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Integration of Renewables into the Ontario Electricity System

Open Access Article

Abstract:
The Ontario electricity industry has a 'hybrid' structure: electricity is bought and sold in a competitive wholesale electricity market while supply mix planning and procurement are conducted through a government agency. Most generation is secured through long-term contracts. Aggressive renewable energy programs have led to rapidly growing renewable capacity, mainly wind generation. Coal-fired generation has been eliminated and electricity sales have dropped. The competitive hourly market price has declined and there is a clear merit-order effect: an increase of wind generation from 500 MW to 1500 MW can be expected to decrease price by 7 CAD/MWh. However, the all-in price, which incorporates contractually guaranteed supply prices, has risen from about 60 to 100 CAD/MWh between 2009 and 2014. Operational and market integration of renewable resources has been achieved relatively smoothly. The procurement process is over-centralized: increased reliance on market discipline and greater separation between governmental policy makers and regulators would enhance both the efficacy and efficiency of decarbonization policies.

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JEL Codes: Q42: Alternative Energy Sources, Q41: Energy: Demand and Supply; Prices

Keywords: renewable integration, wind generation, solar power, feed-in-tariffs, subsidiarity and separation

DOI: 10.5547/01956574.37.SI2.briv

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Published in Volume 37, Bollino-Madlener Special Issue of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.