On December 10, 2020, the Independent Electricity System Operator ("IESO") announced the results of a new capacity auction, which secured 992.1 Megawatts (MW) of capacity from 26 successful market participants.
This much-anticipated round of capacity procurement comes after the IESO delayed the auction originally scheduled for June 2020 following reduced electricity demand resulting from COVID-19.
What are the Results?
The 992.1 MW of capacity have been procured from a combination of eligible resource types, including electricity loads, generators, and energy storage. The clearing price was $197.58/MW-day, representing a significant decrease of approximately 26% from the Demand Response Auction in 2019. Participants have committed to provide capacity for summer 2021, which is intended to assist in managing peak seasonal loads.
The full list of successful participants can be found here. Capacity commitments ranged from 245.6 MW on the high end down to 1.1 MW.
Although the IESO did not disclose the total number or identity of unsuccessful bidders, it revealed that more than 1,700 MW worth of resources enrolled in the auction.
What Stands Out?
This was the first time the IESO invited electricity generating resources to compete, where previously only load-side resources participated as part of the Demand Response Auction. Notably HQ Energy Marketing Inc. received a capacity commitment for 80 MW as a system-backed import.
While this represents a significant development, the majority of successful bidders in this round remained electricity loads. This result may alleviate the trepidation felt by load-side participants, some of whom felt that expanding the capacity auction to electricity generators would limit their ability to compete. This was the subject of an application brought earlier this year by the Association of Major Power Consumers in Ontario before the Ontario Energy Board, which was ultimately denied. Our previous commentary on that decision can be found here.
Also of note is the successful participation of one non-aggregated energy storage entity, which is particularly interesting given the increased market focus on this rapidly developing technology, and the continuing desire for regulatory certainty. As we commented in a previous article, whether additional administrative mechanisms are required to enable energy storage to efficiently compete will turn in part on the pace of storage technology development in Ontario and the physical and financial characteristics of competing capacity market participants. Although much work remains to facilitate the full deployment of energy storage in Ontario, Thursday's results may be a reassuring signal for storage advocates.
The Bottom Line
The ongoing evolution of the IESO's capacity market remains the subject of much attention from stakeholders in the power industry. Particularly noteworthy aspects of this most recent auction include the participation of generation-side resources, as well as the successful participation of an energy storage resource.
The next capacity auction is currently scheduled for December 2021, for which the IESO states it intends to explore additional "auction enhancements" and to enable additional resources to compete.
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