Ontario moves forward with the largest energy storage procurement in Canadian history – Will Canada's federal government align?

5 minute read
17 May 2023

On May 16, 2023, the IESO announced the procurement of 739 MW of battery energy storage projects to support its reliability and sustainability goals – the largest energy storage procurement in Canadian history. Through this record setting initiative, Ontario aims to bolster its grid resilience, enhance renewable energy integration and keep the province on track for its future energy needs.

This procurement represents the first round of successful bids for Category 1 battery storage of the Expedited Long-Term Procurement ("Expedited LT1"). In addition to the storage procurements, the IESO announced the successful bids for the non-storage category of the Expedited LT1, resulting in 295 MW through expansions at two existing natural gas plants, and an additional 291 MW from natural gas plants through the Same Technology Solicitation ("STUC").

These targeted procurements by IESO are in response to significant projected increases of future demand expected on the Ontario electricity grid. The IESO is forecasting a two per cent annual electricity demand increase over the next 20 years. To increase capacity, the IESO is relying on securing new supply and leveraging existing assets. Currently, Ontario only has 228 MW of energy storage capacity on the grid, generated mainly from the Sir Adam Beck pumped storage facility in Niagara Falls, Ont. The IESO is anticipating Ontario having at least 1,217 MW of storage capacity by 2026 with an aim to have an overall 4,000 MW of new long-term energy capacity in the medium term.

By continuing to expand energy storage opportunities and exploring new pathways to further decarbonize its broader energy system, Ontario stands to foster innovation and position the province as a leader in energy production and reliability.

You can read the IESO's full May 2023 Resource Adequacy Update here.

Will the feds align?

As announced last year by directive from Energy Minister Todd Smith, the IESO is aiming to leverage natural gas generation as a transitional source of energy. Currently, legacy natural gas resources play a key role in supporting grid reliability in Ontario. The IESO identified the potential to eliminate emissions from Ontario's electricity system in its 2022 Pathways to Decarbonization report. However, until nuclear energy refurbishments are complete and other emission-free projects are matured, natural gas is likely to remain as a critical source of energy from the provincial perspective.

While Ontario and some of the other Canadian provinces do want to enhance their medium-term grid reliability through the use of legacy natural gas assets, there is a clear difference in energy frameworks when compared to the direction of the Canadian federal government, which  has made clear its intention to help Canadians move past power from fossil fuels. Details on how stringent this federal regulation will be, and how it aligns with various provincial and territorial strategies, is not yet clear.

Gowling WLG energy storage outlook

On May 11, 2023, Gowling WLG hosted its 2023-2024 Energy Storage Outlook session with over 100 storage and distributed energy resource sector experts worldwide looking at key sectoral issues, including Canada's role in the rapidly expanding global energy storage markets; the current state of the technologies; the status of the various storage and capacity procurements underway in Canada; and evolving and ever-changing global supply chain challenges. During the discussion, one key issue raised by several panellists was whether or not the federal government's new Investment Tax Credit (the "ITC" – modelled in part on the American ITC program, and formulated in response to the potent U.S. Inflation Reduction Act) will be finalized on time to align with Ontario and the other province's various procurements. 

As in all things Canadian, it would be ideal for the Canadian industry if the federal government and the provincial governments were able to align.

Gowling WLG's Energy team will continue to follow Expedited-LT1 procurements, STUC, continuing LT1 developments, the federal ITC and legislative proposals closely in the coming months and look forward to answering reader questions as the processes continue to move forward.

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