Ahead of schedule, Illinois begins value of distributed generation study

Currently, residential customers who put electricity back onto the grid in Illinois are paid retail rates while non-residential customers get a $250 rebate per kW of rated capacity. The 2016 energy law calls for switching to a more nuanced payment formula, one that takes into account local demand and grid congestion, when customer generation equals 5 percent of a utility’s peak demand.

The volume of interconnection applications in the two years since the act was signed into law suggests the state may meet that threshold sooner than expected. Since it will take months of study to determine the new, more complex payment structure, regulators initiated the process this month with the first in a series of stakeholder workshops.

“Illinois is going from having no community solar to being a leading state very, very quickly. We will need to determine the value of solar to the grid”, said David Kolata, executive director of the Illinois Citizens Utility Board.

The law requires the Illinois Power Agency to buy renewable credits from about 400 MW worth of community solar projects by 2030. The projects are not likely to be evenly distributed, which could lead to congestion on parts of the grid as the state nears its distributed generation goals. The hope is that the new, more advanced payment structure will discourage that problem.

Scott Vogt, vice president of energy acquisition for ComEd, the state’s largest electric utility, said the community solar market for Chicago is more robust than he had envisioned. The company and developers are still sorting out how to prioritize projects.

“We seem to have managed the flood of interconnection applications,” Vogt said. ​“But actually, figuring out which projects are going to get built and which ones are not, that will impact an awful lot of the agreements.”

Dan Nordloh, executive vice president of EnSync, a distributed energy resource developer, said the Future Energy Jobs Act is one of the more complex programs the company has encountered, but it is well considered.

“I think the program makes a ton of sense,” Nordloh said. ​“They are taking into consideration that distributed energy resources will be part of the portfolio of generation going forward.”

The Illinois Commerce Commission isn’t required to start calculating the new tariff until after community solar reaches 3 percent of peak demand. The state isn’t there yet but the pace of applications suggests it will arrive soon.

“It’s a good problem to have,” Kolata said.

The new rate paid by utilities for community solar power and other customer generation will vary by location and could be higher or lower than the current flat rate depending on the site. Existing customers will be grandfathered in to the current rates and do not need to switch over unless they choose.

Similar conversations are happening in New York, California, and a handful of other states, but no state has made a definitive valuation yet. In 2016, Minnesota adopted a voluntary ​“value of solar” approach for determining how community solar customers are paid.

In February, Illinois regulators published an initial white paper on the value of distributed resources and solicited comments from stakeholders. A second paper will be released in the next few months, followed by more workshops.

Information about the study and future workshops will be posted on the Illinois Commerce Commission’s website.

Clarification: This story has been updated to clarify that Illinois’ initial community solar payments for non-residential projects consists of a $250 rebate per kW of rated capacity.