Saturday, June 16, 2012

State Fiscal Problems Threaten Illinois Wind Power Development

Cash strapped Illinois government has borrowed nearly all of the state’s alternative energy supply investment fund, crippling future development of wind power in the state. Established in 2010, the fund was opened in September 2010 with initial cash of $7.1 million, and within a month $6.7 million was borrowed by various state agencies to pay past due bills. Although the Illinois Power Agency says the debt is being repaid, and it plans to use the repaid cash for its intended purpose, renewable power developers are doubtful the fund’s balance will become available to them with any certainty in the future.

By current law, there is a 2025 deadline for Illinois to get 25% of its electric power from renewable sources. However, changing conditions in the state’s electric market are driving wind power developers away from the state. Houston based EDP Renewables has closed its Bloomington office and, although that company has invested $1.5 billion  Illinois wind farms, future wind power developments are now on hold. “We need to be able to lock in long term contracts in order to sell our power,” says EDP Senior Manager of Government and Regulatory Affairs Jeff Bishop. “Currently, the way the renewable portfolio standard is structured, it makes it very difficult for us to procure long term contracts.”

When Commonwealth Edison signed its first long term wind power contracts in 2010, Com Ed had 99 percent of residential customers in the Chicago region, but that market share is rapidly diminishing under recent legislation permitting municipal aggregation. Already 100 cities, villages and towns have moved their residents to other power companies, and another 160 have passed measures which will further erode the Com Ed market share. Com Ed predicts that by 2017 it will have only 65% or so of the Chicago region market for residential power.

The Illinois Power Agency, which procures energy on behalf of Illinois utility companies, says this sort of market volatility makes it impossible to grant long term contracts at stable prices for new wind power development. Chicago based Invenergy’s Director of Origination Craig Gordon believes that the municipal aggregation legislation jeopardized even those long term renewable power contracts already in place. “We’ve seen a lot of these municipalities are switching their suppliers … and what that does for folks who have long term contracts, is put those contracts in jeopardy,” Gordon says.

Once again, political meddling with long term power market forces in attempts to fix short term problems has created a nightmare for the long term plans of alternative energy developers, and the uncertainty is driving them out of our state.

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