Category: ⚡ Markets & Operations
Complexity Level: ●●●○○ (Level 3 – Intermediate)
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Ontario’s wholesale electricity market coordinates electricity production and consumption by allowing generators and other market participants to submit offers to supply electricity.
The Independent Electricity System Operator (IESO) administers the market while simultaneously operating the physical power system.
The market determines:
These outcomes must satisfy both economic efficiency and power system reliability constraints.
Wholesale Electricity Market
A system in which electricity is bought and sold between generators, retailers, and other market participants under rules administered by the system operator.
⚡ Electricity markets coordinate thousands of operational decisions every day.
They provide economic signals that guide generator operations while ensuring the power system remains physically stable.
Ontario’s electricity market includes several types of participants.
Generators offer electricity for sale at specific prices and quantities.
Examples include:
Large electricity consumers and retailers may participate in the market by purchasing electricity.
These participants represent the demand side of the electricity system.
Some participants buy and sell electricity across interconnections with neighbouring jurisdictions.
These transactions allow electricity to be imported or exported depending on market conditions.
The primary market in Ontario is the energy market, where electricity is bought and sold.
Generators submit offers indicating:
The market then selects the lowest-cost resources needed to meet demand while respecting system constraints.
This process occurs repeatedly throughout the day as electricity demand changes.
In addition to supplying energy, the electricity system requires several reliability services.
These services help maintain system stability and include:
Generators and other resources may be compensated for providing these services.
Related topic:
Ancillary Services
Electricity markets operate through a process called market clearing.
Market Clearing
The process of matching electricity supply offers with demand in order to determine which generators are dispatched and what price is paid for electricity.
Market clearing must also consider transmission constraints and other operational limits.
After electricity is produced and consumed, the market operator calculates financial transactions between participants.
Settlements account for:
These financial processes ensure that market participants are compensated appropriately for their activities.
Related topic:
Electricity Settlements
The electricity market cannot operate independently of the physical grid.
The IESO must ensure that market outcomes respect system constraints such as:
As a result, market outcomes are sometimes adjusted to maintain safe system operation.
Related topic:
Dispatch
Consider a situation where electricity demand increases during the evening.
This process occurs repeatedly throughout the day as demand conditions change.
➡ Next Topic:
Dispatch
This topic explains how the electricity market determines which generators produce electricity in real time.
Last Updated: 2026-03-27