Illinois Fast Becoming National Leader in Modernizing Electricity Infrastructure

Texas is the first state most people think of when the issue of modernizing the nation’s electricity sector is discussed, but there is a good argument to be made that Illinois is worthy of equal consideration.

The land of Lincoln has transformed itself over the past two decades into a leader in the transition to a modern electricity grid. State lawmakers have passed several pieces of legislation aimed at bringing the state’s power system into the 21st century. In doing so, they have put an emphasis on creating a market that can deliver a more dynamic grid that is cleaner, affordable, reliable and more responsive to consumers needs.

As digital technology continues to transition the electricity sector further away from the old vertically integrated utility model, consumers stand to benefit from the efforts of Illinois lawmakers to prepare the ground for a modern grid.

The seeds of Illinois’ reimaging of its power system were first planted back in 1997 with the Electric Customer Choice and Rate Relief Law, which reorganized the state’s two largest electric utilities, Ameren and Commonwealth Edison (ComEd), and created one of the nation’s largest retail electricity choice markets.

While the creation of retail choice markets was a major step forward, the implementation has not been without its challenges. In fact, one cloud over Illinois’ modernization efforts is the ongoing trend of declining participation in its retail residential markets.

Illinois has the third highest number of residential retail choice customers after Texas and Ohio. However, Illinois has seen participation in its retail markets fall to 1.8 million customers as of May 2018, down from more than 2 million in 2016, an annualized decline of more than 7.5 percent each year. As of May 2018, third-party suppliers served only 59 percent of Ameren customers and 32 percent of ComEd’s customers.

The existence in Illinois of default service procurement plans and market pricing failures have caused consumers to switch back to the traditional utilities. Both issues could be resolved through better market design that gives competitive suppliers a greater role and improved consumer protection measures.

A top goal of Illinois’ grid reform has been to make the state a leader in the digitalization of the electricity sector and the adoption of smart grid technology to empower the end user with greater control over their energy use through apps and other smart digital devices. This emphasis on digital communications and the complexity in managing an increasingly distributed grid has led the state’s utilities to invest in private telecommunications infrastructure to keep up with bandwidth demand and to ensure they can maintain data integrity in an emergency.

A joint report from the Smart Electric Power Alliance and ScottMadden, Inc. determined that the reforms so far adopted in Illinois have set the state up to take advantage of the trend toward increasing installation of distributed energy resources (DERs).

DERs are energy assets that are spread out across the grid and are increasingly under control of the end users, including rooftop solar, behind-the-meter battery storage, energy efficiency management tools, and electric vehicle chargers. Managed effectively, distributed generation can make the grid more resilient and increase the integration of clean energy assets. But there are challenges to integrating DERs into the larger grid.

Illinois is ahead of most states in preparing for a more decentralized electricity sector. The state has invested in advanced energy management software and adopted real-time pricing structures to handle issues associated with the growth of distributed generating assets.

In 2011, Illinois lawmakers passed the Energy Infrastructure Modernization Act to ensure that the state’s increasingly clean and advanced grid was also reliable and resilient. The act authorized $3.3 billion to strengthen and modernize the grid, including a sizable investment in smart meters and other advanced metering technologies to help grid managers identify potential problems before they become issues for the wider grid system. Smart meter technologies also offer a number of benefits to the end consumer, including better access to data about and more control over their energy use.

The state has taken steps to ensure software and cloud-based computing solutions keep pace with other advances in the sector. Because utilities in most states are financially rewarded for making capital investments rather than for operational costs like software, smart meters have long been installed in large quantities but investment in the analytics needed to harness the full power of that data has lagged. Illinois is one of the first states to address this issue by reworking the regulatory model to provide an incentive for investing in smart metering software that will ultimately benefit consumers by putting more control in the palm of their hands.

Over the years, Illinois officials have been unwavering in their commitment to grid modernization. The latest efforts include the NextGrid Illinois Utility of the Future Study, a statewide effort to reimagine what the future electricity sector should look like. The study identifies new technologies, business models and policies to further strengthen grid management and the role of consumers. The results of the study were released this past December and provide a roadmap for Illinois to continue to improve the flexibility, efficiency and clean energy integration of its electricity sector.

Reorganization of Illinois’ electricity markets have delivered a wide range of benefits over the years for the state’s retail consumers.

Illinois was ranked second in terms of grid modernization, behind only California, in 2018 by the GridWise Alliance’s Grid Modernization Index, and the state has surpassed its goal for reducing customer power outage frequency and duration.

The vast installation of smart meters and other digital technologies has also positioned Illinois to be a leader in distributed resource installations going forward.  

In June, Illinois Gov. J.B. Pritzker signed legislation to provide $70 million in grants through the state’s environmental protection agency to build electric vehicle charging infrastructure and electrifying public transit and school buses.

While further reforms are needed to improve the design of the retail market, Illinois is ahead of most states.