Wording glitch in law at issue; state has yet to create
market for trading renewable energy credits
Shawn Temple, a development director for Weston Solutions,
said he has manufacturers, grocery chains and retailers interested in erecting
solar panels along large swaths of abandoned industrial sites in Chicago.
"We have lots of clients and sites available,"
Temple said.
But those companies are building large-scale projects in
other states because they can't make the math work in Illinois.
A glitch in the wording of a state law has prevented solar
power from being purchased for Illinois electric customers even though they are
paying into a fund for that purpose. What's more, the state has yet to create a
market for trading renewable energy credits, vastly extending the time it takes
for solar power producers to recoup construction costs.
No chief financial officer is going to sign off on a big
solar project without financial incentives, Temple said. "It needs to pass
the CFO test."
The incentives are especially crucial, given Illinois' lack
of sunny days and low electricity prices.
As a result, virtually none of the power flowing to Illinois
electricity customers comes from the sun, despite aggressive statewide mandates
that require increasing the number of homes and businesses supplied with
renewable energy such as solar.
So far, $53 million has been paid into a fund by Illinois
electricity customers. But the law allows the money to only be spent at the
same time that power is being purchased for Commonwealth Edison and Ameren
Illinois customers. But those utilities have more power than they need because
most of their customers fled for cheaper alternative suppliers.
So the pot of money just sits.
A legislative fix would allow the agency that procures power
to spend that money on behalf of all Illinois electricity users, regardless of
whether they remain with their legacy utility. The fix was expected last week
but was postponed after the Illinois Competitive Energy Association, a lobby
arm of alternative energy suppliers, claimed that such a move would drive up
electricity prices.
Sen. Don Harmon, D-Oak Park, who is sponsoring the
legislation that would fix the law, said last week that the issue will be taken
up after the veto session.
Illinois patterned its renewable energy market after New
Jersey, a state that has made up for its dearth of sunshine and low electricity
prices by paying well for renewable energy credits.
"On paper we have great incentive for people to invest
in solar here," said Sarah Wochos, senior policy advocate and director of
research for the Environmental Law & Policy Center in Chicago. "But
there's some structural flaws in the mechanics of the law right now that make
it impossible for those investments and that growth to happen here."
In the meantime, experts say, solar development in Illinois
has been the exception rather than the rule.
"These are customers that really wanted to make it work
in Illinois for one reason or another that went beyond the pure economics of
the project," said Madeleine Klein, senior vice president of policy and
strategy for solar rooftop developer SoCore Energy, a subsidiary of Edison
International.
For example, SoCore Energy developed two of the state's
largest rooftop solar panel installations, at Ikea stores in Bolingbrook and
Schaumburg. The main reason for those projects is that Ikea is committed to
having solar panels at its stores. Klein said about 90 percent of its stores
have solar panels.
Ikea's projects also illustrate why the state is behind on
solar installations.
In Illinois, Ikea's return on its solar investment could
take decades, compared with only three years if the same project were
hypothetically launched in a sunny state like Hawaii, said Jason Keyes, partner
at law firm Keyes, Fox & Wiedman LLP and an attorney for the Interstate
Renewable Energy Council.
In Hawaii the cost of a typical residential solar
installation has dropped from about $40,000 four years ago to about $26,000
today, according to Brad Albert, owner of Rising Sun Solar, a solar installer
in Hawaii. Federal and state tax exemptions further reduce the cost to about
$12,100.
As a result, companies have popped up that pay for the solar
installation for businesses and homes, and they make a profit selling the
cheaper electricity back to the solar panel hosts. So much solar energy is
flowing into Hawaii's electrical grid that the incumbent utility has refused to
accept any more solar power along certain parts of its system.
"Three years ago, people installing solar were wealthy
and had big homes, wanted to save money, but really, the big thing for them was
being green. But now it has shifted. People are doing it just for the sake of
saving money. And they're saving from day one," Keyes said.
Illinois solar power producers tend to be green enthusiasts,
and their projects relatively small.
Shedd Aquarium last month announced the installation of 913
rooftop solar panels. The $1.1 million project, paid for with public and
private money, is part of the aquarium's goal to cut its energy use in half by
2020.
For Shedd, which can afford a long payback period, the
project fit with its sustainability goals.
