It was a busy week in Springfield last week with the introduction of a new Renewable Portfolio Standard (RPS) bill and the news of Governor Rauner’s proposed 2015-2016 budget.
The Clean Jobs Bill was unveiled Thursday (2/19/2015) with strong bi-partisan support in the House and Senate. A growing coalition of business and special interest groups have joined forces to craft a unique and comprehensive clean energy bill to shape a better energy future. The goals are big, bold and urgent – increase statewide energy efficiency to 20% by 2025, ensure 35% of all power in Illinois comes from renewable sources by 2030 and set up a suggested framework for discussion to meet the new federal EPA carbon standards. If passed, this could generate over 32,000 new jobs per year and attract more than $21B of investment in Illinois. No other industry segment has that kind of potential in today’s economy! What is in store for solar energy specifically?
- Replace the current RPS procurement plan with a new, independent procurement process that is not tied to the traditional annual IPA power procurement process. Note that the existing Regular Procurement (April/Sept 2015) and Supplemental Procurement (June/Nov 2015, March 2016) will not be impacted by the new Clean Energy Bill.
- Identify stepping stones and targets for wind and solar (including DG, community and brownfield development), ensuring 25% RPS met by 2025 and 35% by 2030.
- Shift utility contributions from the supply side (IPA/ARES suppliers) to distribution (ComEd/Ameren) through a line or wires charge. This will fix the broken funding cycle in the current RPS and create a steady, predictable stream of revenue allowing for long term planning.
- Develop a low-income family solar program through the targeted use of RERF dollars. (Renewable Energy Resource Fund is the money from ARES suppliers for their compliance toward clean energy requirements and is the source of the $30M Supplemental Procurement.) New contributions into this fund will cease in October 2016 and the outstanding balance will assist low income DG projects including community solar. The first 15 years of RECs will be paid out once the system is energized and the utility will take ownership of the REC. A 3rd party administrator will assure checks and balances against fraud.
- Publish a DG “declining block” pricing structure for 2016 through 2030. This table will identify MW goals with established declining REC prices, enabling investors to calculate and compare incentives over time. This proven model has worked well in other state to drive steady growth and eliminate the boom/bust cycle that crippled early REC programs. The Illinois Power Agency (IPA) will review/revise every two years to ensure pricing matches market conditions. Investors will likely be paid for the first 15 year REC value once the system is energized.
- Require prevailing wage installation labor for new wind, and solar projects over 1000kW.
ISEA will be actively working to support this legislation and need each and every one of you to roll up your sleeves and help. We intend to hire a lobbyist to work in Springfield on a regular basis and will host a series of events including Solar Lobby Day on May 6th
- watch your calendar for details! 2015 will be a pivotal year for solar growth in IL and is your opportunity to pave a clean energy future, catapulting us to the top 10 solar states in the nation!
The Supplemental Procurement plan will host at least 3 events – June 2015, November 2015 and March 2016. Prospective system owners will work through solar companies or aggregators to bid into one of these events. It is important to keep in mind that the intended purpose of a REC is to assist with the economics of a project and encourage completed IL installations in order to achieve legislated goal of 25% clean energy by 2025. Therefore, the value of a REC will need to be high enough to stimulate the market to grow and build. It could also create an urgency to participate NOW! The rebate program was riddled with problems including limited funding, an onerous application period, an unpredictable lottery or competitive review and stressful installation deadlines. By transitioning to the Supplemental Procurement, all of these problems are eliminated or improved:
- Immediate funding opportunities available in June & November & March. No more “hurry up and wait” for the rebate/grant application deadlines to sign new customers.
- Flexibility in funding amounts on a project by project need. One REC price does not fit all projects, installers and developers can tailor pricing to meet customer needs. (Keep in mind there will be a confidential (unpublicized) ceiling for pricing so all projects must be below this threshold to be approved.)
- Increased state budget from $2.5 million to $6 million ($30million/5 year REC contract).
- Improved odds for funding - elimination of the lottery system and competitive grant cycle!
- Broader installation deadlines – no more November to May rush to install. Approved projects have 6 months to be confirmed and a year to install.
The one possible downside to this format is that the REC payment will be made quarterly as opposed to a single lump sum. It may be a good idea to factor those related costs into your REC price to make the project economically viable and compelling enough to act now. Several ISEA members have expressed concerns that previous market indicators suggested low REC prices. However, do not dismiss the elimination of the rebate changes the economics for project owners. Therefore, we believe the IPA will need to adjust the benchmark accordingly. Aggregators may also look at market conditions to provide input and experience in national REC pricing but the experts will be the installers and ultimately the investors. This will, in all likelihood, be a negotiation with the aim of installing the greatest amount of solar for the most cost effective price.
Please note that ISEA will pursue opportunities to resurrect the rebate/grant program. We are not ready to give up! However, indicators suggest it will be an uphill battle given the drastic cuts across the board to many human services and special interest groups. We feel strongly that, if properly positioned, the Supplemental Procurement could be an excellent replacement to rebates and then transition smoothly to the declining block structure for the new RPS. As stated previously we will need a great deal of support in Springfield from all members in order to secure a successfully incentive program that will drive growth through 2030! Please let us know we can count on you.