Renewable Portfolio Standard

Note: Public Act 102-0662, the Climate and Equitable Jobs Act (CEJA), enacted in September 2021, increased the RPS to require 50% renewable energy by 2040. This law also says that it is the policy of the state to rapidly transition to 100% clean energy by 2050.

Under CEJA, the 25% target by 2025 remains in place, and will increase by at least 3% each year from 2025 to 2030 until reaching 40% in 2030. Thereafter, the Illinois Power Agency will determine the specific increase each year, attempting to procure 50% by delivery year 2040, taking into account energy demand, other energy resources, and other public policy goals.

Illinois’s renewable portfolio standard is met through state procurement of RECs through the Illinois Power Agency (IPA). RPS requirements apply to all retail electric customer load, including that supplied by alternative retail electric suppliers (ARES), but not customers served by municipal utilities or electric cooperatives.

Illinois Power Agency

The Illinois Power Agency Act, enacted August 2007, required large investor-owned electric utilities (EUs) and alternative retail electric supplies (ARES) to source 25% of eligible retail electricity sales from renewable energy by 2025. Electric cooperatives and municipal utilities are exempt from renewable portfolio standard (RPS) requirements.

The Act also created a new state government agency, the Illinois Power Agency (IPA), to develop electricity procurement plans for large investor-owned electric utilities (EUs) and broker all contracts between utilities and suppliers to ensure “adequate, reliable, affordable, efficient, and environmentally sustainable electric service at the lowest total cost.” The only EUs that were subject to the IPA procurement process were ComEd and the Ameren Corporation companies (AmerenCILCO, AmerenIPL, and AmerenCIPCO). (MidAmerican elected to have the IPA procure power and energy for a portion of its Illinois jurisdictional load beginning in the 2016-2017 Planning Year, but it was under no obligation to have power or energy procured by the IPA in future years.)

H.B. 1865, enacted in August 2011, allowed multi-jurisdictional utilities with less than 100,000 Illinois customers to request a procurement plan from the IPA. Such utilities would be subject to the renewable portfolio standard (RPS) requirements.

Eligible Technologies

Eligible renewable energy technologies included wind, solar thermal, solar photovoltaics (PV), dedicated crops grown for energy production, untreated and unadulterated organic waste biomass, trees and tree waste, in-state landfill gas, biodiesel, hydropower that does not involve the construction of new dams or significant expansion of existing dams, “other such alternative sources of environmentally preferable energy,” which may include (among other resources) waste heat from industrial processes and anaerobic digestion. Several means of energy production were specifically excluded from standard eligibility: the incineration of tires; garbage; general household, institutional and commercial waste; industrial or office waste; railroad ties; utility poles; landscape waste other than trees and tree waste; and construction or demolition debris other than untreated and unadulterated waste wood. 

In order for a system to qualify under the distributed generation requirements specified below, systems must have been 2 MW or less; powered by wind, solar thermal, PV, biodiesel, biomass, tree waste, or hydropower; interconnected at the distribution system level; and is located on the customer side of the customer’s electric meter and is primarily used to offset that customer’s electricity load.

Requirements

EUs and ARES were required to source 10% of eligible retail electricity sales from renewable energy by 2015 and 25% by 2025 and each year thereafter, with annual escalations through 2025. 

Process

The IPA plans and administers the competitive procurement processes that result in bilateral agreements between the utilities and wholesale electric suppliers. The IPA issues a Request for Proposals after the Illinois Commerce Commission (ICC) approves the IPA’s procurement plan. The procurement plans must include procurement of cost-effective renewable energy resources to meet annual requirements.  The IPA and a third-party consultant “Procurement Administrator” analyze and select winning bids, and an independent monitor oversees the process.

For more information on IPA Request for Proposals, click here.

Compliance

The IPA procures renewable energy to satisfy the requirements of EUs.

The renewable obligation for ARES was measured as a percentage of the actual amount of metered electricity (megawatt-hours) supplied by the ARES in the compliance year, as reported for that year to the ICC. ARES must meet at least 50% of their renewable energy obligation through alternative compliance payments (ACPs). The price of ACPs is calculated by averaging the REC prices in the most recent IPA REC procurement; each ARES’s ACP is different, based on the utility service territory in which it operates. The remaining 50% of an ARES’s obligation may be met with ACP payments or by procuring renewable energy or renewable energy credits (RECs). The ACPs submitted by ARES is remitted directly to the ICC, which forwards that money to the IPA’s Renewable Energy Resources Fund (RERF) to be used for the purchase of RECs. For more information, see the ICC website “Renewable Portfolio Standards For ARES.” 

According to S.B. 2841 passed in 2016, for the delivery years beginning June 1, 2017 and June 1, 2018, an alternative retail electric supplier need not make any alternative compliance payment to meet any portion of its compliance obligation. Starting from June 2017, all alternative compliance payments by alternative retail electric suppliers shall be remitted to the applicable electric utility.

For compliance years ending on or after May 31, 2020, ARES do not have an obligation to procure renewable energy resources. ARES customers pay a non-bypassable RPS charge on their electric bill that is used to supply the overall RPS budget for their applicable electric utility.

REC Verification

The PJM Environmental System Generation Attribute Tracking System (PJM-GATS) or the Midwest Renewable Energy Tracking System (M-RETS) are used to independently verify the quantity and source of renewable energy resources procured. 

Cost Mitigation Measures

Renewable energy procurement is limited to “cost-effective” resources. The increase in cost to retail customers from meeting the RPS cannot exceed $0.00458 per kilowatt-hour (kWh) for Ameren, $0.00502 per kWh for ComEd, and $0.00263 per kWh for MidAmerican. The cost of procuring renewable resources also must not exceed benchmarks based on market prices for renewable energy resources in the region, where the IPA procurement administrator will determine the benchmarks.