Power Perspectives: Ontario Regional Overview

Introduction

In 2024, Ontario's energy landscape has been marked by significant developments and ambitious plans to meet the province's growing electricity demand. The Independent Electricity System Operator (“IESO”) revised its forecast, projecting a 75% increase in electricity consumption by 2050, driven by the rapid expansion of data centres and the adoption of electric vehicles (EVs). In response, the Ontario government introduced the Affordable Energy Act, 2024, aiming to transform the energy sector through long-term planning, amendments to energy system codes, and the development of EV charging infrastructure.

On April 25, 2025, the provincial government introduced Bill 5, Protect Ontario by Unleashing our Economy Act^[1] to safeguard Ontario's critical minerals and energy infrastructure from foreign interference. Under Bill 5, provincial permitting and approvals for mining and critical infrastructure projects would be accelerated. Additionally, Ontario Power Generation (“OPG”) received approval on May 8, 2025^[2] to proceed with the construction of the first small modular reactor (“SMR”) at the Darlington nuclear site, which will be the first grid-scale SMR in the G7.

Our National Energy Group continues to monitor these changes and provide insights on their implications for Ontario's energy future.

Ontario’s Growing Electricity Demand

The Ontario electricity industry experienced its own “October surprise” in 2024 with the announcement by the IESO that it had revised its forecast of its already expected significant surge in electricity demand in the province. The IESO revealed that this expected material increase in previously forecasted demand was primarily driven by the predicted rapid expansion of data centres and the growing adoption of electric vehicles (“EVs”).^[3] According to the IESO, electricity demand in Ontario is projected to increase by 75% by 2050, with annual consumption rising from 151 terawatt-hours (“TWh”) in 2025 to 263 TWh in 2050. The Ministry of Energy and Electrification’s Ontario’s Affordable Energy Future report released in October 2024 outlines both the challenges the province will face due to this surge and the strategies to manage the increasing demand.^[4]

The proliferation of data centres within the technology sector is a major driver of rising electricity demand. These data centre projects are emerging to support advanced technologies, such as artificial intelligence (AI), and are expected to grow substantially over the next 15 years. The rising adoption of AI is also anticipated to contribute to higher energy consumption.

The industrial and transportation sectors are undergoing a transformative shift towards electrification. EV adoption is anticipated to be the largest driver of increased electricity demand, contributing 20 TWh or 31% of new demand by 2035. The IESO projects that electricity demand from EVs will grow from 1.6 TWh in 2025 to 41.6 TWh in 2050, resulting in an average annual growth rate of approximately 13.9%. This shift will not only significantly reduce emissions but also increase industrial demand by necessitating new supply chain and manufacturing facilities.

Another key factor contributing to rising electricity demand is Ontario’s increasing population. The province’s population is expected to grow by 15% by 2035, adding approximately one million more homes. This population growth is anticipated to further escalate electricity demand. As new housing developments emerge, the demand for residential electricity will rise significantly, particularly as households increase their consumption by electrifying heating and cooling systems.

Demand Strategy for Ontario

To address the rising demand, Ontario is focusing on expanding its electricity generation capacity by accelerating infrastructure development. This includes new investments and the expansion of nuclear energy. The emphasis is on reliable and clean energy to create a competitive advantage for attracting both international and domestic investments.^[5] With growing electricity demand, there is also a need for new electricity generation and storage resources.

The surge in electricity demand presents both challenges and opportunities. In Ontario’s Affordable Energy Future report, the government announced an integrated energy plan to be launched in 2025 to manage energy demand while prioritizing energy affordability. This integrated plan will coordinate all energy resources, including nuclear, hydroelectricity, natural gas, hydrogen, renewables and other fuels. A key goal of this coordinated planning is to achieve greater alignment across the various energy sources.

The province also emphasizes energy efficiency programs, noting that without such initiatives, provincial energy demand would already be 15% higher. Consequently, Ontario’s integrated plan includes efforts to reduce energy consumption alongside increasing power generation. The government plans to significantly expand energy efficiency programs starting January 1, 2025.