"We're very proud to be able to have these solar panels
on our roof, for lots of reasons," said Roger Germann, Shedd's executive
vice president. "It's good for the environment. It's good for the bottom
line, and we have a unique ability to tell the story and use this installation
as a road map for others."
Shedd's solar panels are projected to produce 300,000 to
400,000 kilowatt-hours per year and shave $25,000 to $30,000 annually from its
electricity bill. Shedd officials would like to quadruple on-site renewable
energy generation and possibly partner with the Adler Planetarium and the Field
Museum to produce power for the entire museum campus.
A billing mechanism called "net metering" allows
Shedd, Ikea and residential customers to run their meters backward when they
produce more electricity than they consume.
But if Shedd or Ikea could offset the cost of installing the
solar panels by selling their renewable energy credits to Illinois electricity
customers as was intended under a 2007 law, the aquarium would have money coming
in that could be used to install more panels, Germann said.
The credits, which vary by state, are based on power
production. Renewable energy producers receive one "credit" for each
megawatt-hour produced. New Jersey credits last month traded at $135;
Washington, D.C., credits traded at $485 last month,according to SREC Market
Monitor.
At 300 megawatt-hours per year, that could bulk up Shedd's
annual revenue from those panels by $40,500 if the credits traded at prices
similar to New Jersey's, to $145,500 per year if the credits traded similar to
Washington, D.C., prices.
Without a market for credits in Illinois, there's no
incentive to develop big solar projects, said SoCore's Klein.
Solar panels capable of powering 6,200 suburban homes are
installed in Illinois, according to the Solar Energy Industries Association,
which is about how much the state needs to meet its 2013 goals. But only about
half of those solar credits are being purchased to meet the state's renewable
energy goals, according to the Illinois Power Agency.
The problem is only expected to get worse. To meet
increasing state goals, Illinois will need to increase its solar purchases
tenfold by June 2014, according to an analysis by the Environmental Law &
Policy Center, and by 2015, purchase credits from solar installations capable
of powering about 89,000 homes, or nearly 30 times its current solar purchases.
To meet those goals, the state is not allowed to increase
electricity rates more than 2 percent in any given year from 2007 rates.
"We work with big retailers and the (real estate
investment trusts) that are landlords to the big retailers. In addition to
Walgreens and Ikea, we work with Target, Simon Properties, movie theaters. Our
customers are part of this group of folks like Kohl's and Costco who want to
build solar," Klein said. "In Illinois, low power prices and no
incentives don't paint the right picture for them."
The price for the credits would be set through a bidding
process.
The Illinois Power Agency, which procures electricity on
behalf of Illinois consumers, would open the doors for solar developers to bid
in their solar credits. In turn, the agency would choose which credits to buy.
For smaller power producers, the agency would offer a flat
rate. The agency said it could not speculate on prices for an upcoming
procurement that would occur next year if the law is fixed.
Harmon said he is confident the legislature will approve his
bill.
"Certainly, as in every compromise, nobody is getting
everything that they want. But this is a sensible solution. We have a general
consensus," he said.
In a statement, Exelon Corp., the Chicago-based parent of
ComEd, said it will wait until a final legislative proposal is available before
commenting.
For some time, environmental groups have clamored for the
law to be tweaked to free up money to purchase credits and power from producers
of renewable energy. But the legislature has backed off under pressure from
ComEd and Exelon. Those companies have contended that the law is working as
intended.
But as of June, about 5 percent of Illinois' electricity
came from renewable sources, which include wind power, according to an
Environmental Law & Policy Center analysis of publicly available state
data. That's short of the 8 percent target mandated under the law.
Solar, like wind power, is seen as a threat to traditional
electric generators, who lose money when businesses and residential customers
start generating their own power instead of purchasing it from the electricity
grid.
Utilities across the country have pushed for laws to charge
monthly fees to customers who generate their own electricity or have capped the
amount of solar electricity that can be generated to offset electricity bills.
The Edison Electric Institute, an industry group for
shareholder-owned electric companies, said in a January report that traditional
utilities have lost less than 1 percent of their typical electricity load to
solar electricity producers but that the trend will grow as solar costs
plummet.
"Investors have no desire to sit by and watch as
disruptive forces slice away at the value and financial prospects of their investment,"
the institute said in the report.
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