With Ontario’s electricity demand set to grow significantly over the next 25 years, the Independent Electricity System Operator (IESO) is making a generational effort to invest in the provincial grid. The IESO’s Long-Term 2 (LT2) procurement, a series of application windows in which developers propose energy projects, will award contracts to the most cost-effective proposals that can provide the provincial electricity system with energy or capacity. Logically, low-cost renewables and battery storage, which are quick to deploy and scale and have long-term resilience benefits, should be key players in this procurement.
Municipalities must exercise new powers through municipal support process
The LT2 procurement has an important new requirement that all proposals must have the support of their host municipality to be considered for a contract. As a result, municipalities can give input early in the development process, choose which kinds of energy projects get built in their community, and maximize the benefits development will bring them. Previous procurements did not involve municipalities until after the project had a contract from the IESO or did not include them at all.
With these new opportunities come new responsibilities. For the first time, municipalities are being asked to receive and evaluate a potentially large number of energy development proposals and grant their support to those that are deserving. Municipalities have had to independently design and implement the proper procedures to do so, all while including community engagement in the process, and there have been a few common challenges that have made it harder for them to grant their support.
Pembina Institute offers guides to help municipalities with energy project evaluations
The Pembina Institute is working to make the process easier for municipalities by producing guides and advice on the evaluation of project proposals and the municipal support confirmation process. (See Part 1 and Part 2 of our Power Playbook.)
Recommendations to improve the long-term energy procurement process
Key insights come from municipalities that have already gone through the first LT2 window. Based on their suggestions, we’ve compiled the following recommendations for improving future LT2 windows:
- Municipalities found the early and frequent IESO webinars regarding LT2 updates very informative. These webinars should be continued in future windows, particularly in the later stages of the procurement window when final documents are released.
- Because the final LT2 procurement documents were released in late spring, municipalities had a short timeline to receive proposals before the October energy submission deadline, and most of that timeline fell over the summer when council meetings are infrequent and capacity is reduced. Future windows should be timed so that municipalities have a longer runway to receive and assess proposals, especially if the process runs over the summer break.
- Increased communication from the IESO about the urgency and magnitude of Ontario’s electricity needs would help increase public engagement in the procurement process.
- Educational materials, such as fact sheets on wind, solar and batteries, would help councillors assess proposals and ask important questions when they are presented to council. This is particularly true for new councils who have not had experience with previous procurements like the LT1. It is important that these resources come from highly credible, unbiased sources like the IESO. Public opinion can introduce subjectivity and inconsistency in the evaluation process between different development types if there is not enough information available about the project when it is being assessed. The IESO should supply municipalities with a list of information that proponents should provide and leave municipalities to customize that list based on their decision-making process.
Requiring proposals to have municipal support before the IESO considers them for a contract is a worthwhile change to Ontario’s energy procurement that empowers municipalities to get involved, maximizes the benefits municipalities receive from development in their community, and increases public buy in. As with any new process, we expected growing pains as the IESO implemented its new requirement for energy developments to have municipal support early in the procurement.
With the LT2’s first application window closing October 16, 2025, for energy projects and December 18, 2025, for capacity projects, it’s a great moment to reflect on what went well and what could be improved for the upcoming second, third and fourth LT2 windows over the next few years. Continued dialogue amongst municipalities, and between municipalities and the IESO, will help make sure future LT2 procurements build on lessons learned from the first.
We’d like to extend a big thank you to all the municipalities who have shared their expertise with us as we navigate the LT2 procurement together.
