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Illinois Energy Bill: The Downstate Clean Energy Affordability Act

March 25, 2020


The Downstate Clean Energy Affordability Act, backed by utility Ameren, emphasizes utility-scale solar and storage.

Another major energy bill has surfaced in Illinois, this one focused on ramping up utility-scale solar in the southern part of the state.

The Downstate Clean Energy Affordability Act, introduced Feb. 21, is backed by utility Ameren and would largely just apply to its territory covering 2.4 million electric customers in the lower three-quarters of the state.

The bill’s renewable target — 32.5% by 2030 — is much less aggressive than those in the hotly debated Clean Energy Jobs Act or Path to 100 legislation, both of which promise to get the state to 100%.

The most controversial measure, however, may be the way in which the bill (SB3977 and HR5673) aims to increase renewables by allowing Ameren to build and own large solar and storage projects.

Under deregulation and market competition measures implemented in the late 1990s, utilities are not allowed to own generation in Illinois. Ameren argues that it would essentially not be selling the solar energy to customers, but rather selling it into grid operator MISO’s capacity and wholesale markets. It would also seek the right to sell solar renewable energy credits meant to incentivize solar development under the 2017 Future Energy Jobs Act.

Ratepayers would be billed for the construction of the solar and battery storage, but the money from MISO markets and renewable energy credits would essentially reimburse some of the costs, according to Jim Blessing, Ameren vice president of regulatory policy and energy supply.

“When people ask, ‘Are you getting back in the generation business?’ — that is not the case,” Blessing said. “We would include [the solar construction] in our rate base and charge a fee to all our delivery services customers for it. We would operate these things and we would sell into the wholesale markets in MISO and simply monetize that value. That money would go back to those same customers that are paying for the assets.”

He said that initially, 2- to 5-megawatt solar farms would be connected to Ameren’s distribution grid, which would mean the energy could not be sold into capacity markets. Later on, installations of up to 10 MW would be connected to the long-distance transmission system, allowing the capacity sales.

While there’s been little focus on Ameren’s bill from energy stakeholders in northern Illinois thus far, Natural Resources Defense Council clean energy advocate J.C. Kibbey — a Clean Energy Jobs Act backer — said Ameren’s utility-scale solar plan is bound to raise eyebrows.

“We’re sensitive to the issue of cost, that’s why we favor competitive procurement over a utility saying how expensive something will be and then building it” and billing ratepayers, Kibbey said. “The beauty of competition is that it drives prices down. We should stick with that approach. The idea that utilities should go back to generation is not an appealing one, and particularly not now.”

Shifting to utility-scale 

Ameren is also proposing to change the state’s solar efforts from the Future Energy Jobs Act’s emphasis on widespread distributed generation to more centralized utility-scale solar and fewer incentives for rooftop and community solar.

“Our viewpoint is if we really want to be serious about hitting longterm 100% clean energy goals, we really need to shift the focus to utility-scale at least downstate,” Blessing said. “We need to focus on utility-scale so we can get much more bang for the buck.”

Illinois is currently not on target to meet its renewable portfolio standard of 25% by 2025, set under the 2017 law.

Blessing said that more large-scale renewables are especially needed in southern Illinois, where generation is primarily coal and natural gas. Northern Illinois is home to most of the state’s nuclear fleet.

“We’ve proposed very targeted modifications in the way the IPA [Illinois Power Agency] is spending the current dollars available, which we think will help them get more renewables for the same amount of dollars,” Blessing said. “After minimum levels of rooftop and community solar are met, we shift to a least-cost method of procuring assets rather than forcing the IPA to buy more and more renewable energy credits from rooftop and community solar.”

In stakeholder workshops and conversations with the Energy News Network last summer, power agency director Anthony Star said that much more investment in utility-scale solar is necessary if the renewable goals set by the Future Energy Jobs Act are to be met.

Capacity questions 

Kibbey questioned how much money Ameren could really get for selling solar into the MISO capacity market. Prices for capacity in MISO are much lower than prices in the PJM market, which covers northern Illinois. In fact, downstate power generators have long been pushing for legislation or policy that would increase capacity prices in MISO or allow them to move into the PJM market.

“MISO is not a very lucrative capacity market, and it’s already oversupplied,” Kibbey said.

Capacity markets are also central to the Clean Energy Jobs Act’s plan for expanding renewable energy by creating an alternative to the PJM capacity auction in northern Illinois, where capacity prices paid to generators — and hence charged to customers — are much higher than in MISO. The proposal calls for giving the state authority to procure capacity, and incentivizing renewables in the capacity market — an arrangement known as a fixed resource requirement. They believe that Illinois generators, including renewables and fossil fuels, would elect to participate in the state-run process rather than the PJM capacity auction, and that Illinois customers would save money as a result.

On March 16, the Natural Resources Defense Council and the Sierra Club released a report they commissioned by economist James F. Wilson, alleging that PJM has bought much more capacity than needed, especially from coal and gas plants.

“In the worst year, PJM acquired an extra 18,700 MW of power above its safety margin, enough to supply a mid-sized state,” says the advocacy groups’ statement on the study. “On top of buying too much power, PJM offers to pay generators based on price estimates for obsolete and inefficient technologies. These overly rich prices attract unneeded new gas plants, and give them an undeserved windfall.”

The study also concludes that over-paying coal and gas generators for capacity depresses the spot market prices for electricity, making it harder for renewables to compete in that sector.

Moving pieces 

At least before the coronavirus pandemic stalled legislative activity in Illinois, energy stakeholders had widely expected that an energy bill would be passed this session, which runs through May. Gov. J.B. Pritzker said as much in his State of the State address in January. An eventual law would likely combine elements of the various proposals.

The Clean Energy Jobs Act was developed by a wide coalition of advocacy, community and labor groups, with support from nuclear generator Exelon, the parent company of ComEd. The Path to 100 proposal is backed by renewable industry players. Blessing said Ameren so far is not working with any other organizations.

“We’re rolling this out, talking to stakeholders, helping to educate them,” he said.

Ameren’s bill would raise the cap on how much customers can be charged for the procurement of renewable energy, but by a much smaller amount than the Clean Energy Jobs Act and Path to 100. Those bills call for raising the cap to 4% to 5% of the 2009 price per kilowatt-hour within the next five years, from a current cap of 2% of the 2007 kWh price. Ameren’s bill calls for keeping the cap in place through 2025, then raising it just a fraction of a percent.

Ameren’s bill also proposes charging its ratepayers to build a network of electric vehicle charging stations that Ameren would own, to help incentivize the adoption of electric vehicles. And Ameren would offer rebates to customers who buy electric vehicles. Blessing said that in all, the utility expects the proposed legislation would increase Ameren customers’ monthly bills by 99 cents a month.

“We’re focused on getting more renewables on our system at the most economic price for our customers,” Blessing said.

Despite his reservations about several parts of Ameren’s proposal, Kibbey said he supports other parts of the utility’s proposal.

“It’s encouraging to see Ameren and other utilities thinking about how to expand renewable energy, storage, and electric vehicles,” he said. “Even if we don’t currently agree on exactly the best way to get there, it demonstrates the broad consensus on the need to clean up our energy and transportation sectors, and I’m optimistic given that consensus that we can find a way to do that.”

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