Illinois energy law revives renewables while aiding nuclear
The Future Energy Jobs Act is also expanding energy efficiency in the state, but the nuclear subsidies are being challenged in court.
Nearly a year and a half after passage, Illinois' Future Energy Jobs Act (FEJA) is beginning to bear fruit as seen in a revival of renewable energy development in the state, though it is also increasing costs in some areas.
Approved by the Illinois legislature in December 2016, FEJA is probably best know for instituting the first legislatively-mandated nuclear subsidies in the nation, but it also revised Illinois’ renewable energy procurement, including its renewable portfolio standard (RPS) and its energy efficiency programs.
“The past RPS regime was too complicated,” Dave Kolata, executive director of the Citizens Utility Board, told Utility Dive. “FEJA put us on a path to a cost effective clean energy future with a combination of low average bills and a realistic strategy to decarbonize the economy.”
The result, Kolata said, is a wave of interest in developing renewable energy projects in Illinois. “We are getting more new build than anticipated,” and some of the prices are coming in below expectations, he said. “We are just getting started with big deployments of wind and solar power.”
The combination of the new RPS rules and changes to the state’s energy efficiency programs will have “a significant effect on consumer bills,” Kolata said.
Renewable procurement plan
Earlier in April, the Illinois Commerce Commission approved the Illinois Power Agency’s long-term renewable resources procurement plan, adopted as a result of FEJA.
The plan describes how the IPA will procure the legislatively required amount of renewable energy credits (RECs) under the state’s renewable portfolio standard.
That approval is going to result in between 2,500 MW and 3,000 MW of solar projects and about 1,400 MW of wind power projects, Howard Learner, executive director of the Environmental Law and Policy Center, told Utility Dive.
Another, even more immediate outcome of the changes FEJA brought to renewable procurement in Illinois is a 99 MW solar farm being developed by Ranger Power in Perry County. The project, which will double Illinois’ existing solar capacity, is expected to begin construction in 2019 and enter service in 2021. It will sell power under a 30-year contract with Wabash Valley Power.
At a standstill
Before FEJA, Illinois’ RPS program was at a standstill. When funding for the RPS program was first set up, the funds were put in separate accounts for utilities and retail aggregators. When customers began switching suppliers, it became difficult to reliably predict program funding. In addition, the funds were liable to redirection during Illinois’ budget crisis.
FEJA fixed those problems. It also instituted the long term procurement plan and specified that RECs from existing renewable energy programs would no longer be eligible to meet RPS requirements. As a result, companies that need to comply with the RPS can't use those RECs to comply, but must build new projects.
The revised RPS also gives preference to in-state projects. And the revised RPS rules stipulate that RECs from projects with costs that are recovered through the rate base are no longer eligible for compliance purposes. “The changes in the RPS legislation was a very important victory,” Learner said.
Among the more significant changes, the new RPS rules call for the phasing out of RPS obligations for alternative retail electricity suppliers and the phasing in of programs and procurements for all retail customers, not just eligible retail customers who remain on utility default service.
Under the new rules, the IPA also must develop a community renewable generation program that would allow residential and business customers to participate in renewable energy, even if they cannot host solar panels or other renewable energy devices. And the new rules direct the IPA to establish an adjustable block program for distributed and community solar projects that includes administratively determined REC prices. Learner called it “a big win.”
An administrative law judge had supported a Commonwealth Edison proposal to exclude electric cooperative and municipal utility customers from participating in behind-the-meter and community solar programs. That would have jeopardized several planned solar installations, Learner said. But in the end, the ICC overruled the ALJ.
FEJA requires that both Commonwealth Edison and Ameren Illinois expand their energy efficiency programs. By 2030, ComEd must cut energy waste by 21.5% and Ameren by 16%. FEJA also directs the utilities to engage with economically disadvantaged communities in designing and delivering new programs. And FEJA allows the utilities to put the costs of energy efficiency programs in their rate base.
While the Citizens Utility Board cheered the changes to the state’s energy efficiency program, they were not universally welcomed. Dave Lundy, director of the Better Energy Solutions for Tomorrow Coalition, called the changes a “boondoggle.” Energy efficiency costs used to be a pass through for the utilities. Allowing them to put the costs into their rate base will mean, in effect, that consumers will get less energy efficiency because the same costs will now have to cover the utilities’ return on equity as well.
The most visible part of FEJA, the nuclear energy subsidies, have also increased costs for consumers.
FEJA granted Exelon zero emission credits (ZECs) for the output from its Quad Cities and Clinton nuclear plants in a process administered through the IPA.
Late in January, the ICC announced that those plants were selected as the winning bidders through the IPA's ZEC solicitation. The awards entitle both plants to be compensated for the sale of ZECs retroactive to June 1, 2017.
According to Exelon financial filings, the company’s generation arm will recognize about $150 million of revenue from ZECs for the period from June 1, 2017 through December 31, 2017.
Meanwhile, even though the ZEC program is moving forward, its fate is in the hands of the courts.
The program is being challenged in court by generators, including NRG Energy and the Electric Power Supply Association. The U.S. District Court for the Northern District of Illinois upheld the program last July. An appeal to the U.S. Court of Appeals for the 7th Circuit led to oral arguments in January. The 7th Circuit has yet to hand down its decision.
If the ZEC program is overturned, it would not affect other aspects of FEJA, such as the revisions to the state’s RPS and energy efficiency programs.
“If you want a 100% decarbonized electric system, you have to look at all the options, including compensating nuclear energy,” Kolata said. It is instructive, he said, that the lawsuit challenging the ZEC argues that it will cause price suppression. He noted that the opponents actually say the ZEC will lower prices by $700 million to $1.1 billion.
Kolata said he does not know of any state that has done a better job of getting on a path toward full decarbonization. “We have come a long way with FEJA, but we are not quite there.”
He would like to see more work done on issues involving energy storage and electrification, but it could be a year or two before the legislature is ready to take up another energy bill, he said.
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