The Future of Energy Generation and Distribution in Ontario: Q and A with the IESO

We asked Senior Staff at the Independent Electricity System Operator (IESO) about the future of energy generation and distribution in Ontario and they kindly responded to our many questions. Have a read:

Q1: I have heard that Ontario already generates a surplus of electricity, and the FIT and microFIT program installations add to this surplus; is this true and why more?

A1: The FIT and microFIT programs were intended to increase the amount of renewable energy in Ontario and provide opportunities to a wider variety of participants to generate their own green energy. Participants are guaranteed a price over a long-term contract, with the prices designed to cover the costs of a typical project and enable a reasonable rate of return on investment. The programs also help create new local businesses for technologies such as solar panels and wind turbines, and for Ontarians to design, build, install, operate and maintain these technologies.

Renewable resources make important contributions to power system reliability in Ontario. In capacity terms, projects contracted under the FIT and microFIT programs represent a relatively small percentage of Ontario’s supply mix but they have become operationally valuable to the IESO. Solar generation, in particular, provides power in on-peak periods when electricity demand is high.

Surplus baseload generation is a normal periodic occurrence in power systems all over the world. It occurs during certain off peak hours when demand for electricity dips down below the output of resources that have the lowest operating costs but are not as flexible as other types of generation (e.g., baseload nuclear and hydroelectric). While not uncommon, it’s not an everyday occurrence. Most of the time, resources are dispatched as required throughout the day to meet the fluctuating demand, and there is no surplus generation.

Surplus conditions will occur much less frequently once the nuclear refurbishments begin, with the first reactor at Darlington expected to come offline in 2016.

It is important to remember that this is a long lead time, capital intensive, real time business that requires lots of planning for contingencies and it is not possible to store in any great quantities yet.

Q2: Ontarians do not understand the real costs of the various electricity options available. Will IESO be communicating the bigger picture?

A2: Ontario residents and small businesses have two options for their electricity bill – they can either pay time-of-use rates that are set by the Ontario Energy Board or they can sign a contract with an electricity retailer. If they sign up with an electricity retailer, the global adjustment charge is a separate line item on their bill. More information on these options is available at:

The IESO considers consumer education a priority. For example, our website includes information about:

  • Electricity pricing and charges for all classes of electricity consumers including residential and small business consumers
  • Real-time supply, demand and price data, as well as historical information
  • Interactive tools such as 10 Smart Meter Lane and Time-of-Use Rates at Work, which reflect how prices change throughout the day and show how consumers can use less and lower their costs
  • Innovation in the areas of smart grid, energy storage, demand response
  • Conservation programs such as saveONenergy for home and business, as well as conservation funding programs for business
  • Information about generation costs is available on the legacy OPA website (

We also offer a multifaceted Market Education program to provide medium-size and large electricity consumers with tools and information to better understand the electricity market and the ways in which they can take advantage of market opportunities. In addition to holding information-driven events for these consumers and their respective industry associations, the IESO’s strategy is to make items available on the website, including brochures and booklets, case studies, newsletters, and backgrounders on key issues.

While the IESO takes seriously its responsibility to educate consumers about the cost of electricity, other public sector organizations – including the Ministry of Energy, the Ontario Energy Board, and local distribution companies – also provide consumers with the information they need to understand the costs associated with the changes taking place in Ontario’s power system.

Q3: Faith groups in their buildings for the long haul might be more interested in net metering as this could be the future of rooftop solar and renewables in general. Is net metering in the long term plans of the IESO?

A3: Net metering occurs when electricity generated by a consumer is used to offset electricity provided from the local utility.

As noted in the Government of Ontario’s Long-Term Energy Plan (LTEP), the province will examine the potential for the microFIT program to evolve from a generation purchasing program to a net metering program. An early discussion of the options and implications of such a change is underway but no decisions have been made at this time.

Q4: What was the original purpose of the smart meters and have they been successful in meeting their purpose?

A4: The Government of Ontario introduced smart meters to support the evolution of the province’s power system and to help build a culture of conservation. Smart meters enable time-of-use (TOU) pricing, which better reflects the costs of producing electricity at different times of the day. The government introduced TOU pricing to encourage consumers to use electricity during off-peak demand periods and help them manage their electricity costs.

Research into the effectiveness of smart meters and TOU rates in influencing conservation behaviour is still ongoing. The Brattle Group published an interim report ( that found evidence of load-shifting behaviour as a result of TOU rates.

Smart meters are part of the base infrastructure for the development of a smart grid, which is a sophisticated, integrated system that facilitates information exchange involving specialized equipment to improve the flexibility, security, reliability, efficiency and safety of the power system. This is important to increase renewable generation, expand the availability of price information to electricity customers, and enable innovative energy-saving technologies.

Q5: A lot of my bill seems to have fixed charges, which don’t change with the amount of electricity I use or what time I use it. How does this work to in reducing peak demand?

A5: Most of the charges on electricity bills are based on the volume consumed as well as the time of day when electricity is used. Charges to the consumer reflect both the variable and fixed costs associated with generating and delivering electricity. The Ministry of Energy has created a helpful online “Bill Tutorial” that describes the various components of the standard residential consumer’s electricity bill: The Ontario Energy Board also provides a user-friendly summary of all charges appearing on the typical residential bill:

Q6: Who owns, or what happens with a renewable energy system in the event that a faith community closes/consolidates to share a building with another faith community? For a homeowner who sells, the system just gets sold with the contract, but is it as straight forward in the case of faith community?

