4/5/16 – Ill. clean energy standards slipping away as policy stalemates drag on, report says

Jeffrey Tomich, E&E reporter

Published: Tuesday, April 5, 2016

Ill. clean energy standards slipping away as policy stalemates drag on, report says

Like every other state, Illinois energy policy is an alphabet soup of acronyms such as RPS, EEPS and CCPS.

They stand for renewable portfolio standard, energy efficiency portfolio standard and clean coal portfolio standard — policies aiming to dictate what fuels are used to generate electricity. All three are also meant to help the state exploit energy resources and create jobs.

But a recent report commissioned by the Illinois Department of Commerce and Economic Opportunity shows the state is failing to meet the policy intent of all three standards.

The “Goals Status Report” was a first step of an energy planning process funded by a grant from the U.S. Department of Energy to find ways to maximize energy efficiency and renewable energy as primary options for achieving objectives such as reduced emissions, job creation, reliability and cost stability.

The report, which also looked at other energy-related policies including U.S. EPA’s Clean Power Plan and retail electric competition, was the basis of outreach meetings last month in Springfield and Chicago that sought input on how the state could better meet its goals.

While the report doesn’t make any policy recommendations, its findings play directly into a much broader energy policy debate in Illinois that will help direct investment decisions for years to come.

One of the policies at the center of the discussion is the renewable standard adopted nearly a decade ago.

The standard requires 25 percent of retail electricity sales in areas served by investor-owned utilities to come from renewable resources by 2025. The green power mandate, which is being phased in over time, includes various carve-outs for wind, solar and distributed generation.

Overall, the standard requires 10 percent renewable energy this year. But except for the near-term goal for wind energy, Illinois is falling short of meeting the targets, the report said.

The failure to meet renewable requirements is the result of a complex and unintended conflict with another law that opened the state’s retail electric market to competition (EnergyWire, April 23, 2014). It is a situation well-known among policymakers and the electric industry, but a fix has been elusive because of an ongoing stalemate on comprehensive energy reform in Illinois (EnergyWire, June 2).

The state is also falling short of near- and long-term targets in its energy efficiency standard because of cost caps that limit utility cost recovery. The efficiency standard requires investor-owned utilities to cut electricity sales by 2 percent a year. But utilities are only achieving about 1.5 percent.

The report said lower electricity prices have limited the number of programs that meet a statutory cost-effectiveness test and reduce incentive among customers to pursue efficiency.

Not only is Illinois falling short of the intent of its policy goals now, it is projected to slip further behind in years to come under a variety of scenarios, according to the report. And that will have consequences.

“This lag is not an abstract issue,” the report said. “Failure to meet the intent of Illinois’ primary energy policies imposes opportunity costs on Illinois consumers, and limits the options for the state to cost-effectively comply with future energy and environmental regulations.”

‘INTENT OF THE LAW’

In the meantime, discussion over three major energy bills remains pending in Springfield, any of which could steer Illinois energy policy in a somewhat different direction.

For now, energy and other issues have taken a back seat to a worsening budget crisis in Illinois. But legislators have expressed a desire to pass a comprehensive energy bill.

Among the measures being discussed is a bill that aims to fix the renewable standard and expand it to 35 percent by 2030. The measure would also expand the state’s efficiency standard to require a 20 percent reduction in electricity use by 2025 (EnergyWire, Feb. 20, 2015).

“We’re still pushing hard for its passage,” said Sarah Wochos, co-legislative director for the Chicago-based Environmental Law & Policy Center, part of a broad coalition of environmental groups, consumer advocates and businesses that proposed the bill.

A competing bill by Chicago-based Exelon Corp. would create a low-carbon portfolio standard requiring 70 percent of electricity used in areas served by investor-owned utilities to come from low-carbon sources of generation, notably the company’s 11 nuclear reactors (EnergyWire, Feb. 27, 2015).

Exelon affiliate Commonwealth Edison, the state’s largest electric utility, is also lobbying for a separate sweeping measure that would overhaul the rate structure in its service area and enable hundreds of millions of dollars in investment in community solar, microgrids and electric vehicle charging stations. The bill also seeks to unlock funds for renewable development and would allow it to earn a return on energy efficiency investments (EnergyWire, March 20, 2015).

Regarding how the renewable standard is met, there is also a debate over how that’s achieved.

Exelon argues the wind carve-out in the RPS can be met for years into the future through the purchase of renewable energy certificates from Iowa wind farms. But clean energy advocates say doing so fails to satisfy the policy intent of stimulating renewable development and creating jobs in Illinois.

“We’re not doing that,” Wochos said. “We’re not going to meet the intent of the law.”
In addition to expanding the efficiency standard, the bill would also eliminate cost caps. Efficiency advocates say the caps serve no purpose because utilities can only adopt programs that are proved to be cost-effective.

“It doesn’t make sense to say energy efficiency is the cheapest thing out there but not get all of it,” she said.

If Illinois is slipping behind in meeting renewable and efficiency targets, it hasn’t left the starting gate in meeting a third energy standard — a requirement that the state get 25 percent of its electricity from so-called clean coal plants by 2025.

Two projects contemplated when the Illinois Legislature passed the clean coal portfolio standard in 2009 collapsed, including the federally sponsored FutureGen project.

And in a report last year, the Illinois Commerce Commission concluded that meeting the clean coal standard would be “prohibitively expensive” (EnergyWire, June 17, 2015).

The standard, which was written to mimic the renewable standard, enables developers to enter long-term power purchase agreements with utilities as long as doing so doesn’t cause retail electric rates to rise more than 2 percent.

Phillip Gonet, executive director of the Illinois Coal Association, acknowledges the 25 percent standard within a decade is unrealistic, especially under a 2 percent rate cap. “There’s no way in the world we’ll get close to it,” he said.
While critics say Illinois will never see a kilowatt-hour of electricity from coal plants that capture their carbon emissions, Gonet sees the law as a goal, not a mandate, and said “it makes sense to keep the policy framework in place.”

One developer, Norway-based Sargas AS, continues to seek to use the law to help finance an 80-megawatt project at the original FutureGen site in eastern Illinois, he said. The Sargas project “wouldn’t even come close” to the rate cap, Gonet said. But state utility regulators determined the project is outside the scope of the law, which was specifically written to benefit FutureGen and another project that long ago collapsed.

Legislation was filed last year to tweak the law and help Sargas move ahead. But the measure was sucked into the broader energy debate.

“We were seeing if there was a way to dislodge [the bill] from that mix, and I’m not sure there’s a way to do that,” Gonet said.

Twitter: @jefftomich Email: jtomich@eenews.net

Copyright 2016, Environment and Energy Publishing LLC. Reprinted with permission.