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Americas Energy CEO Series: Peter Gregg, Ontario IESO

With plenty of supply and a relatively flat forecast for peakload, Ontario's Independent Electricity System Operator is likely to focus much of 2018 on making the high-level design decisions about its Market Renewal project, President and CEO Peter Gregg said January 3.

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IESO's most recent 18-Month Outlook, released in December, forecast Ontario's internal peakloads to range from 21,619 MW in a normal winter of 2017-18 to 22,785 MW with an extreme winter.

In December, IESO's maximum internal peakload occurred December 11 with 20,306 MW.

The same report forecast summer 2018 peakloads to range from 22,176 MW with normal weather to 24,500 MW with extreme weather.

Both this winter's and next summer's normal and extreme peakload forecasts were down in the latest 18-Month Outlook, compared with last June's 18-Month Outlook.

"Ontario's peak demand is expected to remain relatively flat," Gregg said in an email January 3. "Conservation savings, growing embedded generation output and Ontario's Industrial Conservation Initiative have offset increased demand from population growth and economic expansion."

The latest report indicated IESO has 36,853 MW of installed capacity, of which about 25,845 MW is forecast to be available at outlook peak.

"With Ontario's stable supply situation, the IESO is also focused on implementing needed market design changes in the Market Renewal project, which will help ensure the province is prepared to meet its future electricity needs, even as the sector and technology continue to evolve," Gregg said.

Having assumed the position of president and CEO in June, Gregg previously served as president and CEO of Enersource from 2014 to 2016, where he helped merge four of Ontario's largest local distribution companies to form Alectra Energy Solutions, North America's second-largest municipal utility.

Market Renewal has several facets In the Market Renewal program, IESO plans to implement a day-ahead market, an incremental capacity auction, enhanced real-time unit commitment and a single-schedule market in an effort to cope with "a range of potential energy futures driven by decentralization, digitization and decarbonization," according to material presented during a recent stakeholder meeting.

IESO currently operates a two-schedule energy market, in which the first schedule solves for resource cost and results in a market clearing price, without consideration of constraints such as transmission limitations.

The second schedule solves for resource dispatch while taking into account actual system conditions, and operational and transmission constraints.

The two-schedule system often results in out-of-market payments to account for the differences between the two schedules.

Judging by real-time average locational marginal prices found in the Platts price database, IESO's on-peak prices can be volatile, ranging from negative C$4.52/MWh on May 22, 2016, to positive C$275.08/MWh on October 23, 2016. The daily average in 2017 was C$18.27/MWh, down from C$19.55/MWh in 2016.

The proposed single-schedule market would be designed to set prices while considering all system and resource operating constraints at the same time and to remove out-of-market payments.

Big changes in generation stack since 2002 When the IESO market opened in 2002, it featured large centralized power plants, including more than 7,500 MW of coal-fired capacity, which fell to zero by 2014, according to an Ontario provincial webpage.

Nuclear power now leads with 13,009 MW, followed by dual-fuel natural gas/oil with 10,277 MW, hydro with 8,480 MW and wind with 4,213 MW, according to the latest 18-Month Outlook.

"Market renewal is about doing things better," Gregg said. "It's about improving the way electricity is priced, scheduled and procured to meet Ontario's current and future energy needs reliably, competitively, transparently, efficiently and at lowest cost. An IESO-commissioned independent study to assess the benefits of market renewal identified a province-wide net benefit of [C$2.2 - C$5.2 billion], over a 10-year period. However, the benefits are expected to extend beyond the 10-year timeframe of the study."

IESO is "studying in-depth the lessons learned by the other independent system operators that have undertaken similar changes," Gregg said. "We are taking the time required to ensure that the actions we are taking and the design decisions being made will achieve the intended outcomes, efficiently and cost-effectively," Gregg said. "Since the work on the various initiatives that make up the market renewal project began at different times and some have more options to be researched and studied than others, they are, of course, at different stages of development. ... Ultimately, we expect to have most of the high-level design decisions made by the end of this year and detailed design decisions and implementation to begin in 2019."

(Corrects: Details regarding IESO's internal peakload forecasts and maximum internal peakload in December.)

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