On May 30, the Illinois legislature adopted a partial fix to existing state law that will result in a boost for solar energy in the state. Once signed by the Governor, HB 2427 sets out a process for the Illinois Power Agency (IPA) to acquire up to $30,000,000 of solar renewable energy credits (SRECs) using money that has already been collected.
The IPA has considerable leeway in designing the procurement but they are directed to procure SRECs from new or existing PV, including but not limited to distributed generation. Of the SRECs from distributed generation, 50% of those should come from projects smaller than 25 kilowatts nameplate capacity. The SRECs will be purchased in in contracts of not less than 5 years.
The amount of solar energy that will result from this procurement depends on a number of factors. The IPA has discretion to allocate among new vs. existing generation and among wholesale/utility vs. distributed generation. However, they are directed, to the extent possible, to allocate 50% of the procurement of distributed PV resources to projects of less than 25 KW installed capacity.
Different levels of generation will bid into the procurement at different levels. In general, it is true that smaller projects have higher costs per watt, and thus would require higher incentives to get done. Thus, we expect the market clearing price for the <25 KW market to be higher than for large commercial DG projects or utility scale, wholesale projects.
The price bid into the procurement will determine how much new generating capacity comes online due to the procurement, but here is a quick "back of the envelope calculation" that shows how if the market were equally split between a >25 KW market with an SREC price of $50 and a <25 KW market with an SREC price of $100, the procurement would result in 75 MW of new generating capacity. The analysis is highly sensitive to changes in allocations, terms of contracts and market clearing price.
|Term of Contracts||5|
|For <25 KW||50%|
|<25KW Total REC Purchases||$3,000,000.00|
|Assumed SREC Price||$100|
|# of SRECs Purchased||30,000.00|
|KWh to Produce Purchased SRECS||30,000,000|
|KW to Produce Required KWh||25,000|
|MW to Produce SRECs||25|
|>25KW Total REC Purchases||$3,000,000.00|
|Assumed SREC Price||$50|
|# of SRECs Purchased||60,000.00|
|KWh to Produce Purchased SRECS||60,000,000|
|KW to Produce Required KWh||50,000|
|MW to Produce SRECs||50|
The Illinois Power Authority will be holding a workshop on the role of distributed generation in their regular 2015 Procurement Plan on June 12 (link to announcement). If Governor Quinn signs HB 2427, as expected, a "special procurement" process for PV resources would be initiated that would include a separate hearing.