On September 29, 2017, the Illinois Power Agency (IPA) released its Draft Long-Term Renewable Resources Procurement Plan (the Draft Plan). The Draft Plan has been released for comment pursuant to Section 16- 111.5(b) of the Public Utilities Act and Sections 1-56 (b) and 1-75(c) of the Illinois Power Agency Act as recently modified by Public Act 99-0906, which went into effect on June 1, 2017.
The Draft Plan sets out the procurements and programs that the IPA has proposed in order to meet the Renewable Portfolio Standard (RPS) requirements contained in Section 1-75(c)(1) of the Illinois Power Agency Act, including the Adjustable Block Program and the Illinois Solar for All Program. This post provides a summary of the statutory process and a brief overview of the Adjustable Block Program (ABP) as presented in the Draft Plan, but does not contain detail on other elements of the plan, including competitive procurements, the Illinois Solar for All Program, or the Community Renewable Generation Program. For more details on these elements of the plan, please refer to the Draft Plan here.
Statutory Process
The IPA is accepting public comments on the Draft Plan for 45 days. Comments must be submitted to Mario Bohorquez, Planning and Procurement Bureau Chief, at mario.bohorquez@illinois.gov by November 13, 2017.
In addition to accepting public comments on the Draft Plan until November 13, 2017, the IPA will host three public hearings to accept in-person public comments. The dates and locations of these meetings are as follows:
- Thursday, October 26, 2017, 3:00 pm – 4:30 pm CT: Illinois Commerce Commission Springfield Office, 527 East Capital Ave, Springfield, Illinois. Hearing Room C.
- Tuesday, October 31, 2017, 10:00 am – 12:00 pm CT: Illinois Commerce Commission Chicago Office, 160 North LaSalle Street, Chicago, Illinois. Room N808.
- Friday, November 3, 2017, 3:00 pm – 4:30 pm CT: MidAmerican Moline Customer Office, 716 17th Street, Moline, Illinois.
The IPA has 21 days following the end of the 45-day comment period to revise the Draft Plan and to file the Plan with the Illinois Commerce Commission (ICC). Based on the timeline presented by the IPA, April 3, 2018 is the deadline for the ICC to enter its order confirming or modifying the Plan. Please refer to the IPA Cover Letter and Hearing Notice for a full overview of the statutory deadlines and timeline.
Adjustable Block Program Overview
The Adjustable Block Program (ABP) features capacity-based blocks set at pre-determined prices for 15-year REC contracts. Key elements of the ABP model include the following, which are detailed in turn:
- Project Eligibility
- Program Administration & Application
- Block Structure & Transition between Blocks
- REC Target & Allocation
- Pricing
- Contract Payment Terms
- Performance Assurance & Delivery Requirements
Project Eligibility
There are two types of “new” projects that are eligible for the ABP. “New” is defined in the Draft Plan as “energized on or after June 1, 2017”.
The two project types are:
- Photovoltaic distributed renewable energy generation devices (i.e., DG solar); and
- Photovoltaic community renewable generation projects (i.e., community solar)
DG solar must be Illinois-sited and interconnected, behind-the-meter, and less than or equal to 2,000 kW AC. Refer to Section 2.5.1.1 of the Draft Plan for full project eligibility requirements.
Section 6.12.1 of the Draft Plan sets forth additional technical system requirements, including system documentation and metering requirements.
Program Administration & Application
The IPA will conduct an RFP for a Program Administrator to run the day-to-day operations of the Adjustable Block Program. The Program Administrator responsibilities will include program and contract management, application review and approval, providing program information for the public, and more.
Participation in the ABP “will take place through, and conditional upon, an Approved Vendor process” proposed by the IPA. Approved Vendors will be required to meet certain criteria and agree to certain terms set forth in the Draft Plan. The use of Approved Vendors will ensure program efficiency and protect Illinois consumers from “bad actors”.
Approved Vendors will submit projects bundled into batches of at least 100 kW and up to 2 MW. Once an Approved Vendor has successfully submitted five batches, the minimum size of a batch for that Approved Vendor will increase to 250 kW. However, the IPA sets forth special exemptions for minority-owned and female-owned businesses. For each project, there will be a non-refundable application fee of $10 per kW, not to exceed $5,000.
Once approved, each batch will result in one contract with one utility. That is, a batch of systems will be contracted with one utility on a portfolio basis. However, the price for the RECs for each system within a batch will be based on the price available within the applicable block on the date of the submittal (see sections below for more on blocks, categories, and pricing). In addition to the non-refundable application fee, there are collateral requirements. See below for information regarding contracting credit requirements.
Project Development Timeline and Extensions
It is not required that projects be energized or interconnected at the time of application. However, all projects will be subject to the following timelines and extensions (based on the contract execution date):
- DG projects: one year to be developed and energized
- Community solar projects: 18 months to be developed and energized and to demonstrate that they have sufficient subscribers
The IPA sets forth certain permissible extensions under Section 6.15.2.
