Share this
The Ontario Market Renewal Program goes live on May 1, ushering in the nodal era for Ontario’s Independent Electricity System Operator (IESO).
Let’s explore the changes coming to IESO and how Yes Energy is responding to this seismic energy market shift.
The Current Landscape of Ontario’s Independent Electricity System Operator
Before we explore where the IESO market is heading, let’s examine its current state. Today, IESO is a two-schedule market with separate financial and physical schedules. The financial market schedule doesn’t account for transmission constraints or losses, whereas the physical dispatch schedule does. This two-schedule market system requires frequent manual adjustments based on congestion costs. Other characteristics include:
- It includes a uniform, system-wide price for the entire IESO, regardless of the physical location of generators or load resources.
- It provides a voluntary, non-financially binding day-ahead clearing process that offers market participants no price guarantees and creates uncertainty and risk for generators.
- IESO makes out-of-market uplift payments to account for congestion costs in the real-time market that were not accounted for in the financial schedules. This can distort prices.
- It has no virtuals market because of the system-wide price and the absence of a formal day-ahead market.
- There’s no Financial Transmission Rights (FTR) market due to the lack of nodal locational marginal pricing (LMP). However, there is a Financial Transmission Rights market for participants to hedge import/export risks.
Key Features of IESO’s Market Redesign
To modernize and deliver more efficient markets and ensure customers have reliable electricity at the lowest cost, IESO’s Market Renewal Program (MRP) will transform Ontario’s energy markets by:
- Shifting to a single schedule market, establishing one schedule for both pricing and dispatch.
- Shifting from a voluntary day-ahead clearing process to a formal day-ahead market that is financially binding.
- Shifting away from out-of-market congestion payments to locational cost of congestion handled in nodal LMPs.
- Adopting nodal pricing for all generation resources and dispatchable load customers in the real-time and day-ahead markets, replacing the single price system. There will be around 970 generator nodes when the MRP goes live.
- Introducing price responsive loads, a new participation type for load customers. The pricing for non-dispatchable loads will remain uniform across Ontario but will better reflect the congestion costs of delivering energy across the grid.
- Introducing a new zonal-based virtuals market that will be financially binding.
- Creating the framework to support FTRs. While this feature won’t be available at the May 1 launch, the introduction of nodal LMPs and location-based congestion prices sets the stage for future FTR support.
- Providing 35 new public reports. 15 existing reports will be updated, and 22 will be retired.
The market redesign is expected to not only improve the efficiency of the market but also enhance competition, simplify market operations, and align IESO with industry best practices for North American nodal power markets. The shift to nodal LMPs also improves certainty and transparency for market participants because congestion costs are accounted for in real time.
Let’s dig into some of these new features a bit more.
New Pricing Structures for Dispatchable and Non-Dispatchable Resources
Currently, dispatchable resources like gas plants settle on a single price for the entire system, which, as noted above, doesn’t account for congestion in the real-time market. Once the MRP goes live, dispatchable resources will settle based on a locational marginal price in the real-time and day-ahead markets, which accounts for congestion impacts specific to that geographic location.
The more accurate price signals will drastically increase the transparency of price formation and introduce more competition in the real-time and day-ahead markets. The real-time market will continue to have 5-minute pricing, and the new day-ahead market will have hourly pricing.
Once MRP goes live, non-dispatchable resources like wind and solar plants will settle on an hourly zonal price. IESO will have 10 zones.
A New Virtuals Market
One of the more exciting new aspects of the MRP is the creation of a virtuals market, which will enable participants to arbitrage between day-ahead and real-time prices. The shift to a financially binding day-ahead market makes this possible.
Like those in the New York ISO (NYISO) and New England ISO (NEISO), the IESO virtuals markets will be at the zonal level. This will introduce less liquidity and lower participation as not all 973 nodes will be tradeable like in the physical market.
There will be nine tradable virtual transaction zones, with the Southwest and Bruce zones combined into a single zone. Market participants can submit hourly bids/offers in the day-ahead market.
