June 1, 2012
Illinois

Money meant for wind, solar power loses steam as customers shift from utility giants

By Julie Wernau, Chicago Tribune reporter, www.chicagotribune.com 31 May 2012

By law, 25 percent of Illinois’ electricity must come from wind, solar and other renewable resources by 2025.

But as more municipalities elect to buy power from suppliers other than Commonwealth Edison Co. and Ameren Illinois, developers of renewable energy are losing confidence that their projects will be funded long term. Some have already given up on Illinois.

That’s because the customer base that was expected to help pay for renewable energy development through electric bills is shrinking.

When the first long-term renewable contracts were signed in 2010, 99 percent of residential customers in the Chicago region received their electricity from ComEd. But a year ago ComEd projected its customer base will erode by 35 percent by 2017, cutting significantly into its budget for renewable energy.

And the switching is occurring at a rapid clip. As of Wednesday, 100 municipalities statewide had moved their residents to alternative suppliers, and another 160 had passed measures stating they intend to switch. Even Chicago is considering a measure that would switch residents to alternative suppliers.

Former customers may return, and others may leave, and this volatility makes it difficult for the Illinois Power Agency, which procures energy on behalf of the utilities, to make long-term promises to wind and solar developers.

“If the monies available from the utilities are shrinking dramatically, that does not bring about a lot of confidence that any commitments made by ComEd or Ameren are going to be lived up to over the long term,” said Mark Pruitt, former Illinois Power Agency director and now an energy consultant.

Moreover, another small fund established in 2010 to buy renewable energy has never been used for anything other than to provide loans to cash-strapped state government. Alternative electricity suppliers pay into the fund.

Records show about $7.1 million was deposited into the fund in September 2010; by October, the state had borrowed $6.7 million.

“They took the money as soon as it showed up, essentially,” said Pruitt, who was the power agency’s director at the time. “It makes doing additional contracts very difficult, because in a short period of time you’re seeing a lot of instability in the amount of money available to support renewables.”

Gov. Pat Quinn’s office said Wednesday that the state has repaid what it borrowed.

Still, the power agency hasn’t been able to count on having a balance, so it has not used the money. Michael Strong, the agency’s chief legal counsel, said it plans to use the restored funds for their intended purpose.

The funding uncertainty has affected EDP Renewables North America, a Houston-based wind developer.

When Illinois laid out mandates for renewable energy in its Renewable Portfolio Standard, EDP began investing “like crazy” in Illinois, said Jeff Bishop, the company’s senior manager of government and regulatory affairs.

The company opened a regional office in Bloomington, Ill., and another in Chicago. By 2010, EDP Renewables spent $1.5 billion building wind farms in Illinois.

But over the last two years, with less money available for wind development in Illinois, EDP is investing elsewhere.

Last year, the company built a wind farm in Ohio; this year it’s building another in New York. EDP closed its office in Bloomington.

“For a company like ours, we need as much long-term revenue certainty as possible,” Bishop said. “We need to be able to lock in long-term contracts in order to sell our power. Currently, the way the renewable portfolio standard is structured, it makes it very difficult for us procure long-term contracts.”

Some renewable energy developers that signed 20-year contracts say they fear ComEd and Ameren won’t meet their obligations as they lose customers.

“We’ve seen a lot of these municipalities are switching their suppliers to the alternative electric suppliers, and what that does for folks who have long-term contracts is put those contracts in jeopardy,” said Craig Gordon, director of origination for Chicago-based Invenergy.

This summer, Invenergy’s 23-megawatt solar farm in LaSalle County will be the only solar project in Illinois flowing power to ComEd customers, under a contract struck in 2010. Invenergy’s adjacent Grand Ridge wind farm also contracts power to ComEd.

“When we have renewable energy flowing into the grid, we are providing low-cost, reliable energy to customers in the state, and that affords us the flexibility to reduce our reliance on forms of energy that are polluting. Consistently across ideological lines, the public supports more clean energy development,” said Barry Matchett, co-legislative director and policy advocate for the Chicago-based Environmental Law and Policy Center.

A fix for the funding woes, supported by the governor, is before the Illinois General Assembly, but the deadline for approval is Thursday. The fix is simple: Regardless of who provides electricity to consumers, they would pay for renewable procurement as a “wires charge.”

ComEd and Ameren deliver electricity regardless of where it comes from, and consumers pay for the electricity to be delivered in addition to paying for the electricity itself from whoever provides it.

The Illinois Power Agency would then procure renewable energy on behalf of all Illinois electricity customers from a budget that is reimbursed by consumers and not in danger of being a source of borrowing.

But the fix is attached to legislation that would pave the way for a $1.1 billion natural gas plant proposed by Nebraska-based Tenaska for Taylorville, Ill., near Springfield. Sources in the Legislature say the bill is unlikely to pass.

Illinois’ renewable energy law also lets the state meet its goals through renewable energy credits, which are cheap and work in the short term but don’t encourage new development. Those credits help existing wind and solar plants, not new ones.

Regardless of what happens in the Legislature, the Illinois Power Agency intends to continue to buy those credits, Strong said. Illinois already has a “robust” amount of renewable capacity, he said.

URL to article:  https://www.wind-watch.org/news/2012/06/01/money-meant-for-wind-solar-power-loses-steam-as-customers-shift-from-utility-giants/