One might say that the Midwestern region of the U.S. has been slow to adopt solar and other renewable energy sources—not because of a lack of sun, but due to the inherently low price of electricity in this region. This situation is largely a result of the natural gas fracking boom starting in the early 2000s. A multitude of factors, namely the cost effectiveness of solar and customer preference, have led to legislative changes that promote the growth of renewables. No Midwestern state has positioned itself to achieve a lofty energy paradigm shift more so than Illinois, when the Commerce Commission passed the Energy Infrastructure Modernization Act (EIMA) in 2011.
EIMA has provided $3.2 billion for grid modernization, in addition to a significant investment into smart meters with a goal of installing more than two million new meters by the end of 2018. Smart meters provide much more accurate data, reducing the need to estimate usage for utility bills. In addition, service activation and efficiency improvements are all made easier through the use of smart meters, versus traditional metering devices.
Through the grid modernization process, EIMA established the framework and the data acquisition tools needed for future programs to be successful, particularly the Future Energy Jobs Act (FEJA), established in 2016.
FEJA is perhaps the most critical piece of legislation pertaining to energy and grid modernization to ever come out of the Midwest. There were three major focuses that FEJA attempted to address:
- Stimulating job creation within renewables, energy efficiency, and grid modernization
- Statewide energy efficiency improvements:
- Illinois’ current goal is to reduce demand by 13-17 percent across the two major utilities (ComEd & Ameren) by 2025
- Loftier goals have been set for 2030 (in the range of 16-21.5 percent)
- Significant improvement to the state’s Renewable Portfolio Standards (RPS):
- RPS Goal is to have 25 percent of electricity generated by renewable sources by 2025
- Shift in the renewable energy credit (REC) program to encourage solar deployment (previously wind-centric)
- 4 million RECs for 1.3 GW of wind projects
- 4 million RECs for 3 GW of solar projects
- Specific carve-outs for utility scale, brownfield development, as well as residential solar projects
Delving further into the RPS program, FEJA helped establish the Adjustable Block (AB) Program. State RECs have traditionally been able to fluctuate in value due to market trends and policy changes. However, through learned experience of other REC markets, the Illinois Power Agency adopted a modern approach, guaranteeing 15-year fixed-price contracts under the AB program. From a financing perspective, this win is huge because of the strengthened bankability of these RECs. Now locked into long-term contracts, the RECs can be effectively utilized to drive down the cost of solar to make it much more competitive with traditional energy sources.
New projects energized on or after June 1, 2017, by pre-approved developers, are eligible to participate in the AB program, with each block anticipated to be 22 MW in size. Between each block there will be a 4 percent decline in the value of RECs, so for those looking to maximize the REC values, it is important to be ready to apply once the program opens.
The AB program is still being finalized and the comments period closes today. It is anticipated that the Illinois Commerce Commission will issue an order confirming or modifying the AB program by April 3, 2018. The first block of the AB program will have a soft closing, meaning that every project that applies for the program in the first 60 days of commencement will be locked in to the Block 1 prices, regardless if the block’s assigned capacity is filled.
This article was originally published by Sustainable Capital Finance and was republished with permission.