The sudden closure of Vistra Energy’s Havana, Illinois, coal plant two years ago was a win for the climate and ratepayers, but a devastating blow to the tax base that the local school district, parks, and libraries depended on.
The sweeping energy bill that passed in Illinois this month promises a “just transition” for communities like Havana that are affected by power plant closings. The law includes incentives to build solar and storage on the site of former coal facilities. The provisions are complicated and limited but could create many construction jobs and tax revenue depending on how companies like Vistra embrace the concept.
For small towns like Havana that have seen coal plants close or expect closings, relief can’t come soon enough.
“Most rural communities in downstate Illinois — we’re shrinking, not growing,” Havana schools superintendent Mathew Plater said. “Getting something [unrelated to the power plant] that can offset some of that loss is unlikely. When you lose the power plant — for something small like our library board, it makes up 50% of their budget. It’s the same way for the park board. It’s catastrophic.”
Plater was glad to hear the promises, but he remains skeptical that they will really help his school district, which typically took in about $770,000 in taxes per year from the now-closed coal plant.
For more than a year, Vistra had been pushing for funding for solar and energy storage on the sites of closed coal plants. The company backed a state bill last year called the Coal to Solar and Energy Storage Act that would have created significant incentives for companies to build such projects on closed coal plant sites. Plater said Vistra representatives often asked the school district and other local leaders to help lobby for the proposal.
“Vistra supported the Coal to Solar framework as a means to help provide a responsible and just transition in plant communities, and to reuse the considerable infrastructure already at plant sites, including transmission lines and interconnects,” Vistra spokesperson Meranda Cohn said.
The energy law signed by Gov. J.B. Pritzker on Sept. 16 includes scaled-back components of Vistra’s proposal, offering grants for energy storage built on the site of five coal plants statewide and incentives for utility-scale solar built on coal plant sites.
The Illinois law mandated all fossil fuel plants close by 2045, though most of the state’s coal plants were already scheduled to close within a decade.
Chris Setti is CEO of the Greater Peoria Economic Development Council, which includes Havana as well as communities where several other coal plants are slated to close in coming years. He noted that while the closures mean job losses, employees often don’t live in the immediate community, and in Havana’s case many employees were transferred to other plants.
“But then there’s the economic activity around that facility. Employees would get off work and stop at the Hardees, the Casey’s, the gas station, have lunch on their lunch break,” he said. “And the thing we’re most concerned about is property taxes. The things you spend money on with those property taxes don’t go away when a plant closes. There’s still a police department, a fire department, schools. So the burden has to be borne by the rest of the business community and property owners.”
Storage and solar
The new law makes grants of $110,000 per megawatt of storage capacity available to five coal plants in Illinois, three in downstate MISO territory and two in northern Illinois PJM territory. The energy storage projects must include labor agreements, equity provisions and pay prevailing wage, and be at least 37 MW. The total grants are capped at $28 million per year, which would mean an average of 51 MW possible at each site if all five are built.
Vistra plans to build 37 MW storage projects at the site of the Havana plant, its long-troubled E.D. Edwards coal plant — scheduled to close next year — and its Joppa plant, all in downstate Illinois.
A separate part of the law incentivizes utility-scale solar at coal plant sites and former coal mines, offering the right to sell renewable energy credits from the solar for $30 each. The law creates a total of 400,000 to 625,000 such RECs annually — which would represent about 300 MW of capacity — with 15- to 20-year contracts. By contrast, the value of RECs for utility-scale projects awarded at auctions in the past has been around $10 each, according to experts involved in the bill negotiations.
Under the new law, the same coal plant site cannot receive both the premium RECs and the energy storage grant. However, the company must build energy storage along with solar to qualify for the premium RECs.
Vistra plans to build solar installations of between 20 and 60 MW at its six plants that are not slated for the 37 MW storage projects, and it plans 3 to 9 MW of energy storage at each of the solar sites.
A statement from Vistra noted that, in all, it plans to build 300 MW of solar and 150 MW of storage at its nine coal plant sites, which would create more than 2,200 construction-related jobs and “generate over $180 million in earnings for workers and add over $300 million to the state’s economic output from 2022 to 2025.”
“In aggregate, the Coal to Solar framework funds these development initiatives at levels based on what is likely commercially feasible to develop at the various sites,” Cohn said.
The companies must make upfront investments because the programs are pay-for-delivery, meaning a project must enter commercial service before the company is paid. Any excess collections made under Coal to Solar are refunded to customers if not used to support the development of renewables.
Vistra acquired the nine plants in 2018 during its merger with Dynegy. Dynegy had acquired five of those plants from Ameren in a 2013 deal where Ameren essentially paid Dynegy to take them off its hands. Vistra has announced closing dates within the next six years for at least five Illinois plants, totaling 4,500 MW.
The law is written to prioritize energy storage and solar in the central and southern part of the state, and Vistra, which operates plants there, was the main entity pushing for the measures. But NRG coal plants in northern Illinois are also eligible for solar RECs and storage grants.