Ontario’s Commitment to an Electrified Future: Affordable Energy Act, 2024

In concert with the anticipated increases in electricity demand and capital expenditures to meet such demand, the Government of Ontario has advanced legislation designed to transform the province's energy landscape. The Affordable Energy Act, 2024^[6], also known as Bill 214, aims to establish long-term energy planning, introduce noteworthy amendments to energy system codes, and develop a comprehensive framework for EV charging infrastructure. Bill 124 was introduced by the Honourable Stephen Lecce, Minister of Energy and Electrification, on October 23, 2024 and received royal assent on December 4, 2024.

During the first reading of Bill 124, Hon. Lecce described Bill 124 as one that:

“would enable the implementation of the province’s first integrated long-term energy plan with a focus on affordability. It would also prioritize zero-emission nuclear energy to meet growing energy demand, expand programs to help families and businesses save money and energy, support EV adoption and, as well, reduce last-mile connection costs.”^[7]

The preamble of the Affordable Energy Act, 2024 also lays out the Ontario government’s vision. It acknowledges the need to meet increasing electricity demands due to economic growth, electrification, and population growth. Bill 124 supports a prosperous economy that reduces emissions without relying on measures like carbon taxation. It emphasizes keeping energy affordable and acknowledges the importance of public engagement, Indigenous reconciliation, and the potential for energy export.

The Act amends the Electricity Act, 1998, the Ontario Energy Board Act, 1998, and the Energy Consumer Protection Act, 2010. However, Part VIII of the Electricity Act, 1998, which deals with electrical safety, still applies. It includes three schedules, each addressing different aspects of the energy sector.

Schedule One: Electrifying Energy Planning

The first schedule of Bill 214 focuses on energy planning in Ontario. The Electricity Act, 1998 would be amended to include a new goal of promoting electrification and energy efficiency to reduce emissions across the province through increased use of electricity. This is part of a broader objective to support a clean energy economy and sustainable growth.

Section 25.29 of the amendments introduces a significant change by granting the Minister the authority to issue integrated energy resource plans unilaterally, following consultations with stakeholders and approval from the Lieutenant Governor. This new process replaces the previous long-term energy plans to better align with governmental goals and objectives over specified periods. Additionally, these energy resource plans must reflect the goals and objectives outlined in section 25.29(2). Furthermore, while the IESO and the Ontario Energy Board (“OEB”) are required to comply with this new integrated planning approach, section 25.31 of the Energy Act – which mandated the submission of implementation plans by the IESO and the OEB to the Minister – has been repealed.

Schedule Two: Rethinking the System Codes

The second schedule introduces two new regulatory powers regarding the Distribution System Code and the Transmission System Code. The first, under Section 70.4, authorizes the Lieutenant Governor in Council to enact regulations specifying amendments to either code concerning cost allocation and recovery associated with the construction, expansion, or reinforcement of distribution and transmission systems. These amendments will be deemed to have been issued pursuant to Section 70.1 and must be integrated into the relevant code. The chief executive officer is prohibited from amending or revoking these amendments while the regulation remains effective.

The second regulatory authority, under Section 70.5, permits the Lieutenant Governor in Council to establish regulations that exempt individuals or entities from certain provisions of the Distribution System Code and the Transmission System Code related to cost allocation or recovery, subject to specified conditions or restrictions. However, while this streamlines the process, it may limit the OEB's flexibility in modifying or exempting specific provisions. Additionally, the broad scope of these regulatory powers, particularly in cost-related matters, could reduce transparency and public input, potentially leading to less accountability in the decision-making process, especially for consumers affected by these changes.

Schedule Three: Charging into the Future with Electric Vehicles

The third schedule addresses the rise of EV charging, a crucial aspect of Ontario's electrification strategy. The Electricity Act, 1998, the Energy Consumer Protection Act, 2010, and the Ontario Energy Board Act, 1998, are amended to define terms related to EVs and charging stations. Moreover, the legislation stipulates that these acts will not apply to the distribution (i.e., delivery) or retail (i.e., sale) of electricity for EV charging unless specified by regulations. This stipulation establishes a regulatory sandbox, facilitating innovation and investment in EV infrastructure by minimizing the regulatory hurdles for potential investors in this sector.

