Continuing Ontario’s efforts to replace costly contracts signed under the previous government, IESO announced it has signed contracts with 27 natural gas and wind generators.

In its second medium-term procurement (MT2), the ISO agreed to purchase 2,006 MW of natural gas-fired capacity ranging from $450 to $795/MW-business day beginning in May 2026 and 2029. The weighted average price was $598/MW-business day.

It also agreed to buy 963 MW from 16 wind generators at prices ranging from $60/MWh to nearly $125/MWh, plus 24 MW of biomass ($204.94/MWh) and 7.82 MW of landfill gas at two sites for $110/MWh and $150/MWh. The weighted average price for all renewables was $79.55/MWh.

IESO said the energy projects were priced 21% below their previous contracts. Although capacity costs were higher than in the ISO’s first medium-term procurement (MT1), the Ontario Ministry of Energy and Mines said the costs were 65% below the costs of building new gas-fired generation.

“This success stands in sharp contrast to the fixed, above-market contracts signed by the previous government, which locked Ontario into long-term costs well above market prices,” the ministry said in its integrated energy plan, released in June. (See Ontario Integrated Energy Plan Boosts Gas, Nukes.)

The Progressive Conservative Party has ruled Ontario since ousting the Liberal Party government in 2018. Between 2004 and 2016, the Liberal government signed more than 33,000 contracts, some at up to 10 times market rates and for as long as 20 years, according to the ministry. It criticized what it called “an ideologically driven energy agenda that prioritized over-market, expensive, intermittent generation at a time when it wasn’t needed.”

MT2 sought to procure existing energy and capacity resources that are uncontracted or coming to the end of their contracts in the next four years. The winners received five-year contracts beginning on May 1 of either 2026, 2027, 2028 or 2029.

“Medium-term [requests for proposals] provide resources greater certainty through longer forward periods and flexible five-year commitments, as compared to the annual capacity auction, while ensuring the IESO is not locked into commitments that are no longer reflective of changing needs,” the ISO said.

Eligibility

Biofuel, electric storage and gas facilities were eligible for capacity contracts; biofuel, solar and wind generators were invited to seek energy contracts.

Dispatchable loads and demand response resources were excluded and instead invited to enter IESO’s annual capacity auction. The ISO will outline potential changes to the capacity auction, including a revised tie-break methodology, on June 26.

The ISO said MT2 gave generation owners not ready to invest in repowering their facilities for the Long-Term 2 (LT2) Energy solicitation more time to prepare proposals for the future LT3 RFP with a contract in place.

1st Procurement

In MT1 in 2022, IESO agreed to acquire 757 MW of nameplate capacity wind and natural gas (309 MW summer UCAP) at prices ranging from $265 to $470/MW-business day (UCAP).

One of the successful bidders in MT1, Atlantic Power’s Nipigon Generating Station, also won a contract in MT2, seeing its price rise from $250 to $449.98, an 80% increase.

IESO spokesman Andrew Dow said he could not say why Atlantic Power bid so much higher in MT2 than in MT1. But he said the ISO’s “general expectation” is that owners of older generators structure their bids “to make sure that they are recovering enough to help [fund] whatever investments or upgrades are needed to keep their facility running for longer.”

The 40-MW Nipigon plant has been operating for 33 years.

The ISO said future medium-term RFPs will reflect system needs and “will likely see increased resource eligibility and competition, including the possible inclusion of new-build resources.”

Future Procurements

Ontario already has contracted for more than 3,300 MW of new capacity, including battery storage, natural gas and biogas, through the Expedited Long-Term (ELT) and LT1 procurements.

The ministry said LT2 will be the largest electricity procurement in the province’s history with a shopping list for up to 14 TWh/year of new energy, equivalent to about 6,000 MW of capacity. The solicitation will be open to energy storage, wind, solar, biomass, biogas, natural gas and energy from waste.

LT2 also will seek 1,600 MW of new capacity resources. Projects will be phased in through four annual intake windows, with in-service dates expected by 2034.

The Ontario Ministry of Agriculture, Food and Agribusiness (OMAFA) and the Ministry of Natural Resources (MNR) will conduct a joint webinar on the LT2 procurement on June 25. MNR will discuss requirements for renewable energy on Crown land. OMAFA will discuss rules for energy projects in prime agricultural areas. The deadline for the first solicitation is Oct. 16.

The province has directed IESO to report back on options for a separate procurement stream for “strategic long-lead projects” such as new hydroelectric generation and long-duration energy storage.

“This stream would help ensure Ontario can continue to plan and diversify its supply mix with assets that support long-term reliability and system flexibility,” the ministry said.