Starting with a zonal virtuals market follows the paths forged by the Midcontinent Independent System Operator (MISO) and Pennsylvania-New Jersey-Maryland (PJM) interconnections, which were zonal-based until they became more established. Also, the Southwest Power Pool’s (SPP) Markets+ virtuals market will start off zonal when it launches, likely sometime in 2027. Nodal virtual markets require significant trading activity to ensure prices reflect accurate market conditions rather than being biased high or low due to a lack of market participation.
Another reason could be that zonal markets are more straightforward to implement. Given all the changes rolling out with the MRP, the market operator may have wanted to de-risk this new virtuals market by starting off zonal.
Yes Energy Is Ready for the Changes to IESO
At Yes Energy, we’re committed to delivering high-quality data to IESO market participants during and after the MRP transition.
We currently collect over 15 reports from IESO, including core market fundamentals data such as demand forecasts and actuals, energy prices, shadow prices, and intertie schedules and flows. Our tools allow you to access, visualize, and analyze this data.
For example, you can analyze pricing and demand data in various modules within PowerSignals®. You can visualize data in our map modules (as shown below), where you can overlay market fundamental data such as prices, weather, and power plant information. The Time Series Analysis tool provides historical, real-time, and forecast data. The Load Analysis module provides load forecasts versus actuals for IESO.
You can also pull the market fundamental data we collect from IESO into QuickSignals®, our low-latency dashboard. New data can be pushed directly to your dashboard, and you can set up alerts when certain market conditions are met.
For more in-depth analyses, you can pull all the IESO data we collect into our DataSignals® products. For example, you can scrape IESO data from our API, Snowflake, or data lake products, as shown below.
Finally, Yes Energy offers wholesale and customer demand forecasts for IESO. Our wholesale forecast is at the system-wide level, as dictated by the demand data currently available from the grid operator, however, that will change with the rollout of the MRP. As zonal-level granularity in the IESO demand forecasts becomes available, we will update our datasets.
Looking Forward
As MRP rolls out, our data teams are committed to ensuring our existing IESO data pipelines flow with minimal disruption. Our top priority is to modify our collectors based on changes to the existing reports we collect. We will sunset collectors for retired reports.
Our second priority is to begin collecting the new reports. For example, we plan to collect the nodal LMP reports from the real-time and day-ahead markets as close to the market launch as possible. We will also focus on collecting the new zonal demand report.
Our plan is to integrate the new IESO reports throughout our core products. For example, the real-time and day-ahead LMP data will be integrated into our maps and time series modules in PowerSignals®, as well as QuickSignals® and our DataSignals® products (API, Snowflake, and lake).
Many of the new and revised reports are already available in the IESO sandbox environment, enabling our data teams to get a head start on these integrations. For example, we have already added the 937 new nodes in our Price Nodes map layer in PowerSignals®.
In the months after the MRP launch, Yes Energy will continue building out our IESO data catalog, prioritizing reports based on customer demand. For example, we anticipate integrating outage and constraint data from IESO into our maps, transmission outage module, outage constraint overlap module, constraint summary module, and constraint profile module.
If IESO introduces FTRs, which is possible now that they are introducing a nodal market, we will integrate that data into our FTR tools. We may also incorporate Financial Transmission Rights data, a hedging instrument for managing import/export risk.
Yes Energy is ready to respond to the changes in the IESO market, and we’re available to you as a resource! Contact Yes Energy to learn how we can help you supercharge your participation in the new and improved IESO market.
About the author: Emily Merchant is a director of product at Yes Energy in charge of setting the vision and strategy for Yes Energy's PowerSignals, QuickSignals, and Trading Regions (public data) products. Emily has over 12 years of experience working in the energy industry. Prior to Yes Energy, Emily worked at Navigant Consulting (now Guidehouse) for seven years where she helped utilities assess the impact of their energy efficiency programs. She has also worked at E Source, Energy Trust of Oregon, and GDS Associates. A career highlight was being on the team that brought on S&P Global on as a new partner to Yes Energy in 2022. Outside of work Emily loves traveling (London is her favorite city), biking, reading, and spending time with friends and family.
