Articles

Illinois' Green Energy Law Needs a Rewrite

Tuesday, May 6, 2014
by Marc J. Lane

Gov. Pat Quinn has proudly proclaimed that Illinois is the first in the nation in renewable energy use and, while the state has unquestionably earned its bragging rights, policymakers need to do more to ensure that our clean energy sector remains strong.

First, the good news: According to a report by the Environmental Law and Policy Center and other agencies, 91 Illinois communities have achieved 100 percent renewable electricity, a feat not accomplished by any other state.

Moreover, the Energy Information Administration ranks the state fifth in the nation in its generation of electricity from wind power. In fact, Illinois is among 12 states the Environmental Protection Agency credits with producing 80 percent of the country's wind power last year.

Illinois' support of clean energy leads to healthier communities, lower costs for consumers and the creation of new jobs. Nearly 100,000 workers are employed in the state's clean energy sector, according to a recent Clean Jobs Illinois report. One-third are highly paid employees in engineering, research, assembly and manufacturing; another third work in installation and maintenance, jobs that can't be outsourced or off-shored.

Even more good news is on the horizon. Home goods retailer Ikea's first wind investment in the United States will be its downstate wind farm — large enough, it claims, that its stores will never buy a single kilowatt of power again. And the $2 billion Rock Island Clean Line, slated for completion in 2017, is expected to take 3,500 megawatts of power created by wind turbines in Iowa and deliver them here.

REVAMPING POWER MANDATES

But Illinois' clean energy leadership would be stronger still if the General Assembly reformed the state's Renewable Portfolio Standard. Here's how RPS works now: Utility giants Ameren Corp. and Commonwealth Edison Co. are required to dedicate a small portion of their revenues to purchasing green energy, either directly in the form of energy from renewable sources or indirectly by purchasing tradable credits representing the environmental attributes of energy produced from renewable sources.

Under the Illinois Power Agency Act, the Illinois Power Agency decides where ComEd and Ameren get their power and how they meet their RPS mandates.

Alternative suppliers that now serve most Illinois customers are obliged to buy renewable energy credits, too, but they pay into an Alternative Compliance Payment fund. That fund can be accessed only when the power agency buys renewable energy or credits on behalf of ComEd and Ameren pursuant to the RPS.

But the agency hasn't needed to do so; the utilities' customer base has shrunk because municipal governments are forcing competition among electric supply services for their communities, meaning that they can satisfy their RPS requirements without the agency's involvement.

With no purchases being made on behalf of ComEd and Ameren, the upshot is that the Illinois Power Agency has no choice but to sit on ACP funds it otherwise would invest in the state's green economy.

Let's urge the General Assembly to revamp RPS and allow the Illinois Power Agency to purchase renewable energy on behalf of all Illinois customers.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems.

A SIB isn't a traditional bond where investors are guaranteed a fixed return but a contract among a government agency that agrees to pay for improved social outcomes, a private financing intermediary and private investors. SIBs shift the risk of experimenting with promising but untested intervention strategies from government to private capital markets, with public funds expended only after targeted social benefits have been achieved.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system.

The government decided which goals would be supported, but exactly how those goals would be achieved was left to the private sector. It was the investors, through a bond-issuing organization, who ultimately endorsed the allocation of investment proceeds — how much would be invested in job training, drug rehabilitation and other interventions.

If the Peterborough plan eventually shrinks recidivism rates by 7.5 percent or more, the government will repay the investors' capital and share the taxpayers' savings with them, delivering up to a 13 percent return. If the target isn't hit, the investment will have failed and the government will owe the investors nothing.

Illinois' SIB effort was spearheaded by the state's Task Force on Social Innovation, Entrepreneurship and Enterprise — the governor's think tank on social issues, which I am privileged to chair — with support from Harvard University's John F. Kennedy School of Government, the Rockefeller Foundation and the Aurora-based Dunham Fund. A request for information issued by the Office of Management and Budget on May 13 yielded responses from service providers eager not only to reduce recidivism here but also to create jobs, revitalize communities, improve public health outcomes, curb youth violence, cut high school dropout rates and alleviate poverty.

Now the governor has issued a request for proposals intended to spur better outcomes for Illinois' most at-risk youth — by increasing placement stability and reducing re-arrests for youth in the state's Department of Children and Family Services, and by improving educational achievement and living-wage employment opportunities justice-involved youth most likely to re-offend upon returning to their communities.

Kudos to Mr. Quinn for bringing SIBs to Illinois. May they soon start delivering on their promise.

- See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf
The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

Marc J. Lane is a Chicago attorney and chairman of the Illinois Task Force on Social Innovation, Entrepreneurship, and Enterprise.

Reprinted from Marc Lane's May 6, 2014 editorial which appeared in Crain's Chicago Business. Crain Communication Inc.'s permission is gratefully acknowledged. Copyright © 2014 by Crain’s Communications Inc.


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