Illinois Electricity: Subsidies, Mandates, Inflation

“If Illinois wants an affordable and reliable grid, the answer is to end subsidies and mandates for all forms of generation. And to eliminate regulations that are taking the most affordable and reliable fuels out of the generation mix. Nothing else will work.”

Electricity prices are climbing in Illinois. As is the public’s concern about them. To address this, Governor JB Pritzker and governors from four other states recently asked the PJM Interconnection to do something about the escalating rates.

While the concern is widespread, there is little consensus over the cause of the higher prices. Some blame fossil fuels. Others the PJM capacity market. And others a lack of investment in battery storage. Most agree, though, that government intervention is needed to fix the problem.

However, a closer look shows that government intervention is the source of the problem.

Background

Illinois’ fuel mix, the type of facilities used to generate electricity, has dramatically changed over the last ten years. In 2013, 91 percent of the electricity used in the state was generated by nuclear (48%) and coal (43%). Renewable generation from wind and solar were less than 5 percent, and natural gas supplied only 3.4 percent.

The mix is very different today. Coal’s output plummeted to only 15 percent, leaving a huge hole in Illinois’ generation capacity. To fill the breach, renewable generation has almost tripled to 13.3 percent and natural gas now provides 16 percent of load.

Why did this happen? First, over the decade, Congress has provided subsidies of more than $81 billion of taxpayer money to force renewable energy onto the national grid. Illinois is partnering with Congress to require its electric utilities to obtain 40 percent of their electric power from renewables by 2030 and 50 percent by 2040.

The second reason is that in 2021, Illinois enacted a clean energy law mandating zero emissions from all coal-fired power plants by 2045. Federal regulations are also designed to accomplish a similar outcome.

The result of this growing dependence on renewables is a more expensive, less reliable electric grid. Advocates of wind and solar are doing everything they can to mask this.

Misdirection, More Government

For instance, state Sen. Bill Cunningham filed legislation last spring designed to address higher prices and energy shortages. One of the ways the legislation addresses this is to set up a system of energy storage credits. In layman’s terms, Sen. Cunningham is proposing government mandated subsidies for batteries designed to store electricity.

In addition to ignoring how consumers paying for new subsidies will reduce their electricity costs, the senator does not explain that the reason Illinois is facing potential energy shortages is because intermittent, i.e., unreliable, renewable energy has replaced the highly reliable coal-fired generation that had kept the lights on in Illinois for decades.

Another renewable advocate, Sarah Moskowitz, the executive director of the Citizens Utility Board, tries to blame fossil fuels for the grid’s problems. She offers the example of Winter Storm Elliot, when she says PJM “made the unusual request that everyday customers conserve energy. She claimed that “the fossil-fueled power generators who for years had sold themselves as necessary for grid reliability, failed to deliver.”

However, the data explains that it was renewables that were no shows.

During the storm, PJM asked “consumers to reduce their use of electricity … between the hours of 4 a.m. on December 24, 2022 and 10 a.m. on December 25, 2022.” At 4 a.m. when the call for conservation went into effect, it was 0 degrees outside and demand was rapidly increasing, but renewables were not coming through. Wind provided only 5 percent of the electricity being generated, and solar 0%. Eighty-three percent of the electricity came from natural gas, coal, and nuclear generation. Even at noon that day, solar only provided 1 percent of the load, 692 megawatts, despite having an installed capacity of 2,096 megawatts.

Conclusion

Renewables can still not be counted on, while the options for grid reliability are diminishing. Government mandates, subsidies, and regulations are shutting down investment in reliable, dispatchable thermal generation from fossil and nuclear fuels.

PJM’s capacity market will not solve the problem—it will only make the grid more expensive, not more reliable. My state of Texas—the nation’s leading generator from renewable sources—has already tried this by throwing $40 billion at generators over the last three years in the hope of increasing thermal capacity. It did not work.

If Illinois wants an affordable and reliable grid, the answer is to end subsidies and mandates for all forms of generation. And to eliminate regulations that are taking the most affordable and reliable fuels out of the generation mix. Nothing else will work.

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Bill Peacock is the policy director of the Energy Alliance. He has been researching and writing about electricity markets for 20 years.

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Source: https://www.masterresource.org/illinois-energy-policy/subsidies-and-mandates-behind-illinois-higher-electricity-prices/