Warnings of summer brownouts downstate spur scrutiny of Pritzker’s energy law

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Critics of policies phasing out coal and natural gas in favor of renewable power are seeing their doomsday forecasts start to come true far faster than even they thought. The price shock downstate also hands Republicans who didn’t support Gov. J.B. Pritzker’s sprawling, costly Climate & Equitable Jobs Act, or CEJA, last year an issue in the upcoming election.

The statute requires the closure of all fossil fuel power plants in Illinois no later than 2045. Effectively, it’s made the usual method of addressing power-supply shortages—construction of new natural gas-fired plants—uneconomic and significantly reduced the tools available to address the shortage that’s emerged.

MISO sounded the alarm last week, saying it was concerned about the rapid closure of coal-fired power plants, which that have kept the lights on for decades in much of the Midwest. Replacement sources aren’t being established fast enough to offset the loss.

“The reality for the zones that do not have sufficient generation to cover their load plus their required reserves is that they will have increased risk of temporary, controlled outages to maintain system reliability,” Clair Moeller, MISO’s president and chief operating officer, said in a release.

In other words, rolling blackouts, which have caused distress in other parts of the country, like California, but have yet to be seen in Illinois.

Ameren Illinois, which delivers electricity downstate, says it’s optimistic that outcome can be avoided.

“Currently, we are confident that our delivery system is stable and reliable and power will be there when it is needed this summer,” spokeswoman Marcelyn Love said in an email. But, she added, “Even hearing MISO’s president suggest the possibility of having to shed load is a serious concern.”

Costs are spiking because a power auction MISO recently conducted set a record price power generators will receive from electricity users to promise to be available when most needed—say, during heat waves, when air conditioners are humming. The $236.66-per-megawatt day established in that auction translates into as much as $13 more a month for a typical household, Ameren Illinois says.

For an average industrial user, that’s another $84,000 a year or so.

Mark Denzler, CEO of the Illinois Manufacturers’ Association, opposed CEJA last year, warning it would lead to just this kind of outcome and jeopardize Illinois’ energy cost advantage over neighboring states for attracting and retaining businesses. He was traveling and unavailable today for an interview.

But late last week, he tweeted, “The IMA warned Gov. Pritzker and lawmakers about cost and reliability in energy markets when CEJA passed. The MISO capacity cost increased 47-fold. Other regions cleared at the same price, but we are the only unregulated one, so Illinois is really the only state paying.”

Ameren Illinois echoed the sentiment.

“We have been sounding the warning bell that the transition to renewable generation should be made in a steady and measured fashion, and that moving too fast could leave downstate short of the minimum amount of locally produced generation required,” Love wrote.

“We shared these concerns with Illinois policymakers during negotiations on the massive clean energy legislation that was passed last September. Unfortunately, it’s customers in central and southern Illinois who will shoulder the burden.”

Ameren owns no power plants in Illinois and passes along the cost of power at no markup to ratepayers.

The Pritzker administration says that coal-fired plants were closing with or without the new law, due to economic realities. Failing to act on CEJA wouldn’t have prevented this year’s outcome.

“New gas (plant) build was not prohibited by CEJA, and the ability of gas plants to stay online until 2045 without reaching zero emissions was a legislative concession to gas-fired investors who insisted they could make the economics work and transition to clean hydrogen in the out years,” Pritzker spokeswoman Jordan Abudayyeh said in an email. "Some of those projects are in the permitting process currently.”

That concession was made to developers of two large gas-fired plants that already were well along in the planning phase. Industry representatives say there’s no way they would pursue any other new facilities given the 2045 deadline.

Abudayyeh adds, “No new gas plant could help with the current MISO projection; the permitting and construction of such a new plant would take many years—the buildout of new renewables, including Illinois’ innovative coal-to-solar program, could have a speedier impact.”

Northern Illinois, which is part of a different regional power grid than MISO, isn’t facing the same shortages, due to its reliance on nuclear power plants. Commonwealth Edison customers are paying more than $4 a month in subsidies to keep open nukes that owner Exelon threatened to close without more ratepayer cash provided under two state laws, one of which is CEJA.

But a prolonged downstate shortage could have an effect in the future on supplies in the Chicago area. The nukes, now owned by Baltimore-based Constellation Energy Group (a spinoff from Exelon), could look to bid into the MISO-run auction if prices are high enough. That potentially could raise prices in northern Illinois as electricity produced here is sent downstate.

Pritzker aggressively pursued passage of CEJA last year, making it one of his highest legislative priorities. He hoped to campaign on enacting one of the nation’s most ambitious green-energy laws.

The flip side, though, is that he now owns the energy issue in Illinois. Whether the administration deserves any blame for the supply woes downstate, now or in the future, Pritzker will have to confront that narrative.

via Crain’s Chicago Business

April 19, 2022 at 07:13AM

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