Conclusion

The Affordable Energy Act, 2024, marks a considerable advancement in Ontario’s energy policy. It exemplifies a firm commitment to emission reduction through electrification and enhanced energy efficiency. The legislation emphasizes the integration of long-term energy planning with the requirements of a growing economy and the transition to EVs, positioning Ontario as a leader in sustainable energy management. The government's endorsement of a diverse array of energy resources and the modernization of infrastructure ensures that the province is well-prepared to meet future demands and stimulate economic growth, both within the province and through energy exports.

Nevertheless, while the Act aims to support economic growth and affordability, its long-term economic implications for Ontario remain uncertain. The shift towards an even more extensively electrified energy system is expected to be accompanied by economic challenges given the enormity of the projected capital requirements to achieve Ontario’s ambitions.

IESO Market Renewal Program

Twenty-Three Years After Market Opening, MRP Set to Go Live

Among other important functions, the IESO serves as the operator and mainstay for the reliability and security of Ontario’s electricity grid and the administrator of Ontario’s electricity markets. Its objects focus upon providing Ontarians with reliable power when needed. The IESO has operated the Ontario wholesale electricity market since it opened on May 1, 2002, however, the IESO has also viewed that market as requiring improvement since then. After years of planning and effective May 1, 2025, the IESO will finally implement its Market Renewal Program (“MRP”). The initiative aims to foster more efficient electricity markets and secure cost-effective, reliable power for Ontario residents.

Some of the main drivers for MRP are two fundamental flaws that the IESO has perceived to be inherent in the current electricity market and incompatible with contemporary needs:

• Ensuring Reliability: The existing market operates under a two-schedule design. One schedule sets a uniform price across Ontario for electricity to be paid by the IESO ignoring physical limitations or costs of suppliers. The second schedule dispatches electricity based on locational constraints. Thus, the two-schedule design risks supply shortages when prices do not align with supplier offers or abilities. To counter this, the IESO makes payments to suppliers to ensure reliable price-offer alignment, which payments are settled “out-of-market” and not reflected in the published wholesale market commodity price (i.e., the hourly Ontario energy price, better known as “HOEP”).
• Transparency: Transparency is limited in the existing market, offering only a partial view of operations for the day-ahead and current operating day. Consequently, the market relies on out-of-market payments to ensure resource availability, which can be expensive as they cover both the energy supplied and the operating costs of suppliers from one region fulfilling the demands of another.

The MRP has been designed to introduce three key reforms:

1. Single Schedule Market (“SSM”): As a replacement to the two-schedule system, the SSM features locational pricing to replace HOEP and to ostensibly correct price-supply misalignments and eliminate the out-of-market payments arising from grid restraints.
2. Day-Ahead Market (“DAM”): A DAM is a system where energy is bought and sold one day before it is consumed or generated. Implementing a DAM is intended to provide operational predictability for the IESO and financial assurance for market participants, thereby reducing electricity production costs and committing only essential resources.
3. Enhanced Real-Time Unit Commitment (“ERUC”): The ERUC initiative is intended to lower the costs of scheduling and dispatching resources to meet fluctuating demand from day-ahead to real-time. The ERUC will observe several hours at a time, replacing the current hour-by-hour approach and intended to thereby enhance the predictability of scheduling and service reliability.

The objective of MRP is to revamp the wholesale electricity market by integrating the above initiatives in order to create a diverse and decentralized variety of energy resources. Specifically, the IESO stated the following:

“Together, these changes will deliver significant ratepayer savings, ensure continued reliable operations of the system, and support the transformation underway within the electricity sector.”

The IESO published a business case in 2019 that estimated over the first ten years following its rollout, the IESO anticipates the MRP to deliver net gains amounting to $800 million. Of these anticipated benefits, enhancements in market efficiency will yield $525 million while reduced out-of-market payments will amount to $275 million. The forecasted implementation and ongoing operational expenses stands at $176 million. Nonetheless, a 2022 reassessment scaled back these net benefit expectations to $700 million for the first 10 years following the MRP’s introduction, without offering additional forecasts.

