Worried about grid reliability, state officials seek to boost renewables, energy storage

[December 20, 2024]  By Andrew Adams

When you flip the switch, the lights come on.

But in Illinois, after years of sweeping reforms to the energy industry and growing demand for electricity, that premise is coming into question.

Several experts – including those involved in crafting the state’s energy reform, current and former regulators, and those in the renewable energy industry – are warning that prices will spike this summer and rolling blackouts could become necessary in the coming years. That is, unless the state takes action to make sure enough electricity is available – in the right place and at the right times of day.

“If we don’t continue finding other ways of energy – making sure we can store it in some way – we’re going to see that supply and demand kind of thing,” Rep. Barbara Hernandez, an Aurora Democrat and sponsor of a bill to incentivize energy storage, told Capitol News Illinois. “We’ll see a lot of demand, but the supply will not be there and it’s going to create a lot of blackouts in our communities. But also, our families are going to be paying the price and we’re going to see an increase in utilities.”

Several factors contribute to the concern over the grid’s future. A growing number of data centers in the U.S. and in Illinois are demanding massive amounts of energy. The state’s fossil fuel industry is – by design – in decline. And backlogs at regional grid operators have delayed renewable electricity generation from coming online.

The state also isn’t bringing renewable energy online quickly enough, according to a lead sponsor of the Climate and Equitable Jobs Act – Gov. JB Pritzker’s marquee climate legislation that seeks to decarbonize the state’s electric grid by 2045.

“We in Illinois are behind on our goals for renewable generation,” Sen. Bill Cunningham, D-Chicago, told Capitol News Illinois.

Lawmakers, meanwhile, are hurriedly working to find solutions that could be rolled out quickly to keep electricity reliable and affordable.

A short lame duck legislative session tentatively planned for Jan. 4-7 could become an energy policy battleground with long-term consequences. But the tight timeline could cause the legislative process to drag into Springfield’s regular session as a new General Assembly is sworn in on Jan. 8.

Illinois’ renewable energy plan

In 2021, state lawmakers passed the Climate and Equitable Jobs Act, or CEJA, a sweeping regulatory reform that advocates hailed as a nation-leading effort to transition the state off fossil fuels while boosting the economy and protecting consumers.

But three years in, the state is struggling to keep up with its goals to bring new renewable energy online as fossil fuel plant owners reconsider their future in a state that’s looking to fully phase out carbon emissions by 2045.

Coal-fired electricity generation fell from 46% of the state’s portfolio in 2009 to 15% in 2023 due to tightening emissions regulations and economic pressures according to the U.S. Energy Information Administration. About one-third of the total drop in coal capacity occurred in 2022 alone.

Natural gas-powered generation increased over that period, reaching an all-time high last year, but those plants will also be subject to closure over the next two decades.

CEJA’s aim was to replace fossil fuels with renewables by incentivizing investment in wind and solar. But regulators now worry that the pool of money that funds that transition could soon fall short.

Illinois requires electric utilities to supply a minimum percentage of customer demand with renewable energy. The Illinois Power Agency purchases this electricity at “procurement events” using a complex system of financial instruments such as “renewable energy credits.” It tracks its progress through what’s known as the renewable portfolio standard, or RPS.

The RPS is funded by Illinois utility customers through a charge on their monthly bills. Utilities then use the money collected from this charge to purchase renewable energy credits.

The state’s next benchmark is to have 40% of electricity sales come from renewable sources by 2030. As of October, the RPS was less than halfway to meeting that mark, although there is still time for the state to back new developments to meet that goal.

IPA Director Brian Granahan said while the RPS’ funding is sufficient for now, it could fall short in the near future.

“We face substantial uncertainty past 2026,” Granahan told Capitol News Illinois.

The IPA’s most recent forecast shows the RPS facing a potential budget shortfall by mid-2027, based on its long-term renewable procurement plan. By 2039, the RPS has a projected budget shortfall of $3.13 billion dollars. This “uncertainty” over the future of the RPS budget has several causes, including forecasted increases in the price of renewable energy credits. Increased demand for electricity also contributes to higher projected costs in the RPS budget.

