What Happened?
Illinois has nurtured a competitive retail energy market which has enabled 91 cities to operate on 100 percent renewable energy for the last five years. Through municipal aggregation, the cities are able to reduce energy consumption, increase demand for clean resources and save taxpayers $37 billion.
The Goal
Illinois allows local governments to join forces when searching for energy and utility providers. By pooling their demand, the group enjoys stronger purchasing power that can make it easier to negotiate with providers for lower rates and cleaner energy. Because the cities will purchase in bulk, savings can be secured and energy-efficient commitments can be made with suppliers. When different energy providers compete for the business from municipal aggregations, the rates can drop even lower.
Illinois System
According to a recent report, the Community Choice Aggregation in Illinois has enabled 91 participating municipalities to enjoy 100 percent renewable energy since 2009. The municipal aggregation has increased demand and sources of clean energy such as wind and solar, while reducing pollution equivalent to more than 1 million car emissions.
By joining forces, the municipal aggregation empowers communities to select energy providers that meet their needs and goals, rather than whatever company is most dominant in the area. Cities can express their concerns and demands, and allow suppliers to bid for their business. The retail energy marketplace has allowed cities to hand off the responsibility of operating utility to suppliers.
In 1997, Illinois passed the Electric Service Customer Choice and Rate Relief Act which enabled municipal aggregation and led to $37 billion in consumer savings split between commercial and industrial business, as well as residential customers. The electricity rates for customers in nearby states have increased while being regulated, while Illinois’ rate have dropped 5 percent since the passing of the act. In Wisconsin rates have increased 26 percent, while Indiana and Michigan are reporting jumps of more than 30 percent.
How It Works
Municipal aggregation strategies allow a group of communities to buy and build electricity supply with stronger purchasing power. The utility provider then supplies the energy, maintains the infrastructure and bills customers. Because the suppliers had to compete for business and purchases were made in bulk, residential, business and industrial customers enjoy lower rates and local control over clean energy.
Aggregated renewable energy sources are supplied and monetized through renewable energy credits (RECs), which create value for particular electricity sources and can be bought and sold separate from electricity. One REC represents one megawatt hour of electricity generated from a renewable energy source, and contains information on how the energy was sourced. RECs offer a market incentive to encourage communities to invest in energy projects.
So far, Illinois’ municipal aggregation represents the demands of 1.7 million consumers with an annual demand for renewables by more than 6 terawatt hours. While 91 cities are enjoying 100 percent renewable energy, more than 600 cities in the state are aggregating demand for energy to find lower rates on clean energy sources.
Clean Energy and the Economy
Gov1 has found clean energy not only saves municipalities money, but also spurs economic development for a long-term benefit.