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The Future Energy Jobs Bill: Promise, Pitfalls, and Opportunities for Clean Energy in Illinois

, policy analyst, Clean Energy | November 28, 2016, 4:12 pm EDT
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On November 16, the Illinois House Energy Committee held a six-and-a-half hour committee hearing on the recently released Future Energy Jobs Bill (SB 2814).

This bill builds on the Next Generation Energy Plan (NGEP) that was introduced in May 2016, and includes key components from the Illinois Clean Jobs Bill. The Union of Concerned Scientists is a member of the Illinois Clean Jobs Coalition, which has been in conversations with Exelon and ComEd for months. We are cautiously optimistic that detrimental provisions to the bill will be removed this week and, if they are, UCS will recommend that lawmakers cast a yes vote.

The Future Energy Jobs Bill contains provisions to fix the Renewable Portfolio Standard (RPS) in Illinois, and to increase the energy efficiency standards in the state, which are both components the Clean Jobs Coalition has been working to pass since February 2015. With only three days left of veto session, we are encouraged to hear that negotiations are continuing, and we expect some key revisions to the Bill, including the removal of the coal subsidy and rate design change. What remains is a long, complicated bill that will, on balance, serve Illinois well, expanding renewable energy and energy efficiency programs.

Here’s what you need to know:

Restarting renewable energy development in Illinois

The Future Energy Jobs Bill includes a meaningful fix to the state’s existing Renewable Portfolio Standard (RPS) law by ensuring stable and predictable funding for renewable development.

The RPS has been one of the primary drivers of wind and solar development in Illinois, until recently. Established in 2007, the RPS requires investor-owned utilities to supply 25 percent of their electricity from renewable energy resources by 2025. But progress toward meeting the RPS has been hampered by flaws in the policy.

The proposed fix to the RPS will finally restart renewable energy development in Illinois.

The fix would provide $180 million per year, growing to $220 million per year in funding to install new renewable energy projects in Illinois. The bill requires a minimum of 3,000 megawatts (MW) of new solar power and 1,300 MW of new wind power to be built in the state by 2030.

The bill also includes provisions to create the state’s first community solar program, which allows members of a community the opportunity to share the benefits of solar power even if they can’t install solar on their own roof. And the bill creates the Illinois Solar for All Program to support solar development in low-income communities and related job training.

For energy efficiency, the bill would nearly double ComEd’s energy efficiency programs. This is a very strong and laudable commitment because energy efficiency is one of the most cost-effective ways to combat climate change, create jobs, and reduce energy costs for consumers.

Anti-consumer/pro-coal provisions

Similarly to the NGEP, the Future Energy Jobs Bill as originally written included a change to the structure of residential electricity rates. Customers would no longer be charged based on the amount of electricity they use in a month, but they would be charged based on their peak usage during a billing cycle. Consumer advocates argue that demand charges are complicated and hard to understand, which would make it difficult for consumers to manage their bills. And as a result, their electricity bills may vary wildly from month to month.

The proposed demand charges would also greatly reduce the savings from investing in energy efficiency and distributed energy sources, particularly rooftop solar. One of the primary drivers of the recent boom in residential solar has been the prospect that a homeowner can lower their electricity bill by reducing electricity purchased from their utility. Demand charges could evade that mechanism.

Additionally, proposed energy efficiency targets for Ameren Illinois, the state’s second largest investor-owned utility, do not match ComEd’s targets. Ameren previously proposed a target of 12% cumulative annual energy efficiency savings by 2025, and just 15% cumulative annual savings by 2030. Meanwhile, ComEd proposed increasing their energy efficiency target to 18.5% cumulative annual savings by 2025, and 23% cumulative annual savings by 2030.

As it was originally written, the bill created a Fixed Resource Adequacy Plan (FRAP) that would put the state in charge of procuring capacity in Southern Illinois, which is part of the Midwest Independent System Operator (MISO). The state would have to purchase power capacity downstate from power generators over four-year periods. Dynegy, the energy company pushing the FRAP, would prolong the life of old, uneconomic coal plants that are a large source of carbon emissions and other harmful pollutants in Illinois.

The future of Illinois nuclear plants

The bill also creates a Zero Emission Standard (ZES) to subsidize two of Exelon’s nuclear power plants (Clinton and Quad Cities) in Illinois that are at risk of closing early. This proposal is very similar to what was proposed in the Next Generation Energy Plan from May 2016, but has a different way of calculating subsidies.

The subsidy in the current bill is based on the economic value of the avoided carbon emissions from these facilities using the federal social cost of carbon, which represents the avoided economic damages from climate change. To protect ratepayers and prevent Exelon from making windfall profits, the bill would reduce the level of subsidies over time if wholesale electricity prices increase, prevent consumer electricity rates from increasing by more than 2 percent in any year, and limit the duration of the subsidies.

UCS is quite aware that owners of economically vulnerable nuclear plants in some states are seeking financial assistance from policymakers. Until carbon pricing is in place or natural gas prices rise significantly, this trend will likely continue and we believe should be handled on a case by case basis. UCS has worked to make sure that Illinois policymakers consider the cost and feasibility of a range of options, from providing financial support for power plants with strong safety records, to replacing their capacity with renewables, to implementing policies that lower and reconfigure customer demand for electricity.

We have also recommended to Illinois policymakers that if they agree to provide financial support, they should at the same time fix the state’s RPS as well as increase the state’s energy efficiency programs and policies. The ZES ensures that any financial assistance to existing nuclear power plants will not dilute or otherwise come at the expense of incentives for energy efficiency, grid modernization, or renewable resources such as wind and solar.

Negotiations continue

Governor Rauner recently weighed in on the large, 446-page energy bill and signaled support for a slimmed-down version. The governor’s office was critical of the proposed change to the rate design, and the potential increase in electricity costs for Illinois residents and businesses. They also wanted a stronger commitment from Exelon to keep the two at-risk nuclear plants open for a longer time frame (at least 10 years).

Recent articles indicate that changes to the legislation are being made to reflect the feedback from a broad cross section of stakeholders, including testimony given at the recent House Energy Committee Hearing. These changes potentially include the elimination of the demand based rates and the FRAP, and other substantive changes.

Next steps

The second half of veto session begins Tuesday, November 29. and ends on Thursday, December 1, leaving just three days for a bill to move in Illinois.

Ultimately, we need comprehensive energy legislation that will serve as a powerful driver for expanding clean energy investments, curb carbon emissions, and keep electricity bills affordable for consumers. And it looks like we are on the path to achieving that.

While the bill is not perfect, on balance UCS could support the bill if the clean energy provisions are maintained, the FRAP and rate design changes are removed, and Ameren’s energy efficiency targets are increased.

 

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