Market Rule Amendments Facilitating the Market Renewal Program

On October 24, 2024, the IESO Board of Directors approved amendments to several market rules required to operationalize the MRP. A summary of the amendments can be found at the Market Renewal Program: Summary of Market Rule Amendment Batches and include establishing a market power mitigation working group which will assist with determining reference levels and quantities for electricity resources. The Board’s approval comes on the heels of a unanimous recommendation made by the IESO’s Technical Panel. As of November 11, 2024, the IESO amendments took effect with the purpose of facilitating registration activities ahead of the MRP’s launch.

Amending IESO Contracts to Align with the Market Renewal Program

In the lead up to the anticipated launch of MRP on May 1, 2025, the procurement and contracting side of the IESO has been conducting stakeholder information sessions. It has also been providing terms sheets and draft amending agreements for the myriad procurement contracts it has assumed or entered into since the creation of its predecessor, the Ontario Power Authority, in 2004. The market rule evolution provisions of the oldest of such contracts serve as a reminder that the DAM has been on the IESO to-do list for over two decades.

Procurement

Ontario’s Second Long-Term Procurement

On August 28, 2024, the Government of Ontario announced the launch of the IESO’s second “Long-Term Procurement” (“LT2”). This initiative supports the province’s strategy to secure up to 5,000 megawatts (“MW”) of generation capacity (14 TWh of annual energy generation from eligible energy producing resources and up to 1,600 MW of eligible generation capacity) through multiple procurements. This newest IESO procurement builds on the government's recent acquisition of nearly 3,000 MW of new battery storage projects with capacities ranging from 5 MW to over 400 MW.

The IESO released a draft of the Long-Term 2 Request for Proposals (“LT2 RFP”) on September 6, 2024 and has revised it and the accompanying LT2 contract several times since then. Generally speaking, LT2 establishes a framework for suppliers who seek to deliver year-round energy generation services in Ontario using new electricity generating facilities that exceed 1 MW. LT2 contemplates an energy stream and a capacity stream with similar but different LT2 RFPs and LT2 contracts for each. The IESO has indicated that the energy stream will be prioritized over the capacity stream and it plans to finalize the LT2 RFPs and contracts in Q1 of 2025.

LT2 is open to “technology-agnostic” energy resources including natural gas, wind, and solar, and the LT2 RFP outlines several key requirements and incentives. Developers must obtain municipal support resolutions to ensure local consent, and prohibitions relate to “specialty crop areas” and “prime agricultural areas.” The framework incentivizes projects in Northern Ontario and those avoiding prime agricultural areas, and plans to utilize Crown lands for renewable energy. It also promotes economic opportunities for projects involving Indigenous communities and mandates agricultural impact assessments for projects in prime agricultural areas.

The LT2 also incorporates rated criteria points to evaluate proposals and lower the Evaluated Proposal Price (“EPP”) upon which submissions will be judged. Points are awarded for Indigenous participation, projects not located on Prime Agricultural Areas, and projects located in Northern Ontario, with proponents able to receive up to 12 points to reduce their EPP. This approach aims to encourage project development in targeted areas and regions that may benefit from increased economic activity, emphasizing the importance of strategic project placement in the LT2 framework.

To protect agricultural land, the LT2 prohibits specific projects on agricultural land, including lands in specialty crop areas and prime agricultural areas. An agricultural impact assessment is required for projects on prime agricultural areas, and proponents who are awarded LT2 contracts must notify the IESO and provide supporting documents, including delivering the report to the relevant municipality’s planning department, by the date eighteen months after the contract date. Failure to complete the assessment within this timeframe constitutes an event of default under the LT2 contract.

To further bolster Ontario’s energy strategy, the IESO also launched the second Medium-Term (“MT2”) procurement on November 15, 2024. The MT2 aims to reacquire resources that were subject to IESO procurements contracts that have or will expire before April 20, 2029, and to encourage investments to prolong the operational life of such facilities. This procurement also includes both capacity and energy streams, with a primary focus on price for eligibility.

Electricity Transmission Procurement

The IESO announced its latest design decisions for the Transmitter Selection Framework (“TSF”), a competitive procurement for new electricity transmission in Ontario, following a July 10, 2023 directive from the Ontario Ministry of Energy.