Energy storage

Illinois lawmakers, energy industry groups and consumer advocates are looking to address another well-established problem with renewable energy – its intermittent nature.

Because solar and wind generation cannot be turned on or off at times of high demand – like natural gas or coal plants – they often generate electricity at the “wrong” times of day. Solar, for example, stops generating electricity in the evening and at night, but the peak daily demand often comes as people return home from work.

“Not all megawatts are created equal,” Pruitt said. “A megawatt that’s delivered at 2 in the morning does not have the same value as a megawatt that’s delivered at 3 in the afternoon.”

One proposal would implement new incentives for building large-scale batteries at either the consumer or power plant scale to store electricity generated by renewables and make its availability more regular.

Bills from Cunningham and Hernandez would require state agencies to treat energy storage similarly to renewable energy. That includes authorizing the IPA to solicit energy storage developments and requiring the Illinois Commerce Commission and large utilities to develop plans for integrating storage into existing power systems.

Renewable energy groups and others interested in addressing climate change have urged quick action to prop up the nascent industry.

A study from Pruitt’s consulting firm – which was supported by several clean energy trade groups – found that “immediate action is required” to allow time for new energy storage to be built before existing power plants go dark over the next 20 years. That study also found that while there would be upfront costs for electric customers in the first few years, it would save money in the long term.

A Union of Concerned Scientists report from November recommended that Illinois act quickly to get at least 3,000 megawatts of storage online by 2030 to reduce the risk of forcing the state to import fossil fuel-generated energy from other states.

“Across all scenarios, Illinois requires substantial energy storage development to meet long-term CEJA decarbonization goals,” the report found.

Hernandez said she’d like to see such a bill move in the lame duck session. Cunningham echoed that sentiment but left the door open to the issue taking longer to resolve.

“It’s definitely something we’ll try to address in lame duck, but if not, it’s something that will be top of list in the regular session,” Cunningham said.

Pritzker pumped the brakes on a lame duck energy package in mid-December, telling reporters there “isn’t currently some bill that’s being put together” that would address a broad range of energy issues.

But the governor did signal support for energy storage legislation and a spokesperson later clarified Pritzker is aware of a smaller bill that is likely to come up in January.

“I think that would be an important topic for us to take up,” the governor said of battery storage.

Transmission lines are pictured in central Illinois. (Capitol News Illinois photo by Andrew Adams)

Moving electricity around

The complex process of moving electricity from one place to another, and the federal regulators who coordinate that process, have also complicated CEJA’s rollout.

When electricity is needed, it must be moved from a power plant, solar farm or storage facility to its end user – like a household or factory. As new generation projects come online, new transmission lines must be built, like roads going to and from a freshly developed neighborhood.

Most grid operators face major backlogs for approving new generation projects. As of April, the two grid operators in Illinois – PJM Interconnection and the Midcontinent Independent System Operator – have almost 600 gigawatts of generation capacity waiting to go online, according to a report from Lawrence Berkeley National Laboratory. That’s roughly equivalent to 600 nuclear power plants. These backlogs are due to a surge in interconnection requests over the past 10 years, leading to a slowdown in regulatory approvals for necessarynfrastructure upgrades, including transmission lines.

Nationwide, generation projects that came online in 2023 averaged nearly five years waiting in the queue, up from three years in 2015 and less than two years in 2008, according to that report.

Clara Summers – who manages the “Consumers for Better Grid” campaign for the consumer advocacy group Citizens Utility Board – said PJM’s interconnection queue is “particularly egregious,” leading to problems with the local electricity market.

“The market can’t work if the interconnection queue doesn’t work and it hasn’t for a while,” Summers said of PJM, which serves northern Illinois and much of the eastern United States. “That’s something that just fundamentally needs to be fixed.”

Electricity generation developers responded in a 2024 survey published by Columbia University’s Center on Global Energy Policy that PJM’s interconnection process makes other stages of development challenging, such as sourcing materials and financing.

