESO declined to release more information on the CA[1].

The IESO is rapidly expanding peaking capacity in the province in anticipation of demand growth and the end-of-life of the Pickering nuclear generating station, augmenting the CA with a series of Long-Term (LT) procurements and other mechanisms. There remains a great deal of uncertainty on the amount of capacity that will ultimately result from each LT procurement, and when that capacity will become available. There is potential for greater volatility in CA prices as Ontario manages demand growth, generator retirement, and substantial new generator and storage construction.

[1] “At this time, for confidentiality reasons, the IESO will not be releasing further auction information such as offer prices, zonal breakdowns, etc.“ https://ieso.ca/-/media/Files/IESO/Document-Library/engage/impd/MPDE-20240703-response-to-feedback.pdf