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The final incentives from the state’s 2017 Future Energy Jobs Act were awarded on Monday as solar developers plead for a legislative fix next month.
State incentives for small solar installations in Illinois have officially run out, leaving the state’s industry looking over the “solar cliff” that developers and advocates have long warned about.
Illinois has experienced a solar boom in recent years, driven by incentives in the 2017 Future Energy Jobs Act. The Illinois Power Agency reported this week that the last of those funds were allocated Monday.
The wildly popular community solar program created by the 2017 law was tapped out quickly, and incentives for larger solar projects dried up earlier this year. Funds for solar installations under 10 kilowatts in Ameren’s downstate Illinois territory were used up earlier this month, the Illinois Power Agency reported, and funds for such installations in ComEd’s territory that includes Chicago ran out on Monday.
Now solar developers are desperately hoping that state legislators during their January lame-duck session will pass a short-term fix to fund the adjustable block program that distributes solar renewable energy credits central to the state’s solar incentive programs.
At stake, many say, is the state’s ability to meet the ambitious renewable targets laid out in the Future Energy Jobs Act, and the future of solar companies and their employees, in an industry that has already seen 3,500 layoffs statewide this year.
Among those feeling anxious and abandoned is Dawn Heid, CEO of Rethink Electric in the Chicago area. She said incentives for small solar installations ran out more quickly than expected. The adjustable block program awarded the right to sell solar renewable energy credits in tiers, and an earlier tier still had credits available until recently. Then a glut of applications filled both tiers in a short time, meaning Rethink and other companies can no longer promise the incentives to their customers.
Rethink Electric grew from four employees when Heid joined in 2018 to 74 today. The company has solar projects lined up through April, then revenue could stop until legislation renews incentive funding.
“It was a roller coaster; we shot straight up, and we learned a lot along the way,” Heid said. “That’s what the incentives allowed us to do. We were able to purchase equipment and train people, which is a costly endeavor when you are starting in a new industry in an area where there’s not a labor force for it. Now we already incurred all the costs, we already trained all those people — but if we’re not able to retain all those trained employees then we are starting over. As a business owner, do you have the stomach to do this again?”
The solar industry spent much of this year advocating for proposed legislation known as Path to 100, which would revamp renewable incentives. A recent study by Illinois State University professor David Loomis predicted that Path to 100 would create 53,000 construction jobs and 3,215 long-term operations jobs, in both wind and solar. Several other energy bills have also been introduced in the legislature, and while Gov. J.B. Pritzker has promised to pass clean energy legislation, it’s not clear that the wide range of stakeholders involved will agree on details any time soon.
“My biggest fear has been that it takes too long because they’re trying to pass a comprehensive bill and there’s a period where the funding runs out and there’s a gap before the next piece of legislation,” said Jeremy Vavrik, who after the Future Energy Jobs Act returned to the Chicago area to launch Fresh Coast Solar, now employing 14 people. “This is going to cause a huge contraction in the industry across the state if something isn’t addressed right away.”
Now, many solar developers are willing to put Path to 100 on hold, to prioritize a stop-gap measure that could restart funding more quickly. After the announcement that the adjustable block program is closed, the Clean Jobs Coalition, which backs legislation known as the Clean Energy Jobs Act, issued its own statements.
“Thousands of solar workers are about to lose their jobs,” said John Delurey, Midwest campaigns director at Vote Solar, in a statement. “Solar businesses will either downsize or disappear entirely. The hundreds of aspiring workers who graduated from training programs and bet their future on stable clean energy policy will have nowhere to go for employment. We need emergency relief for these workers and the stable funding that the Clean Energy Jobs Act provides.”
Boom and bust
Angela and Luke Luginbuhl founded their company Legacy Solar, a SunPower dealer in central Illinois, because of the Future Energy Jobs Act.
“We thought we’d try this as a summer part-time gig as we were trying to make ends meet as public school teachers,” Angela Luginbuhl said. They’d long been interested in solar, and as a physics teacher, Luke found it a “natural fit.”
“It kind of blew up on us — it has been awesome,” Luginbuhl said. “We’ve never looked back. We love it.”
By their second year, they had hired salespeople, and now the company has 12 employees and keeps two or three crews of subcontractors busy. Luginbuhl and others had remained hopeful that the legislature would pass an energy bill extending incentives during the November veto session, until the session was canceled because of the pandemic. The Luginbuhls had even posted a job opening in administration and planned to hire their first in-house installation crew.
“We were looking at another solid year with 2021,” and wanted to get a jump on business in the winter, Luginbuhl said. “We just doubled the size of our team last year so now we have a pretty high threshold of what we have to do to survive. If we don’t have [a solar renewable energy credit] for 6 months or a year, we’re in big trouble.”
