§ 16-135 — Energy Storage Program

(a) The Illinois General Assembly hereby finds and declares that: (1) Energy storage systems provide opportunities to: (A) reduce costs to ratepayers directly or indirectly by avoiding or deferring the need for investment in new generation and for upgrades to systems for the transmission and distribution of electricity; (B) reduce the use of fossil fuels for meeting demand during peak load periods; (C) provide ancillary services such as frequency response, load following, and voltage support; (D) assist electric utilities with integrating sources of renewable energy into the grid for the transmission and distribution of electricity, and with maintaining grid stability; (E) support diversification of energy resources; (F) enhance the resilience and reliability of the electric grid; and (G) reduce greenhouse gas emissions and other air pollutants resulting from power generation, thereby minimizing public health impacts that result from power generation. (2) There are significant barriers to obtaining the benefits of energy storage systems, including inadequate valuation of the services that energy storage can provide to the grid and the public. (3) It is in the public interest to: (A) develop a robust competitive market for existing and new providers of energy storage systems in order to leverage Illinois' position as a leader in advanced energy and to capture the potential for economic development; (B) implement targets and programs to achieve deployment of energy storage systems; and (C) modernize distributed energy resource programs and interconnection standards to lower costs and efficiently deploy energy storage systems in order to increase economic development and job creation within the state's clean energy economy. (b) In this Section: "Energy storage peak standard" means a percentage of annual retail electricity sales during peak hours that an electric utility must derive from electricity discharged from eligible energy storage systems. "Deployment" means the installation of energy storage systems through a variety of mechanisms, including utility procurement, customer installation, or other processes. "Electric utility" has the same meaning as provided in Section 16-102 of this Act. "Energy storage system" means a technology that is capable of absorbing zero-carbon energy, storing it for a period of time, and redelivering that energy after it has been stored in order to provide direct or indirect benefits to the broader electricity system. The term includes, but is not limited to, electrochemical, thermal, and electromechanical technologies. "Nonwires alternatives solicitation" means a utility solicitation for third-party-owned or utility-owned distributed energy resources that uses nontraditional solutions to defer or replace planned investment on the distribution or transmission system. "Total peak demand" means the highest hourly electricity demand for an electric utility in a given year, measured in megawatts, from all of the electric utility's customers of distribution service. (c) The Commission, in consultation with the Illinois Power Agency, shall initiate a proceeding to examine specific programs, mechanisms, and policies that could support the deployment of energy storage systems. The Illinois Commerce Commission shall engage a broad group of Illinois stakeholders, including electric utilities, the energy storage industry, the renewable energy industry, and others to inform the proceeding. The proceeding must, at minimum: (1) develop a framework to identify and measure the potential costs, benefits, that deployment of energy storage could produce, as well as barriers to realizing such benefits, including, but not limited to: (A) avoided cost and deferred investments in generation, transmission, and distribution facilities; (B) reduced ancillary services costs; (C) reduced transmission and distribution congestion; (D) lower peak power costs and reduced capacity costs; (E) reduced costs for emergency power supplies during outages; (F) reduced curtailment of renewable energy generators; (G) reduced greenhouse gas emissions and other criteria air pollutants; (H) increased grid hosting capacity of renewable energy generators that produce energy on an intermittent basis; (I) increased reliability and resilience of the electric grid; (J) reduced line losses; (K) increased resource diversification; (L) increased economic development; (2) analyze and estimate: (A) the impact on the system's ability to integrate renewable resources; (B) the benefits of addition of storage at specific locations, such as at existing peaking units or locations on the grid close to large load centers; (C) the impact on grid reliability and power quality; and (D) the effect on retail electric rates and supply rates over the useful life of a given energy storage system; and (3) evaluate and identify cost-effective policies and programs to support the deployment of energy storage systems, including, but not limited to: (A) incentive programs; (B) energy storage peak standards; (C) nonwires alternative solicitation; (D) peak demand reduction programs for behind-the-meter storage for all customer classes; (E) value of distributed energy resources programs; (F) tax incentives; (G) time-varying rates; (H) updating of interconnection processes and metering standards; and (I) procurement by the Illinois Power Agency of energy storage resources. (d) The Commission shall, no later than May 31, 2022, submit to the General Assembly and the Governor any recommendations for additional legislative, regulatory, or executive actions based on the findings of the proceeding. (e) At the conclusion of the proceeding required under subsection (c), the Commission shall consider and recommend to the Governor and General Assembly energy storage deployment targets, if any, for each electric utility that serves more than 200,000 customers to be achieved by December 31, 2032, including recommended interim targets. (f) In setting recommendations for energy storage deployment targets, the Commission shall: (1) take into account the costs and benefits of procuring energy storage