A6: In the case of a microFIT contract, the instructions to assign the contract to another party vary by contract version. The contract assignment instructions for each version of microFIT contract can be found here: A contract assignment is required even when a home is sold with a microFIT project.

For larger projects with FIT contracts, the instructions will vary depending on whether the assignment is requested before or after the contract reaches commercial operation. The instructions can be found here:

In either case, if a situation arises that requires a contract assignment, our microFIT team or FIT contract analysts can answer any questions.

Q7: There seems to be a debate about the cost to the consumer of the Green Energy Act and its FIT and microFIT programs. Based on your data, has green energy been pushing electricity prices up?

A7: All new generation is more expensive than existing generation. Green energy is only one factor, among many, that has resulted in price increases over the past few years. The costs associated with recent renewable generation procurements, including FIT and microFIT, are just one element. Most of the cost increases are due to all the generation that has been brought online over the last decade including natural gas plants, refurbished nuclear units and some hydro, in addition to the wind and solar.

Despite the relatively small contribution of green energy to total system costs, the IESO is committed to ensuring Ontarians receive a cost-effective supply of electricity. For this reason, an annual review of FIT and microFIT contract prices is conducted. The annual price review to determine the FIT and microFIT pricing structure for 2016 got underway in July of this year, with the new price structure expected to be announced later this fall.

Globally, the cost of green energy components and the payments made to green energy suppliers are declining as the industry matures and more completion emerges. As part of the current price review, the IESO will focus on ensuring ratepayer value, with consideration of global renewable generation cost trends and prior application volumes. As part of the review process, feedback from program participants, industry associations, municipalities, Aboriginal communities and other interested parties is being sought.

Q8: Have you achieved the goals from the original mandate of the Green Energy Act? Have the goals changed since the inception of the program?

A8: The Green Energy and Green Economy Act, 2009 was introduced by the Government of Ontario, not the IESO, and came into effect on May 14, 2009. Within that framework, the Green Energy Act was created to expand renewable energy generation, encourage energy conservation and promote the creation of clean energy jobs.

The major components of the Green Energy Act include:

  • the renewable energy Feed-in Tariff (FIT) Program
  • the Renewable Energy Facilitation Office (REFO)
  • a streamlined environmental approval process
  • aggressive new conservation targets

Specific benefits of the legislation include:

  • stimulating growth in renewable sources of energy such as biogas, biomass, landfill gas, solar, wind and waterpower in Ontario
  • creating the potential for greater household savings by introducing new conservation measures across the province
  • making a positive contribution towards provincial climate change objectives

The IESO can confirm that considerable growth in renewable energy has been achieved through the FIT Program and that conservation results have been achieved. The questions of whether the Green Energy Act has achieved its other goals or whether the goals have changed are best addressed by the Ministry of Energy.

Q9: The microFIT and FIT programs seem to encourage  decentralized power generation. Why is this good for Ontario?

A9: In jurisdictions around the world, the way in which electricity is generated and delivered is changing. Large, centrally located generating plants are giving way to smaller, distributed facilities, in which power is generated at or near its point of use. In the case of FIT and microFIT generators, the power is generally consumed locally.

There are several advantages associated with distributed generation, of which the most important are:

  • Efficiency – distributed generation significantly reduces line losses, which result when electricity has to travel long distances on transmission or distribution lines from its point of generation and its point of consumption and some energy is lost along the way
  • Resilience – distributed generation can speed local restoration after an outage

Q10: What is the future direction of the FIT program?

A10: The FIT Program has already evolved from when it was first introduced in 2009. Today, the program is for projects generally 500 kilowatts or smaller. Domestic content provisions have been removed from the program but did serve to kick-start industries in Ontario. Prices are reviewed annually to ensure they continue to provide ratepayer value.

As directed by the Minister of Energy in a letter dated April 22, 2015, the IESO is reviewing the outcomes of recent procurements to incorporate lessons learned and re-evaluate system needs, prior to proceeding with additional procurements. The province remains committed to developing renewable resources but is reassessing its targets, plans and timelines for future procurements of new supply.

Q11: Can the FIT program be developed further so that lower income individuals, and not for profits can benefit from it?

A11: There are no plans at this time to make changes to the FIT Program to increase participation by lower income individuals. The IESO operates funding programs for municipalities, Aboriginal communities, and public sector entities to help defray the costs associated with renewable energy projects.

Q12: Many faith groups are hesitant to take advantage of the FIT/microFIT incentives because they are unsure about the province’s long term objectives with respect to renewables. What would you tell them to address this concern?

A12: All types of customers are encouraged to participate in the FIT and microFIT programs as they are available today. Regardless of any changes in direction that may occur in the future, FIT and microFIT contracts offered are for 20-year terms and are not affected by changes made to future versions of the programs.

Q13: Do you have any comments to offer concerning renewable energy in a global context and where Ontario fits in?

A13: Ontario is recognized as a major proponent of renewable generation and has earned a reputation for leadership and vision in this area.

Q14: This just came out:

Why do we need to import more energy into Ontario?

A14: Discussions of a potential trade deal between Ontario and Newfoundland are still at a very early stage. The IESO is responsible for long-term planning for the electricity system so we look ahead for future gaps between expected demand and the generation that will be available at that time, and consider what options will provide the most cost effective solutions.

As noted in the news release cited above, discussions will be guided by the two provinces’ shared goals of reducing costs, fighting climate change, improving system reliability, and supporting a dynamic economy. The working group that was created to explore the options is actively engaged in assessing the impacts and implications of any such arrangement, and is expected to issue an interim report by December 31, 2015.