Illinois tackles high energy costs with major battery storage bet

As electricity costs surge throughout the nation, Illinois ranks among the states experiencing the most drastic price hikes. In the last half-decade, the state witnessed an average spike of around 33% in prices, with certain regions facing near 50% increases. The Illinois Commerce Commission reports that over 170,000 disconnection warnings were sent out in just June — a stark rise from around 46,000 during the same period the previous year.

In an effort to tackle the mounting utility bills, a comprehensive energy reform package was recently passed by Illinois legislators. The Clean and Reliable Grid Affordability Act (CRGA) aims to increase power supply and heavily invests in battery storage. Remarkably, this law also lifts the almost 40-year ban on building new large-scale nuclear reactors in Illinois. About two years ago, the state legislature passed a law permitting the creation of small modular reactors. Currently, more than half of the state’s energy mix is generated by nuclear power. Solar and wind power constitute nearly 13% of the remaining energy mix, which also includes fossil fuels.

The cost of this program, almost $1 billion, will be covered by a surcharge on electricity bills starting from 2030 for Illinois ratepayers. The Illinois Power Agency, responsible for managing the procurement of the state’s electricity supply, conducted an analysis revealing that consumers will save over $13 billion in the span of 20 years despite the program’s substantial execution cost.

The new legislation is in response to the state’s electrical system being stretched thin due to an uptick in demand from power-intensive data centers, a state law committing to phasing out fossil fuels for electricity generation, and cuts in federal funding for clean energy. The legislation was passed by state lawmakers in the last two days of an October legislative session with Governor JB Pritzker committing to sign it.

“The One Big Beautiful Bill, which is going to have the impact of raising prices on all Americans, is an attack on clean energy and Illinois consumers,” said Andrew Linhares of the Solar Energy Industries Association, a national trade group advocating for solar power and energy storage. He added that Illinois is the first state to take significant climate action since the re-election of President Donald Trump.

Under the 2022 Inflation Reduction Act, President Joe Biden’s signature climate law provided tax credits and other incentives to expedite the transition to cleaner energy sources like wind and solar, putting the country on track for net-zero carbon emissions. Illinois was projected to receive about $1 billion through this law. But the climate-friendly tax credits were short-lived as Congress passed the One Big Beautiful Bill earlier in the summer, which ended these incentives. Experts in energy foresee that the lack of these tax credits and other incentives could lead to an additional $250 in annual energy costs per household.

Trump, who labelled climate change as “a giant hoax,” also withdrew nearly $600 million in grants for Illinois aimed at modernizing the state’s electrical grid and minimizing methane leaks, a greenhouse gas. This pro-fossil fuel stance of the administration has discouraged investors from clean energy, according to Linhares.

The recent legislation assigns the Illinois Power Agency the responsibility of creating a plan to incentivize developers to bring an additional 3 gigawatts of battery storage capacity onto the grid. This is crucial for a grid transitioning toward renewable energy, as batteries can absorb excess electricity when prices are low and store it for later when prices are high.

According to Jen Walling of the Illinois Environmental Coalition, this legislation is “an incredibly exciting investment in climate progress” as it not only funds batteries but also allocates funding for energy efficiency programs at home, geothermal energy, thermal energy network pilots, and expansion of electric vehicle charging stations. The new law also equips the state’s utility regulator, the Illinois Commerce Commission, with new authorities to make long-term plans about the state’s electricity supply.

Meta, the tech giant that owns Facebook, signed a 20-year contract this summer to purchase all the electrical output from Constellation Energy’s Clinton nuclear plant in central Illinois to fuel its AI boom starting in 2027. A similar deal was inked last year between Constellation and Microsoft to restart the Three Mile Island nuclear facility to power its data centers in Pennsylvania.

Communities across the nation have blamed the surge of always-on, power-hungry data centers for the escalating electricity bills in recent years. However, a recent study from the Lawrence Berkeley National Laboratory suggests that the burden of data centers varies from state to state.

Ryan Hledik from the Brattle Group, an economic consulting firm that contributed to the study, noted, “This is a very nuanced situation,”. In states like Virginia and North Dakota, data centers have grown considerably without causing an increase in rates. The situation in Illinois is less clear, but ComEd, which supplies electricity to the northern half of the state, is predicting a 40 percent increase in demand by 2040 due, in part, to the data center boom. Whether this will lead to a rise in residential electricity costs is yet to be determined.

At the national level, a primary factor escalating rates is the increasing expense of modernizing the aging power delivery system — including power lines, poles, substations, and transformers — and safeguarding it against natural disasters induced by climate change. Nevertheless, the core issue of the imbalance between supply and demand persists.

“What we are seeing is that as utilities or markets are running out of spare capacity, new investments are going to need to be made to continue to support load growth,” said Hledik.