Illinois needs batteries. Will a new incentive program help?

Illinois has built out large amounts of renewables in the past decade to reach its mandate of 100% clean energy by 2050. So far, though, it has lagged on building battery storage, which advocates say is especially necessary now as data center development drives up energy demand.

Last fall, Illinois passed an ambitious law requiring 3 gigawatts of batteries on the state’s grid by the end of 2030. In August, the Illinois Power Agency, which procures electricity on behalf of the state’s large utilities, ran an auction-type proceeding to hand out incentives for companies promising to develop these batteries.

The results were mixed. Statewide, deals were made for 600 megawatts of storage — less than two-thirds of the target that the law set for the initial procurement. The state sought to get 588 MW of storage in the utility ComEd’s territory in northern Illinois, but the procurement ended with just one company planning to build an 80-MW battery project there. In utility Ameren Illinois’ territory, which stretches over much of the state, three developers’ bids were chosen to supply 520 MW.

Advocates said that while they were disappointed in the outcome in northern Illinois, the results overall were encouraging. James Gignac, Midwest policy director for the climate and energy program at the nonprofit Union of Concerned Scientists, called it ​“a strong start” that indicates ​“there is interest in developing energy storage in Illinois.” He noted that the new deals will increase Illinois’ total energy storage manifold: The state currently has only 102 MW, according to energy data firm Cleanview.

The Illinois Power Agency is collecting feedback from developers through Oct. 28, with the goal of improving the next procurement process. Already some important takeaways have emerged that Illinois can use to entice more developers to build battery storage over the next few years.

“I believe storage developers see Illinois as a strong market for new utility-scale storage, especially with our policies in place and state agencies focused on expanding batteries’ role on the power grid,” Gignac said.

A nationwide push for grid batteries

Across the country, states are turning to battery storage to bank renewable energy that is abundant when the wind is blowing and the sun is shining. This helps meet clean energy goals and spiking demand.

A few states — notably Texas with over 18 GW and California with over 16 — have already installed large amounts of energy storage on their grids. Indiana tops the list of Midwestern states with 587 MW, over five times Illinois’ capacity.

Overall energy storage has increased dramatically on U.S. grids, from 4.7 GW total in 2022 to over 50 today, according to federal data, but that surge took time to ramp up.

Massachusetts, for example, launched an energy storage initiative in 2015 and an official target in 2018, but progress was slow until an uptick the past couple years. The state passed legislation in 2024 and the governor issued an executive order this year to boost battery deployment.

New York, like Illinois, has a goal of 3 GW of utility-scale storage on the grid by 2030, as part of its goal of getting off fossil fuel-fired electricity by 2040. New York has 288 MW of storage installed, according to Cleanview, and in September the state secured promises for 950 MW using the same incentive mechanism that Illinois has employed. Two of the four companies chosen in Illinois’ procurement are New York-based.

In the regional grid known as the PJM Interconnection, which handles the flow of power in parts of 13 states, including New York and the ComEd territory in Illinois, long delays to connect batteries to the system have been a significant barrier to deployment.

Brett Sproul leads regulatory work in Illinois for Advanced Energy United, a national industry organization whose members include renewable and battery storage companies. He said there are multiple developers that could build batteries in Illinois by 2030, ​“however because of the interconnection queue at PJM there’s a lot of uncertainty” as to whether those projects could actually start storing power by the deadline.

“That uncertainty led to some cold feet,” he added.

How to improve procurement

States like Illinois can have a hard time convincing developers to build batteries, because of the structure of their energy market.

In states with vertically integrated energy markets, utilities can include batteries in their plans to meet energy demand, and with the approval of state regulators, charge customers for the cost. But in states such as Illinois, New York, and Ohio that have ​“restructured” markets where generators compete to get contracts to supply the grid, a different model is often needed to incentivize developers to invest in batteries and sell their storage services on the open market.

In Illinois, that’s taken the form of an incentive program under the Clean and Reliable Grid Affordability Act signed into law in January that uses ​“indexed storage credits” to guarantee a certain amount of revenue to storage developers.

During the bidding process that culminated Aug. 26, storage developers stated how much payment they would need in order to build batteries connected to the grid. If regional wholesale energy prices available to battery owners end up being below those amounts, the utilities will make up the difference — using customers’ funds to pay the storage companies. If wholesale prices are higher, the storage company will pay excess funds back to the utility.

While the model means battery developers could feasibly earn less than they would without participating in the program, the guarantee of a certain revenue level is crucial to jumpstarting the state’s still-new industry, experts said.

The indexed storage credit mechanism appears to be working for storage developers ​“given that we had multiple projects bidding into the procurement,” said Gignac. ​“The whole point is to have competitive bidding, encouraging developers to reduce their costs” while also providing them certainty they’ll get a specific amount of revenue.

But based on the feedback received this fall, advocates and agency officials hope to implement changes that will lead to more battery contracts. The first procurement had strict rules set by the state legislature, in an effort to make sure the process happened quickly. The agency has more flexibility to set the terms for procurements in 2027 and 2028.

The first procurement was likely hampered because only stand-alone storage projects were eligible. This could change in the next round, opening the incentives for solar paired with storage, which ​“is a really … thriving market now,” Sproul said. ​“It’s just the way tides are turning.”

The state could also shift where it aims to deploy storage.

During the August proceeding, the Illinois Power Agency sought to get slightly more battery storage on the PJM grid than the grid that covers Ameren’s territory, operated by the Midcontinent Independent System Operator, or MISO.

In its questionnaire seeking feedback, the agency asked whether that should change, potentially allowing the 3-GW overall goal to be met with a higher portion of storage in the MISO grid, which had more success in the initial procurement.

Advocates said that while it’s important to get batteries installed across the state, the state’s clean energy goals will be served even with a higher concentration of storage in central and southern Illinois.

“I’m just absolutely delighted we’re procuring battery storage,” said Jen Walling, CEO of the Illinois Environmental Council, which represents more than 150 environmental organizations statewide. ​“The more we can invest in deployment of renewables and storage, the more likely it is we can reduce pollution for Illinois communities and reduce our climate impact.”