Solar For All Program (ILSFA) Overview
Started just this year, Illinois’ Solar For All Program (ILSFA) is a system which incentivizes installers to target lower income households. In 2014, Illinois set a renewable energy target of 25% by 2025, of which 1.5% must come from solar. As part of this initiative, the state created a Renewable Energy Credit (REC) market overseen by the Illinois Power Agency. As part of the current Illinois REC system, utilities pay the state fees for failing to meet mandated targets for renewable energy use, which in turn are passed onto customers via a surcharge. The state then uses this money to solicit and purchase REC’s from new producers of renewable energy via a fixed price 15 year contract. The value of the contract is dependent upon a number of factors that lowers the fixed price as Illinois gets closer to its renewables target.
The ILSFA works by giving additional incentives for installations benefiting lower income households by increasing the price paid for REC’s by 30 to 50 percent and paying out the credits all up front, rather than on an annual basis, based upon the predicted generation over 15 years. These incentives are paid directly to the installer, which is then expected to use them to provide reduced cost installations and contracts to low income households.
The ILSFA is administered by the non-profit Elevate Energy based in Chicago. To be eligible for the program, household’s must have an income 80% or below the Area Median Income or be located within a designated Environmental Justice Community. To be eligible for funds, vendors must be first approved by Elevate Energy. Funds are then allocated to projects via approved vendor proposals which are evaluated based upon a point system taking into account overall costs, expected installed kW, geographic location, job training opportunities, community outreach, and whether or not women or minority owned businesses or employees will be involved. However, funds are not distributed until actual installation is complete.
In order to be eligible, projects must guarantee that low-income households will face no upfront costs, that ongoing costs and fees do not exceed 50% of the value of the energy generated by the installed panels, and that several other consumer protection requirements are met. Due to these terms, as well as the Federal Incentive Tax Credit (ITC), most of the ILSFA projects involve either leasing agreements, wherein the household pays a rental fee for the panels, or third party ownership agreements (TPO), wherein the household pays for the power produced by the panels via a Power Purchase Agreement (PPA).
Funding for the program is set at $30 million per year through 2021, with two-thirds of the total coming from the state’s Renewable Energy Resources Fund, which is left over money collected via the state’s old REC program. Of these funds, $7.5 million is specifically allocated per year to projects involving single family households. After 2021, a minimum of $10 million per year will be available for the overall program through 2025.
Is Solar For All in Illinois successful?
The ILSFA in many ways provides creative solutions to issues affecting many similar programs. By soliciting projects from approved vendors, it is helping guarantee consumer protections while still creating competition to ensure costs stay in line with the solar market over time. However, in many ways it is also an overly complicated program with many carve outs and other requirements which limit the most efficient utilization of funds, such as each type of solar installation being allocated a portion of the overall budget regardless of actual demand for each type of project.
Perhaps the most significant issue facing the ILSFA is the question of long-term funding. Though designed to be phased out as the state nears its renewables target, it is likely that the effectiveness of the program will significantly decline prior to the achieving of this goal. This issue of course centers on the program’s budget being cut by two-thirds in 2021 when the availability of old surplus funds will be completely drained. However, a second and just as significant issue is the expected end of the ITC that same year. If not renewed, the end of the ITC will remove a large incentive for installers to participate in the program and make it much more difficult for them to meet its requirements.
Another issue is the structuring of the incentive payments going to the installers rather than the households. This creates an incentive for installers to target households which, while still low-income, can afford to pay higher PPA rates compared to households further down the economic ladder. This issue will likely become more pronounced as program funding becomes more limited and the ITC expires.
Last modified: August 9, 2019