The Illinois Renewable Portfolio Standard (RPS) has aggressive renewable energy goals. The RPS requires Investor-Owned Electric Utilities (EUs) and alternative retail electric suppliers (ARES) to have 25% of their electricity come from renewable resources by 2025, so why don’t we see a viable SREC market? Part of the story can be tied to anemic SREC incentives.

Within the 25% renewable requirement, 6% of the renewable energy procured from EUs and ARES must come from solar sources, with percentages starting lower, reaching 6% by 2016, and holding until 2025. This latest addition came into effect under HB 6202, the details of which can be seen here. The legislation goes into effect in June 2013, with incremental requirements leading up to 6% in June 2016. In order to meet this requirement, EUs and ARES are able to purchase Solar Renewable Energy Credits (SRECs) from private individuals and businesses throughout the mid-West and mid-Atlantic regions- not just from within Illinois.

A unique aspect of the Illinois RPS revolves around a forced alternative compliance payment (ACP), which states that ARES must meet 50% of their renewable quota by paying an ACP. This effectively divides the potential REC market in half as tradable RECs will only be utilized for 50% of the renewable quota. EUs and ARES can buy RECs from the PJM-GATS or M-RETS (Midwest Renewable Energy Tracking System) tracking registries, or just pay the ACP fine.

It’s unlikely that the Illinois market will be attractive for the following two reasons:

1) The ACP currently covers all renewable fuel types. Current ACP rates for June 1, 2011 through May 31, 2012 are estimated to be approximately $0.058 per MWh, with a maximum value of $2.158/MWh. ACP rates vary by utility territory and more information can be found here. There isn’t a separate “carve-out” for solar with a higher ACP rate. This means that REC values are much lower than necessary to incentivize the solar market with RECs alone. For comparison New Jersey’s RY2012 Solar ACP (SACP) is $658 per SREC.

2) Utility companies may opt to meet their full solar requirement by paying the relatively low ACP fine for not complying, rather than meeting the other “optional” 50 % requirement by paying for SRECs.

Other options for Illinois sited solar systems:

Illinois systems are eligible to sell SRECs in Pennsylvania if their facility is located in an area served by Commonwealth Edison (ComEd) utility. Currently, selling their SRECs into the PA market provides the highest value for SRECs coming from IL (ComEd) facilities, with pricing in August 2011 at $25 per SREC. Solar systems that are located in all of Illinois were previously able to sell SRECs into the D.C. market, but recent legislation has made that option no longer possible.

Other incentives have been put in place to help catalyze the Illinois solar market, though several lack the necessary funding to allow for widespread solar adoption. The Illinois Solar Energy Association runs an annual Renewable Energy Credit Aggregation Program (RECAP) that allows qualified systems to sell SRECs to the ISEA at a fixed rate of $200/SREC. Unfortunately, this program has exhausted its funding and is only accepting wait list applications.  The state of Illinois also offers a special property tax assessment for properties with solar systems. Finally, the state Solar and Wind Rebate program offered a 30% rebate to residential and commercial systems and a 50% rebate for non-profit or commercial systems before closing its latest round of funding in December 2010.