Proponents who successfully qualify through a Request for Qualifications will be added to a registry of approved electricity transmitters eligible to bid on future transmission projects. To qualify, proposals must benefit all electricity ratepayers and have an estimated cost of at least $100 million, a nominal voltage of 200 kilovolts or greater, and a lead time of at least six years.

Successful proponents under the TSF will receive partial contracts following commercial operation, after which the OEB will apply existing utility rate regulation mechanisms.

Transmitters must submit their projected costs for review via a cost-of-service application to the OEB. The revenue requirement, including post-commercial operation date revenue, will be fixed through an IESO contract and incorporated into the Uniform Transmission Rates (“UTRs”). This partial contract aims to control design and construction costs by setting a cap based on a fixed lifetime operations and maintenance plan. After the IESO contract expires, the OEB will apply its standard rate regulation, reviewing all cost components before they are included in the UTRs. This blended revenue structure is intended to balance competitive economic growth with long-term stability by maintaining price pressure through competition and attracting large-scale capital investment through rate regulation.

Electric Vehicles

Overview of Manufacturing and Investments

Ontario has continued to attract significant investment into EV manufacturing. Over the last four years, $45 billion has been invested into Ontario by global automakers, parts suppliers, manufacturers of EV batteries, and battery materials. Federal, provincial and municipal governments have all supported new EV manufacturing projects. Some noteworthy investments over the past year have been:

• An investment of approximately $5 billion by NextStar Energy, a joint venture between LG and Stellantis that will build a state-of-the-art battery manufacturing facility in Windsor, Ontario. The project will receive both federal and provincial contributions potentially totalling $18.6 billion over its lifespan. The federal government will cover two-thirds of the combined production subsidies for NextStar and Volkswagen (PowerCo), while Ontario will provide the remaining one-third.
• An investment of over $575 million by Goodyear to modernize its Napanee plant, with an emphasis on producing tires for EVs. Invest Ontario will contribute $20 million to this project, along with $44.3 million from the federal government’s Strategic Innovation Fund and approximately $2 million in incentives from the Town of Greater Napanee, the Township of Stone Mills and the County of Lennox and Addington.
• An investment of approximately $15 billion by Honda Canada to create Canada’s first comprehensive EV assembly plant. Ontario has committed up to $2.5 billion toward this project through direct and indirect incentives, along with an additional estimated $2.5 billion from proposed federal tax credits.

The increased investment into EVs builds upon Ontario’s plan to build a world-leading EV and battery supply chain. In its 2024 Budget, the Ontario Ministry of Finance noted how “Canada’s raw material resources, strong integration with the United States’ automotive sector, and clear policy commitments have given it an edge over competitors.” As manufacturers continue to choose Ontario for their facilities, its goal to become a world-leading jurisdiction for EVs becomes closer.

Development of Charging Infrastructure

As part of the province’s increased focus on EVs, the Ontario Ministry of Energy is exploring options to reduce electricity rates for public EV chargers. This is part of a larger plan to encourage further development of charging infrastructure. Under existing rules, there is little incentive to build public EV charging stations in areas with low EV demand. Due to electricity costs to the developer and low revenue to cover such costs, charging stations in low-utilization areas are “either not built or operate at a loss.”

Accordingly, the OEB has been conducting public consultations on a new EV Charger Discount Rate for public EV charging stations in areas with low utilization. The aim is to incentivize infrastructure developers to build additional chargers in these areas. If approved, a lower rate will be offered to public EV charging providers in low-utilization areas (between 50 kilowatts (“kWh”) and 4,999 kW) beginning on January 1, 2026. The outcomes of the public consultations, such as the discounted rate to be charged, remain to be seen.

In addition to the reduced-rate plan, Ontario is building over 1,300 new EV charging ports in small and medium-sized communities. These new charging stations are part of a “$63 million investment to build publicly accessible charging stations in communities with less than 170,000 people, as well as in any Indigenous community in Ontario.” The Ontario government has placed an emphasis on smaller and underserved communities to provide more certainty to drivers during their commute while using EVs.

