Minister's Directive

To: The Independent Electricity System Operator

I, Stephen Lecce, Minister of Energy and Mines ("Minister"), hereby direct the Independent Electricity System Operator ("IESO") pursuant to section 25.32 of the Electricity Act, 1998 (the "Act") with regard to procurement of electricity resources to ensure the reliable, cost-effective and efficient operation of Ontario's electricity system in response to ongoing and growing needs expected in the future, as follows:

Background

Ontario’s integrated energy plan, Energy for Generations, released June 12, 2025, recognizes hydrogen as a strategic resource that can complement other fuels and technologies to help meet growing energy demand, support industry and heavy transportation, and provide reliable energy storage and generation capacity.

The government released its Low-Carbon Hydrogen Strategy in 2022. This strategy set out a vision for a thriving hydrogen sector that leverages Ontario’s clean electricity system, existing infrastructure, and regulatory environment. Considerable progress has been made on the actions outlined in the 2022 Strategy since its release, including the launch of the IESO’s Hydrogen Innovation Fund in 2023 (“2023 HIF”) to support low-carbon hydrogen pilot and research/feasibility projects.

The 2023 HIF was established via a Minister’s Directive on January 26, 2023, with $15 million in electricity ratepayer funding over three years. The 2023 HIF aimed to develop opportunities for using low-carbon hydrogen for balancing and strengthening Ontario’s clean electricity system and to improve understanding of hydrogen’s potential benefits and limitations in supporting the provincial electricity grid. Fifteen successful project bids were announced, with a total of $13.8 million awarded from the 2023 HIF.

Energy for Generations recognizes that additional immediate and broader efforts are needed to spur greater production, deployment, and use of low-carbon hydrogen and related technologies across high-potential sectors in the province. Greater scalability and commercialization of hydrogen technologies can support the province’s economic security and job creation, energy security, and Ontario’s clean energy advantage in the industrial sector.

The IESO will launch a new HIF (“2025 HIF”) with $15 million in new funding over five fiscal years for the Electricity-related Project Stream described below, and $15 million in new funding over five fiscal years (to be provided by the government) for the Broader Sector Projects Stream described below:

  1. Electricity-related Projects Stream: Projects supporting the integration of low-carbon hydrogen into the electricity grid to increase electricity supply, capacity, or storage, which could include peak demand management, ancillary services, and long-term/seasonal storage of surplus renewable energy.
  2. Broader Sector Projects Stream: Projects directly or indirectly enabling broader applications of low-carbon hydrogen, such as new industrial and transportation sector applications including innovative hydrogen fueling infrastructure, as well as creating hydrogen “hubs” that connect producers with end users. This stream will be government funded and established via a separate agreement between the Ministry of Energy and Mines and the IESO.

With regard to hydrogen’s potential to strengthen energy security, I wish to note that Ontario has developed a broad suite of policy tools to protect Ontarians in response to US tariffs and foreign antagonists, including passage of the Protect Ontario by Unleashing our Economy Act, 2025. It is important for IESO’s 2025 HIF program be designed in a manner that supports Canadian applicants. The use of weighted evaluation criteria as described in this Directive supports this objective while helping to protect Ontario’s economy.

The 2025 HIF is intended to support direct or indirect advancement of the Ontario low-carbon hydrogen economy and benefits to communities, including Indigenous communities. Broadening the scope of the 2025 HIF to include other energy and sector applications would support market transformation during a critical stage for the hydrogen sector.

Directive

Therefore, in accordance with the authority under section 25.32 of the Act, the IESO is hereby directed as follows with respect to the Electricity-related Projects Stream described above:

  1. The IESO shall consider its experience from the 2023 HIF projects, updated market analyses, and long-term electricity system forecasts in designing and administering the Electricity-related Projects Stream of the 2025 HIF. The goal is to support projects that further evaluate, demonstrate, and support the increased integration of low-carbon hydrogen technologies into Ontario's electricity grid for the purposes of balancing and strengthening our reliable electricity system.
  2. Without limiting the foregoing, electricity-related projects, or research/feasibility studies with a focus on commercializing technologies or solutions, funded through the Electricity-related Projects Stream of the 2025 HIF could involve hydrogen technologies applied to:
    1. Grid support services from hydrogen production loads;
    2. Customer-sited peak demand management;
    3. Energy storage and;
    4. Clean energy integration, including hydrogen integration into key heavy emitter industries, in order to assess the resulting impact on electricity demand profiles.
  3. The 2025 HIF will have a budget of $15 million over five fiscal years for the Electricity-related Projects Stream. The IESO may determine how the program budget is allocated among the projects within the stream.
  4. The IESO shall, working with the Ministry, include rated evaluation criteria to recognize applicants who have and maintain Canadian Status, as defined in this paragraph, for the period specified in the HIF contribution agreement, provided that the applicant submits an attestation to the IESO, signed by a natural person with the authority to bind the applicant, verifying that it will meet the Canadian Status requirements. An applicant has "Canadian Status" if the following requirements are met:
    1. If the applicant is not Controlled by any other Person (as "Control" and "Person" are defined in the HIF contribution agreement), the headquarters or main office of the applicant are located in Canada; or
    2. If the applicant is Controlled by any other Person, other than a natural person (as "Control" and "Person" are defined in the HIF contribution agreement), both the applicant and the Person that ultimately controls the applicant meet the requirements set out in (a) above; or.
    3. If the applicant is Controlled by a natural person (as "Control" is defined in the HIF contribution agreement), the applicant meets the requirements set out in (a) above and the natural person that ultimately controls the applicant is ordinarily resident in Canada as defined in the HIF contribution agreement.
  5. All 2025 HIF projects must be sited in Ontario.
  6. The IESO shall, working with the Ministry, consider in its evaluation of projects the importance of community and Indigenous engagement and/or participation.
  7. For the Electricity-related Projects Stream of the 2025 HIF, once projects have been selected, but prior to notifying successful applicants, the IESO will seek the Ministry’s opinion about any potential Indigenous consultation associated with each selected project that the Ministry deems appropriate. If, in the Ministry’s opinion, consultation on a project would be appropriate, then the IESO will communicate to the relevant applicant that they must carry out, to Ontario’s satisfaction, the consultation requirements, if any, specified by the Ministry. For greater certainty, whether a project would, in the Ministry’s opinion, require Indigenous consultation shall not impact the IESO’s determination about whether to select the project application for 2025 HIF funding.
  8. The IESO is expected to implement the Electricity-related Projects Stream of the 2025 HIF on the following timelines:
    1. Commence updating Electricity-related Projects Stream rules upon receipt of this Directive;
    2. Issue a call for applications by November 4, 2025;
    3. Report successful and unsuccessful applications to the Minister by April 8, 2026;
    4. Enter into contracts with successful applicants by June 30, 2026.
  9. The IESO will report achievements under the Electricity-related Projects Stream to the Ministry including:
    1. Annually, number of new/expanded low-carbon hydrogen production facilities, number of new-expanded hydrogen end users, the amount of hydrogen produced annually by funded projects, and key IESO lessons learned, including related to the commercial readiness of technologies/solutions.
    2. By September 3, 2029, a final report on the 2025 HIF including lessons learned and recommendations for future funding or other actions, including to support the commercial readiness of low-carbon hydrogen technologies or solutions.
  10. The IESO shall work with the Ministry on a communications plan for the Electricity-related Projects Stream of the 2025 HIF that includes a plan on issuing the call for applications, selecting projects, and announcing successful projects.

General

This Directive takes effect on the date it is issued.

Order in Council 1022/2025