Block Structure & Transition between Blocks
Each block will be for a specified quantity of nameplate capacity with a specific REC price. When a block reaches its subscription capacity, projects will be eligible for the next block and its block price.
For each Block 1 as summarized in the table below, all projects submitted within 60 days of the program opening date will be included in that Block 1, regardless of subscription to the block.
For subsequent blocks, each block will be held open for 14 days after the block is fully subscribed. The IPA will announce when a block has been filled and when the closing date will be.
REC Target & Allocation
The initial REC target for the ABP is to have 1,000,000 RECs delivered annually by the end of the 2020-2021 delivery year (i.e., May 31, 2021). Based on a blended 17% capacity factor, this amounts to roughly 666 MW of new photovoltaic generation. However, the IPA notes in its Draft Plan that this goal is not a cap and that, subject to demand and budget constraints, there is potential for additional capacity.
The blocks will be divided into two groups by service territory/geographic category and then further allocated by project category as follows:
Block Groups
- Group A: for projects located in the service territories of Ameren Illinois, Mt. Carmel Public Utility, and rural electric cooperatives.
- Group B: for projects located in the service territories of ComEd, MidAmerican, and municipal utilities.
Project Category Allocations
Section 1-75(c)(1)(K) of the Act requires a 25% each allocation for four categories:
- DG PV systems less than or equal to 10 kW (“Small systems”);
- DG PV systems greater than 10 kW and up to 2,000 kW (“Large systems”);
- PV community solar; and
- remainder to be allocated by the IPA.
Since it is too soon for the IPA to appropriately allocate the “remainder” category in any other manner, the IPA will distribute the 25% remainder amount evenly, for an allocation of 33.3% in each category 1-3. The IPA will revisit, review and reallocate the 25% remainder amount as needed in the Plan Update.
Accordingly, the 666 MW allocation is summarized by the IPA as follows:
Illustrative Block Opening Volumes (MW)
Capacity Factors
The IPA set a 16.4177% capacity factor for fixed-mount systems and a 19.3149% capacity factor for tracking systems. Accordingly, the estimated REC production would be as follows:
- Fixed-Mount Systems: 21 RECs over 15 years per 1 kW AC
- Tracking Systems: 25 RECs over 15 years per 1 kW AC
Pricing
The IPA adapted its REC Pricing Model from the CREST model developed by the National Renewable Energy Laboratory (NREL). The IPA modified the CREST model’s “input assumptions and post processing of the results.” IPA cautions in its Draft Plan that the prices summarized in the table below “should be viewed as preliminary in nature and not necessarily the prices that will be offered once programs launch, and parties should not take actions in reliance on the availability of these preliminary proposed incentive levels.” Parties can review, explore and comment on the data used, assumptions made, and the REC Pricing Model itself through the public comment process.
Block Group REC Prices ($/REC)
For systems in the Large DG PV and Community Solar categories, the IPA set a base price for each category at the >500 kW – 2,000 kW level with adders to differentiate the price for RECs from different sized systems, as summarized above. The IPA proposes these adders in lieu of sub-dividing project categories by project size or type. Adders are discussed in further detail in Section 6.5 (Tables 6-3 and 6-4) of the Draft Plan.
As shown in the table above, REC prices will step down by 4% in each block after Block 1. However, the IPA will monitor performance during the blocks and may modify the price step-down based upon the speed at which each block is filled.
Contract Payment Terms
For systems that are accepted into the ABP with an executed contract for 15 years of REC deliveries, payment will be made as follows:
- Full Prepayment for DG systems of no more than 10 kW, paid “at the time that the facility producing the [RECs] is interconnected … and energized.”
- 5-Year Payment Term for systems larger than 10 kW and community solar projects, with 20% paid at the time of interconnection and energization and the remaining portion “paid ratably over the subsequent 4-year period.”
The standard for “energized” as it applies to contract payment is the “completion of the interconnection approval by the local utility and the registration of the system in GATS or M-RETS so that generation data can be tracked and RECs created.”
Performance Assurance & Delivery Requirements
The Draft Plan sets forth certain credit and delivery requirements to manage performance over the life of the contracts. The Approved Vendor will be required to post collateral equivalent to 10% of the total contract value when each Batch’s contract is approved.
The collateral amount will be maintained for the life of the batch contract, but can be reduced in the later years of the contract when the collateral amount exceeds the remaining value of the contract. This requirement will be maintained at the portfolio level, not the individual system level, to manage the risk of systems that under-perform or have other issues, balanced against projects that over-perform. Under certain conditions, failure to deliver RECs will result in the utility drawing on the collateral to be compensated for undelivered RECs.
Next Steps
SRECTrade intends to participate in the continued statutory process set forth above, and plans to participate in the ABP as an Approved Vendor in a capacity similar to its role in the SPV and DG procurements.
The IPA issued an Errata on the Draft Plan on 10/06/17, which is available here. The Block Group REC Prices ($/REC) table in this post has been updated to reflect these corrected prices.
