Illinois Enacts Legislation to Kick-Start Additional Renewable Energy Development

Illinois was recently ranked as one of the top five states for companies seeking to build renewable generation, and state officials have taken action to encourage additional development. Last month, the Illinois legislature passed and Governor Bruce Rauner signed sweeping energy legislation known as the Future Energy Jobs Bill. The bill’s proponents state that it should generate an additional $12-15 billion in new renewable energy investment and tens of thousands of new jobs in the clean energy sector.

The Future Energy Jobs Bill can be best described as an omnibus measure because it contains a number of wide-ranging initiatives. For example, the bill provides financial relief to Illinois’ nuclear fleet; allows the state’s largest utilities to earn a return on their energy efficiency investments and increases their energy efficiency goals; and expands low-income energy assistance programs. With respect to renewables, the bill provides a meaningful fix to the state’s existing Renewable Portfolio Standard (RPS) by ensuring a stable and predictable funding stream for renewable energy development. This, coupled with the mandate that the Illinois Power Agency (IPA) procure long-term contracts for renewable energy credits (RECs), is likely to promote investment in new wind and solar projects.

The RPS, created in 2007, requires utilities to source 25 percent of their electricity from renewable energy by 2025. However, progress towards meeting that target has been hampered due to shortcomings in its design. For example, the RPS dollars collected from electricity customers and then used by the IPA to procure RECs are held in a fund in the state treasury known as the Renewable Energy Resources Fund (RERF). With the state’s budget deficit nearing a record-setting $8 billion, RERF dollars have been used to patch budget holes. In fact, last year, the legislature swept $98 million out of the RERF and into the state’s general fund. To address this issue, the bill provides that utilities should hold onto the RERF dollars and turn them over to the IPA only at such time that the IPA needs the money for REC procurements.

The bill requires the IPA to procure 15-year contracts for RECs from new wind and solar projects on a 1-to-1 basis, meaning that wind RECs and solar RECs must be purchased in equal amounts.  The IPA must procure 4 million RECs from each generation source by 2030, with half of those RECs to be procured by 2020. This requirement is expected to generate 1,300 MW of new wind power and 3,000 MW of new solar power, which equates to approximately 650 additional wind turbines and 12 million additional solar panels. The bill also creates procurement “carve-outs” for the solar RECs. Specifically, the IPA must procure more than half of the solar RECs from new rooftop, community, and brownfield solar projects.

The bill directs the IPA to develop a long-term renewables procurement plan. This is a departure from the IPA’s existing practice to plan for procurements on a short-term (annual) basis. The long-term plan will guide competitive renewables procurements from 2018 to 2030. It will establish the exact procedures and tools that the State will adopt to incentivize renewables development, and it is through this process (which will likely include many stakeholders seeking to protect their interests) that the policy decisions left unsettled by the bill will be negotiated. The plan must include spending for low-income and not-for-profit solar projects, an adjustable block program for small-scale solar projects, and support for community solar.

Before the IPA’s long-term plan becomes effective, the IPA will be conducting at least two REC procurements. Specifically, the bill provides that the IPA must procure in 2017 one million RECs from new utility-scale wind projects and one million RECs from new utility-scale solar projects.  These procurement events could occur as early as June 1, 2017.

The IPA has already begun developing its long-term renewables procurement plan and 2017 utility-scale solar and wind procurements. For that reason, stakeholders looking to help shape Illinois’ renewables markets should take action now.

Next Steps for Renewables Developers in a Nutshell:

• 2017 Utility-Scale Procurement: As early as June 1, 2017, the IPA will conduct a procurement for one million RECs from new utility-scale wind projects and one million RECs from new of new utility-scale solar projects. This is designed to pave the way for an additional 325 MW of wind power and an additional 750 MW of new solar power.

• Long-Term Renewables Procurement Plan: The IPA has already started to develop its renewables plan that will establish the exact procedures and tools that the State will adopt to incentivize renewables development through 2030.

• 2017 Rooftop Solar Procurement: As early as March 2017, the IPA will use existing RPS dollars in the RERF to procure RECs from rooftop solar projects. This is intended to help avoid a lag in the market as developers wait for the new REC procurements mandated by the bill. The IPA states that it soon will announce the exact date of this procurement.

How to Help Shape Illinois’ Renewables Markets

If you are interested in weighing in on the IPA’s long-term plan and the 2017 utility-scale solar and wind procurements, please contact Adam Margolin at adam.margolin@quarles.com/(312) 715-5089 for more information.