according to the framework developed in the proceeding under subsection (c); (2) consider establishing specific subcategories of deployment of systems by point of interconnection or application. (g) The Commission, in its role as the relevant electric retail regulatory authority for Illinois, shall initiate a workshop process no later than February 1, 2025, for the purpose of facilitating the development of an initial forward storage procurement process and model contract for the procurement of utility-scale energy storage resources, hereafter "initial procurement". The workshops shall be coordinated by the staff of the Commission, or a facilitator or any other experts or consultants retained by the staff of the Commission, in consultation with the Illinois Power Agency. The workshop process shall be designed to develop an effective initial procurement of no more than 1,500 megawatts of utility-scale stand-alone energy storage resources whereby the Illinois Power Agency shall be positioned to have developed a confidential benchmark and solicited, received, and opened sealed bids for such initial procurement to conclude not later than August 26, 2025. The workshop process shall conclude no later than April 1, 2025. Following the workshop process, the staff of the Commission, or the facilitator retained by the staff, shall prepare and submit a report to the Governor, the General Assembly, and the Commission no later than May 1, 2025, that summarizes the information obtained through the workshop process and recommends the most effective procurement process, structure, and contract terms that would result in a successful initial procurement. Specifically, for the purposes of this initial procurement only, the report shall at a minimum include: (1) a definition and key terms of contracting structures, including, but not limited to, tolling agreements and indexed credits, and whether they are used in other states; (2) an assessment of changes to the contract structures, and the identification of appropriate signatories, used by other states necessary to fit the legal and regulatory structures of Illinois; (3) commercial terms required for the contract to be financeable without creating contractual obligations on the utilities that are not contingent on full and timely cost recovery; (4) contract structures that avoid a requirement that contracting utilities consider such agreement a lease under generally accepted accounting principles, or that such an agreement is reflected as debt on a contracting utility's balance sheet; (5) necessary or appropriate roles for the owner of an energy storage system selected in a procurement to, either directly or through a third-party administrator which may be an affiliate, be responsible for operation, maintenance, dispatch, and other operational functions of the energy storage system; (6) other allocations of rights and responsibilities between the winning bidder, the electric utility, and, if applicable, the third-party administrator; (7) an assessment of whether a contract length different from 20 years is financeable, and whether other contract lengths would impact the net benefits of the storage procurement; (8) a model of a standard contract, including contract terms and conditions, to be used by the Illinois Power Agency and its procurement administrator for the initial procurement; (9) an analysis of whether 1,500 megawatts is the appropriate size for the initial procurement and whether additional procurements beyond August 2025 are valuable to Illinois taking into consideration the amount of projects in advanced stages of development and Illinois' need for storage energy systems in order to ensure it can meet its clean energy goals and to prevent or minimize any anticipated resource adequacy shortfalls; (10) an assessment of the appropriate cost recovery and allocation structure that ensures electric utilities can recover all of the costs associated with the procurement of energy storage resources and any other costs associated with proposed utility participation; (11) an assessment of the appropriate geographic location for the battery storage systems, including, but not limited to: (A) the geographic split of the megawatts of capacity of the energy storage resources procured pursuant to this initial procurement between those interconnected to the Midcontinent ISO, Inc. and PJM Interconnection, LLC; and (B) the potential benefits of procuring one or more projects within an area designated as an area of the State certified by the Department of Commerce and Economic Opportunity as an Enterprise zone or Energy Transition Grant Community; (12) an assessment of minimum application requirements, such as having achieved interconnection milestones, including, but not limited to: (A) projects that have applied for approval for surplus interconnection service or to transfer existing capacity interconnection rights to the relevant regional transmission organization and have received a completeness determination following completion of the initial review process and whether it is beneficial if such projects are also colocated with a renewable energy resource; (B) for projects interconnected to MISO, projects that have signed an interconnection agreement, or are in the MISO Generating Facility Replacement Process, or have provided the most current deposit in the MISO definitive planning phase (DPP) cycle 2021 or an earlier definitive planning phase cycle; or (C) for projects interconnected to PJM Interconnection, LLC, projects that have received a Phase 2 study; (13) an assessment of the impact of the costs and benefits to Illinois ratepayers of these issues related to this initial procurement; and (14) recommendations for the inclusion, or adaptation, of minimum equity standards and an equity accountability system to the procurement process. Given the rapid actions required pursuant to this Section, the procurement of any facilitator, expert, or consultant pursuant to this subsection is exempt from the requirements of Section 20-10 of the Illinois Procurement Code.

Legislative History

(Source: P.A. 102-662, eff. 9-15-21; 103-1066, eff. 2-20-25.)