Ultra-Low Overnight Price Plan

Finally, the Ontario government has recently implemented their Ultra-Low Overnight Price Plan. Beginning in May 2023, customers of Toronto Hydro, London Hydro, Centre Wellington Hydro, Hearst Power, Renfrew Hydro, Wasaga Distribution and Sioux Lookout Hydro have been able to opt-in to this plan. This plan is designed to be particularly advantageous for those who charge EVs overnight, and helps prepare the grid for increasing electricity usage by EVs.

Nuclear and Small Modular Reactors

In 2024, Ontario’s nuclear industry continued building off its accomplishments from last year. Near the beginning of the year, the Ontario government announced support for OPG’s plan to proceed towards the refurbishment of Pickering Nuclear Generating Station’s “B” units. OPG has completed the Project Initiation Phase of refurbishment and is now proceeding with the Project Definition Phase, with the refurbishment of Pickering Nuclear Generation Station anticipated to be completed by the mid-2030s. As part of the Project Definition Phase, OPG is authorized to sign a $2.1-billion contract with CanAtom, a joint venture of Aecon and AtkinsRéalis, for early engineering and procurement. The refurbishment is contingent upon regulatory approval by the Canadian Nuclear Safety Commission (“CNSC”). If the refurbishment proceeds, the Pickering Nuclear Generating Station’s “B” units are expected produce 2,000 MW of electricity once refurbished, enough to power two million homes.

The government also confirmed that OPG has completed the early works for its closely watched small modular reactor project on time and on budget. The government’s announcement noted that main site preparation is now underway by Darlington New Nuclear Project’s construction partner, Aecon.

Ontario was also the recipient of up to $50 million in federal funding through the Electricity Predevelopment Program for Bruce Power’s assessment of new generation opportunities in Tiverton, Ontario, which would have the potential to generate power for up to 4.8 million homes and businesses across the province. This project alone would account for more than a quarter of the new nuclear capacity needed by Ontario to meet its clean electricity demands in 2050 as recommended by the IESO. Additionally, Bruce Power has submitted its Initial Project Description for the proposed Bruce C project to the Impact Assessment Agency of Canada. This submission is part of the federal impact assessment process, which will evaluate the addition of up to 4,800 MW of electricity production at the Bruce Power site.

In April, the government welcomed an $80-million investment by BWX Technologies, Inc. to expand their Cambridge nuclear manufacturing plant, which will create new skilled, unionized jobs, support the ongoing efforts of Ontario’s existing Darlington, Bruce and Pickering nuclear stations, and reinforce Ontario’s global leadership on new nuclear technologies. Construction of the expansion project is expected to begin in the third quarter of 2024 with completion targeted for early 2026.

After more than a decade of collaboration with potential host communities, the Nuclear Waste Management Organization (“NWMO”) announced in November the selection of the Wabigoon Lake Ojibway Nation-Ignace area for Canada’s deep geological repository for high-level nuclear by-products. This milestone advances the NWMO’s Adaptive Phased Management approach, established in 2007 for the safe, long-term management of nuclear waste, and adheres to international best practices. The project will now enter a thorough regulatory review process, including licensing by the CNSC and an integrated impact assessment.

[1] Ministry of Energy and Electrification, “Protecting Ontario’s Critical Minerals and Energy Sector” (25 April 2025).

[2] Ministry of Energy and Electrification, “Ontario Leads the G7 by Building First Small Modular Reactor” (8 May 2025).

[3] Independent Electricity System Operator, “Electricity Demand in Ontario to Grow by 75 per cent by 2050” (16 October 2024).

[4] Ministry of Energy and Electrification, “Ontario’s Affordable Energy Future: The Pressing Case for More Power” (October 2024).

[5] Ministry of Energy and Electrification, “Ontario Ready to Meet the Challenge of Soaring Energy Demand” (22 October 2024); Ministry of Energy and Electrification, “Ontario’s Affordable Energy Future: The Pressing Case for More Power” (October 2024).

[6] Affordable Energy Act, 2024.

[7] Bill 214, Affordable Energy Act, 1st reading, Ontario Legislative Assembly, 43-1, (23 October 2024) (Hon. Stephen Lecce).