Bridging the gap in Illinois community solar project and program development

A previous article about the Illinois Commerce Commission (ICC) approving ComEd’s community solar tariff raised questions about where the Future Energy Jobs Act and its community solar and low/moderate income programs are in terms of implementation, especially from a developer’s point of view. A somewhat flippant comparison may be comparing it with building a bridge where one side of the structure, in this case the solar project itself, may be further along than the other side which is the program implementation, particularly for subscribers.

While there are some holes in the project side, program implementation, primarily through the Illinois Power Agency’s draft plan process, won’t be fully realized until ICC approval in the early Spring of 2008. There could be further delays of actual implementation if a program administrator or administrators are not on board immediately. Another factor to realize is that community solar and the low and moderate income “Solar For All Illinois” (Solar For All) programs are quite different, though there will be considerable overlap. Community solar projects could be market rate for the general population, and individually net metered systems could be installed under Solar For All.

For a developer, there are some existing parameters, as this overview will show. A developer knows the maximum size of a community solar project is 2 MW of capacity, anything larger than that becomes a utility project subject to different criteria. Siting and interconnection issues are well underway with a large number of proposed projects through ComEd’s application process. The process consists of the choice of an online or paper based application, with an initial response within 30 days or so to help the applicant in project planning and development. There is a technical issue of using “smart” inverters or not, but a broader issue of co-location, whether there can be multiple 2 MW installations allowed at a single site. Otherwise it is a fairly routine application in terms of requirements.

The next phase is project cost and financing. Project cost would be normally be a cinch pre-Trump tariff and tax incentive threats, plus other potential federal mopery and dopery. But within the context of the Illinois programs, one large source and one or two lesser sources of revenue are available besides tax credits and depreciation. The largest source is 15-year SREC’s, front loaded to maximize impact, 100% up front for energized small installations, or paid out over 5 years for larger ones. Illinois’ community solar programs relies on SREC’s more than any other program in the U.S. so far. A preliminary, proposed value of SREC’s by installation size, purpose and utility service territory has been posted as part of the Illinois Power Agency’s (IPA) draft plan.

However, there is a long road between the initial draft, posted September 29th, and all the regulatory iterations underway, culminating in, hopefully, ICC approval on or before April 3, 2018. Hopefully, the draft will give developers enough guidance of what to expect in developing that part of their pro formas. It should be noted that the IPA intent is setting SREC rates administratively, not competitively. Projects will be considered in capacity blocks with some degree of SREC price reduction per block. Additional incentives may be tied to the level of low-and-moderate income involvement.

The biggest variable in projects would be on the subscriber end, primarily in community solar. There will be most likely additional administrative requirements under Solar For All for small, net metered installations, primarily in terms of income verification. But at present, despite approval of the ComEd tariff (Ameren Illinois and MidAmerican Energy, the other two major investor owned utilities in Illinois, have not yet had tariffs filed or approved), there is not yet a process where a customer, whether low/moderate income or market rate, can subscribe in investor owned territory. This is still being worked out by IPA in its draft plan. There are parameters, like consumer protection requirements, but no transaction system. There may not be any actual process even after ICC approval, but left to the program administrators to spell out.

This is the biggest uncertainty factor for developers in Illinois community solar. Outreach and marketing can take place, and there could be collection of interested parties. But no signing on the dotted exists as of yet. After SREC prices are finalized by the ICC, developers could firm up what rates they would offer subscribers, at least on a preliminary basis. There could be considerable uncertainty to gauge marketing and administrative costs for developers with little or no experience in community solar programs. This would especially be the case for low and moderate income households depending on the level of income verification required.

For a 2 MW community solar system, there could be quite a soft cost difference between having a minimum three market rate subscribers (under the 40% maximum single subscriber rule) and having 500 low and moderate income apartment subscribers (theoretical maximum in 1,000 subscribers under the 200 watt minimum rule, but that’s unlikely). There would be incentives as well as the ability to diversify the subscriber portfolio. But how this will result in diverse representation of all segments, especially low and moderate income households and communities, remain to be seen as the regulatory process unfolds.