October 06, 2020
Illinois Starts Planning for Life After Net Metering
Illinois is at an energy crossroads. In the coming months, several regulatory decisions could determine whether the state’s small-scale solar and battery storage market wanes or continues to grow. The outcome will shape Illinois’ energy grid of the future.
By Jordan Graham, Policy Intern
At issue is the price that electric utilities pay future owners of small-scale solar arrays, batteries, and other distributed energy resources (DERs) for the value those systems provide to the electric distribution grid. Illinois has used a net metering policy to compensate solar customers for years, but what comes next after this familiar, foundational policy expires?
Compensate fairly, and ownership of rooftop solar and behind-the-meter battery storage likely will continue to increase.
Compensate fairly, and ownership of rooftop solar and behind-the-meter battery storage likely will continue to increase. Compensate unfairly, and Illinois’ nascent DER market will likely squander the momentum it gained since passage of Illinois’ landmark 2016 clean energy legislation, the Future Energy Jobs Act (FEJA).
Last Friday, the Environmental Law & Policy Center, in collaboration with Vote Solar and the Natural Resources Defense Council, filed testimony with the Illinois Commerce Commission in an investigation called to determine the rebate value that Ameren Illinois will pay to new DER owners in its service territory of 1.2 million customers. The outcome of the investigation – how that value is calculated – will not only impact Ameren’s customers, but could also inform how ComEd develops its own DER compensation scheme in Northern Illinois.
But the case also presents a different opportunity. The Ameren investigation gives Illinois a pivotal chance to continue to make good on some of the 2016 FEJA legislation’s visionary intentions: to expand clean energy access, reduce harmful pollution, and save customers money. By incrementally transitioning the state’s electricity system to a transactive market, customers, utilities, and energy suppliers can compete and cooperate to provide a full range of energy services.
This vision is attainable, but Illinois regulators must require thoughtful, holistic methodologies for calculating the “value of DER.” Calculations must recognize the full range of tangible benefits, including power generation, avoided transmission and distribution capacity, reduced line losses, improved grid resilience, ancillary grid services, and environmental benefits. In parallel, Illinois utilities must follow the lead of other states and implement transparent grid planning processes to reveal where customer- and third-party-owned DER can provide grid services in exchange for fair compensation.
ELPC & allies testimony presents a comprehensive and forward-looking blueprint for the relationship between grid planning, DER value, and DER compensation. Our witnesses also present a series of recommendations on how utilities might transition smoothly from net metering to a more sophisticated future where DERs are compensated based on their locational and temporal value.
Our recommended framework is rooted in the technological capabilities of DERs and based on analytical methodologies that have proven successful and market-compatible in other U.S. states with growing DER markets. When DER services are accurately priced, they communicate a strong market signal that has the potential to stimulate investment in small-scale solar and battery storage, and it can help concentrate development on portions of the grid that have the greatest need for DER services. It is this mechanism that empowers customers to compete and cooperate in markets historically monopolized by utilities.
On the other hand, witnesses highlight their concerns that Ameren does not currently have in place a distribution planning process that would reasonably reveal DER value. ELPC therefore recommends that Illinois regulators take a deliberate, data-driven, and incremental approach to the transition from net metering to a more sophisticated framework. Such an approach would help minimize any disruption to Illinois’ nascent DER market and ensure that Ameren’s customers and its grid benefit from the company’s transition.
Illinois is not the only state in the Midwest that is currently considering how to maximize and optimize DER on its grid while evaluating its DER compensation policies—Minnesota, Michigan, and Indiana are examples of other states at various stages of a similar transition. Illinois’ DER investigation – although in its early stages – could help set the tone regionally in this emerging area and create a model that unlocks the power of DER as a climate solution.