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Business demands stable renewable energy policy from state and federal governments

The Renewable Energy Standard debate in Illinois spotlights the difficulty of policy uncertainty in state capitals—an uncertainty that extends to Washington, D.C.

By Kevin Borgia

On a cold day in February, a group of clean energy companies joined labor groups, environmentalists, faith groups, and Chicago Mayor Rahm Emanuel to announce the formation of the Illinois Clean Jobs Coalition, a group dedicated to fixing the state's broken Renewable Energy Standard law, expanding energy efficiency opportunities and pricing carbon dioxide emissions.

"We're on the doorstep of a great opportunity for clean energy," said Emanuel, a former White House Chief of Staff under President Barack Obama. "Illinois is not putting wind power to use like other states," he proclaimed, referencing data showing Oklahoma had recently passed Illinois as the #4 state for installed wind capacity.

Much of the reason for the drop in national rankings for Illinois stems from the troubles facing the Renewable Energy Standard (RES).

Illinois' RES law has caused headaches for the renewable energy sector since at least 2009, when other changes in the state's power laws rendered the renewables statute unable to achieve its goals. The industry and its advocates have argued for technical changes that would get the RES law back on track, but the policy has been caught up in broader energy debates in the state capital for years.

In many ways, the delay is similar to the political hurdles that have stymied consistency of the production tax credit (PTC) at the federal level.

It's a well-known refrain for the industry: PTC instability creates financial difficulties for wind sector growth. But federal instability is further complicated when states throw in their own wild cards. Looking at recent instability in states like Ohio and Illinois, it sometimes seems like building a wind farm can be the result of the stars aligning rather than diligent development work.

Even if the Illinois General Assembly does act to fix the RES this year, it's unlikely the law will be passed in time for the industry to take advantage of the current PTC cycle. As a result, developers interested in the Illinois market are forced to closely monitor political discussions in Springfield and Washington instead of working to build the best wind and solar projects.

Harmonizing Illinois policy with the feds isn't exactly easy. While the wind industry saw relatively strong growth in 2013 and 2014, exactly zero wind farms were completed in Illinois during that time because of the broken RES.

The problem stems from unintended complications of deregulating the state's electric market and the complexity of the RES law itself. When lawmakers fully deregulated Illinois' power market in 2010 and opened it up to "municipal aggregation", entire cities and towns began to leave their incumbent utilities for competitive electric suppliers.

Within just a few years, 60 to 90 percent of utility load shifted to alternative retail electric suppliers (ARES). And while many ARES continue to supply renewables to consumers, the companies generally source their green power through one to three-year REC purchases. For utilities, the risk of further load-shifting is so great that the Illinois Power Agency (IPA) directs the utilities to sign one-year REC supply agreements. These short contract terms are far shorter than the terms needed for new builds.

Meanwhile, the IPA has gathered over $100 million in alternative compliance payments (ACPs) via a different RPS mechanism, but spending those funds is restricted by different flaws in the law. Additionally, the state's severe budget crisis means that "sweeps" of those funds is increasingly likely in the coming months.

Into this debate comes the Illinois Clean Jobs Coalition and their ally, Rahm Emanuel. The group seeks to increase the RES to 35 percent by 2030, scrap the convoluted statute and replace it with a single compliance mechanism that eliminates the risk of long-term planning and purchasing. The proposal would also divert ratepayer funds from state control and prevent sweeps.

A recent study by the Union of Concerned Scientists indicates that the proposal at hand will create over 2,500 jobs and foster as much as 11,000 megawatts of renewable generation. It's a fantastic opportunity for the industry and for the people of Illinois, but it requires legislators to take action on a proposal that has been on the table for years.

Now it's time for the General Assembly to act.

Kevin Borgia is a public policy manager for Wind on the Wires (www.windonthewires.org), a nonprofit wind energy advocacy group working in nine Midwest states.