“The law creates an opportunity for NRG to develop energy storage and potentially solar at several of our power plant facilities in the state,” said NRG spokesperson Dave Schrader. “We look forward to working with key stakeholders, including local communities, as we prepare to advance these projects.” He added that in considering whether to move forward at any plant, NRG would consider “many factors … such as feasibility, regulatory hurdles, economic benefits, and stakeholder input.”
Hard times
In Havana, a recent agreement with Vistra means it will pay greatly reduced property taxes over the next three years, dropping to 64%, then 42%, then 23% of what it previously had paid. Cohn noted that the company negotiates such agreements with communities to avoid an even steeper drop-off in tax revenue.
New taxes generated by the energy storage project likely wouldn’t kick in until 2025. Plater said federal pandemic aid for schools has helped mitigate the reduced tax revenue from the plant closure thus far, but the district will have to dig deep into reserves and cut costs in the next few years.
“It’s nice that there’s light at the end of the tunnel — in the end maybe we’ll look back on this and it ends up being a good thing — but we’ll have some super lean years,” Plater said.
Cohn said the new storage and solar projects will generate three to four times more tax revenue than the closed coal plants and land value.
“Former power plants have no practical taxable property tax value,” Cohn said. “In comparison, the new zero-emission generation provides new, stable taxable value for the communities for the next few decades. … It is possible, based on a variety of factors, that a new renewable plant could generate more property tax revenue than during the final years of a legacy plant’s operations, though that is not the likely outcome across the fleet.”
Plater said that he and other local officials have been frustrated by what they see as arbitrary and opaque processes that determine the property value of energy-related sites.
“As soon as our plant closed, all the taxing body leaders started meeting on a regular basis,” Plater said. “What we learned very quickly is that the assessment of power plants isn’t consistent across the state,” in terms of how the value is assessed and hence how much taxes the companies pay. “It’s all been pretty loosey goosey. It would be nice if Illinois passed some legislation to make it black and white and uniform, where everybody is playing by the same rules.”
Plater worries that the energy storage Vistra builds could be a “token” installation that doesn’t generate much tax revenue. He also wonders whether Vistra might build utility-scale solar affiliated with the site, but just across the Illinois River outside their county, which would mean they would not reap the tax benefit. Cohn said the Havana site and the two other plants where 37 MW of energy storage are planned are not large enough for solar on-site.
A separate component of the new law created community energy transition grants that Havana could apply for, and Plater and others have been exploring the possibility.
Earlier bills called on power companies like Vistra to fund such just transition investments, but ultimately the law passes the costs on to ratepayers. Plater said he would have liked to see power companies pay but didn’t expect it.
“We’re dealing with big money, big business, deep pockets; over the last two years I’ve come to learn they are always 10 steps ahead of us,” Plater said. “They just got everyone to pay to invest in clean energy that will make them profit. We’re helping them get richer, but at the same time we need them here. If it helps Illinois reach its clean energy goals, it will be a win-win-win for everybody, as long as everybody keeps their promises.”
A cleaner future
The transition grants could help redevelop parts of the site or adjacent land that isn’t being used by the power company.
Setti said people in Havana are worried “they are just going to have this hulking vacant structure, and a brownfield. You can’t just move in and open a brewery — it was a coal plant.”
A vacant plant that becomes an “eyesore” is also a constant reminder for people of what they lost, Setti said. “The people of Havana probably just want their power plant back — a lot of those people were fine with the way things were. We recognize the value and importance of clean energy but [the closure] probably still smarts for a lot of them.”
Yvonne Long grew up in Havana, and now hopes she can help build a different energy and economic future for the town still “near and dear” to her. She is operations manager for Hawk-Attollo Solar Development Partners, which specializes in helping nonprofits, including local government entities like wastewater treatment facilities and community centers, take advantage of solar tax credits. The company launched in 2016, and Illinois’ 2017 Future Energy Jobs Act helped their business blossom. But, like solar companies across the state, they have struggled since RECs created by that law ran out.
“All of our projects rely on RECs,” Long said. “Larger commercial projects have a bottom line that allows them to front the cost of an asset like solar. We have tax-exempt nonprofit organizations that don’t have that budget. Utility costs are often over 50% of their operating costs, so [saving money on energy bills] is a big way to provide impact for these smaller organizations. Larger developers don’t have an appetite to do that; they shy away from those smaller projects. That’s why I love what we do — we’re filling that gap.”
They are hopeful the robust new REC funding for distributed solar created by Illinois’ new energy law will help bring more solar installations to Havana, saving money for the same government agencies that have been hurt by the coal plant closing.
“Obviously there’s the opportunity for large-scale developers to come in and put utility-scale projects on closed power plants, but it’s important to bring in distributed solar as well,” said Hawk-Attollo owner Jason Hawksworth. “To prioritize distributed projects to support local nonprofits and local entities that were operating off of tax dollars [paid by the coal plant] — that’s important. We hope to see some of the incentive dollars go to help communities that were impacted by these plant closures, getting them back on their feet, bringing good jobs to the communities.”