A SunPower loan that the Luginbuhls offer is contingent on the project having solar credits. Similarly, they’re only able to lease solar installations to customers with credits, and leasing is an important way that lower-income customers are able to access solar. The Luginbuhls felt good about serving a growing number of customers through leasing, including “younger families that may not have capital saved up yet to do a cash purchase,” but now that is off the table.
Impacts large and small
In 2013 the decades-old Illinois company New Prairie Construction launched a solar branch in downstate Illinois, and New Prairie Solar expanded quickly after the Future Energy Jobs Act in both residential and larger systems.
With a parent company in a stable industry, New Prairie may be in a better position than other smaller and newer solar operations, said business and operations manager Doug Scatterday. Still, the absence of new solar credits will hurt.
“Our company is very committed to renewable energy and committed to weather the storm,” said Scatterday, who is also a certified installer. “But we were in a position where we could have really expanded our volume, our warehouse space, vehicles and equipment, adding additional solar installation teams” — efforts that are now on hold.
Scatterday said the lasting damage to the market for larger distributed solar installations may be especially bad.
“The momentum was building for the larger systems — small commercial, small industrial and farm,” he said. “Those were the people who were really starting to catch on to how advantageous solar energy is and how doable it is. That’s the disappointing thing — this took the wind out of the sails of what I would call the biggest component of the state’s emerging solar market.”
Illinois Solar Energy Association Executive Director Lesley McCain noted that after the incentives for larger installations ran out, companies focused even more on the residential market and made a flurry of sales, despite the pandemic.
“Look how quickly we ran through the incentives — there’s so much pent-up demand,” McCain said. “A lot of people want solar, all we need is an opportunity for the General Assembly to meet and fix this.”
The end of solar renewable energy credits comes as the federal Investment Tax Credit is phasing out, the solar industry is still struggling with the economic and logistical challenges posed by the pandemic, and ComEd and Ameren are preparing to replace net metering with less-lucrative rebates when solar hits 5% penetration in their territories.
Ameren had announced it would end net metering in October, but the Illinois Commerce Commission ruled that the utility was calculating its penetration incorrectly. Under the commission’s ruling, it will take significantly longer for the threshold to be reached in both territories.
“We have the three major components of the solar renewable energy incentive program at risk,” said Scatterday, referring to the solar credits, the Investment Tax Credit and net metering. “It means companies aren’t going to invest or reinvest, expand, hire personnel, buy equipment and gear up … and you’re not going to put as much into your marketing program.”
McCain said that even with the Investment Tax Credit and net metering, solar had not been viable for most Illinois customers without the adjustable block program. Even without net metering and federal supports, the state’s solar market could thrive with a sustainable, robust solar credit program, McCain and others say.
The end of funding for the solar credits, McCain said, “is really just so disconcerting right before the holidays, before the end of the year. We are entering people’s slower times as far as development is concerned, but this still would be a very ripe time to have conversations with potential customers and clients.”
That won’t happen now. “Can you imagine going to someone saying, ‘I’d like to sell you this but I’m not sure what it’s going to cost’?” McCain said. “You wouldn’t buy anything like that — not a refrigerator, not a car, not a house.”
Growing, or going backward?
Like the Luginbuhls, Jason Hawskworth started selling solar as a “side job” and a “little bit of a passion” while he worked an unrelated job in logistics. He quit that post after the Future Energy Jobs Act and focused on his solar company, Hawk Energy Solutions, which now has four employees and provides solar primarily for nonprofits including churches, schools, wastewater treatment plants and other public agencies downstate. Hawk Energy Solutions owns the installations and passes on the savings from incentives through power purchase agreements.
“We grew from one to four [employees], which is a pretty big jump” for a small company in a short time, Hawksworth said. “I don’t want to go back to one, that’s for sure. A small business like mine needs to have some security. You can’t be operating while thinking about having to lay people off the next year. If legislation gets passed and the market continues, we plan to continue to hire and grow our business even further.”
Hawksworth, Scatterday and Luginbuhl all said they are still hopeful that comprehensive legislation will pass next year, and they hope that it avoids the boom and bust cycle created by the Future Energy Jobs Act.
“We need to have a sustainable plan for how we’re going to keep this going,” Hawksworth said. “As a small business, you can’t have as many projects as you can handle for a year and then zero for two or three years — it just can’t work that way.”
Heid, of Rethink Electric, emphasized that her company and others not only tapped solar incentives to grow their markets, but participated in the parts of the Future Energy Jobs Act meant to diversify the solar workforce and make solar accessible to more people. She and other developers note that they hire employees out of the FEJA job training programs for underrepresented and marginalized people, and now those pipelines are disrupted and those jobs could be lost.
“Companies like ours did everything they wanted us to do — build and grow, create jobs, bring in multicultural diversity,” Heid said. “We have a lot of people working, and they are critical parts of their own communities. We did all the things asked of us. Now we need [legislators’] help, to please help us keep this going.”