The report suggested that federal regulators adopt reforms to generation development to ease interconnection, ranging from making it easier for new projects to be built at the site of retiring plants to reducing the requirements placed on energy generation developers before they’re allowed to begin construction.

This problem reared its head over the summer when PJM held an auction to secure electric “capacity” for the upcoming year. These auctions are the mechanism by which grid operators ensure there is enough electricity generation to meet future demand.

That auction set the price for capacity at $269.92 per megawatt-day, twice the average over the past decade and more than 9 times higher than last year’s price. PJM projects the total cost to provide electricity for the 2025-2026 delivery year to be $14.7 billion, a $12.5 billion jump from last year and a 35% increase over the second-highest annual capacity price.

That means prices for customers will increase by between $7 and $10 for the average household in the Commonwealth Edison territory in northern Illinois, according to the Citizens Utility Board.

CUB, the Illinois Attorney General and the attorneys general of several other states argued in a November complaint to federal regulators that the auction was artificially high because PJM undercounted how much electricity would be available in the future, among other reasons.

PJM has already filed rule changes for future auctions in response to that complaint and others. Advocates called the filing a “major win” for customers in PJM’s territory, though experts said the high prices still signify trouble for the grid.

The Midcontinent Independent System Operator, or MISO, operates the grid for much of the Midwest, including downstate Illinois. Earlier this month, it approved the next phase of its multi-year plan for long-range transmission lines. Those projects will cost an estimated $21.8 billion and will move electricity around the Midwest.

James Gignac, a senior policy manager at the Union of Concerned Scientists, said this model should be considered by other grid operators – including PJM – to increase transmission line construction and put cheaper and cleaner energy on the grid.

“The quicker that we can get these long-range projects approved and moving toward construction, the sooner we’ll have that increased capacity for projects to be able to access the grid more quickly and at a lower cost,” he said.

Several of the first round of MISO transmission line projects are currently under review at the Illinois Commerce Commission. While federal regulators limited states’ authority in long-term planning earlier this year, state regulators still play an important role in procedural approvals.

Cunningham filed a bill this spring that outlines several changes to transmission line regulation and incentives, though it’s unclear if facets of it would be included in any energy legislation that moves quickly.

“We can incentivize transmission development in the same way we incentivize renewables and dedicate a portion of everyone’s electric bill,” Cunningham said.

Data centers and demand

Illinois’ grid problems are also exacerbated by a growing demand for electricity.

In recent years data centers and large-scale industrial and manufacturing development have boomed nationwide and especially in Illinois. Data centers, which are key for artificial intelligence development and other high-tech businesses, require massive amounts of electricity, as do manufacturing plants.

Illinois has been competing to land data centers by providing tax incentives to build facilities here. Pritzker has said the data center tax credit helped move Illinois from “kind of middle of the pack to now becoming the third-largest data center market in the nation and the fifth-largest in the entire world.”

But data center developments are already increasing demand in northern Illinois and hastening the need for greater electricity generation.

A report from the consulting firm Grid Strategies found that that demand for electricity will increase by 15.8% over the next five years, about a five-fold increase over nationwide growth estimates from two years ago. PJM territory is expected to see some of the largest demand growth, driven in part by an “unprecedented” increase in data centers.

For drafters of CEJA, the level of demand growth was unexpected.

“We knew that demand would go up,” Cunningham said. “But the words ‘data center’ were never used in CEJA negotiations.”

The Columbia University study of PJM’s grid, meanwhile, recommended state-level changes to mitigate the risks of delays in getting renewable generation online as demand increases.

“State regulators and other policymakers will also be wise to manage the phaseout of existing resources carefully,” the report suggested. “One way of doing so is to build ‘reliability safety valves’ into environmentally driven retirement schedules.”

In Illinois, that could mean state lawmakers and regulators now face difficult choices on an increasingly short timeline: increase costs to customers, back down from the state’s most ambitious decarbonization goals or accept an increasingly unreliable grid.

Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.