As data centers drive electricity costs higher, energy sector reform fails in Springfield

SPRINGFIELD — Heading into the end of the legislative session, consumer advocates, renewable energy industry groups and environmental advocates were hopeful about a bill that would have overhauled Illinois’ energy industry.

It would have been the largest energy reform in years, touching almost every part of the state’s electricity sector, including the power demands of the burgeoning data center industry.

But lawmakers declined to take up the bill, kicking the can down the line on energy reform for the second time this year, after initially punting on the issue during the January lame duck session.

“It was a confluence of factors,” said Christine Nannicelli, a Sierra Club organizer and longtime environmental advocate. “To a certain extent, it was a product of running out of time.”

The push for an energy reform package grew out of a growing sense of concern that the state won’t be able to meet its ambitious climate goals. The rise of power-hungry data centers has placed significant demands on the electric grid at a time when the supply of electricity is stagnant or falling.

This situation already has led to higher prices — residential ComEd customers will see their monthly bills rise an average $10.60 starting this month.

While lawmakers couldn’t do anything to halt those increases, the prospect of prices staying high for longer has frustrated some advocates.

“We’re gonna lick our wounds,” said Anna Markowski, who works on Midwestern issues for the Natural Resource Defense Council.

Signals that negotiations were heating up — and possibly breaking down — came two weeks before session ended Saturday. A proposal from environmental groups to impose new costs on data centers drew fierce public criticism.

A letter urging Gov. JB Pritzker to oppose the proposal was released by a coalition of interest groups including the AFL-CIO, Climate Jobs Illinois, Illinois Manufacturers’ Association and Constellation Energy — the last of which operates the state’s commercial nuclear power plants. A similar letter was signed by several economic development officials from around the state.

The provision, which would have required data centers and other large electric customers to fund new energy developments to offset their demand, was dropped from the bill shortly after.

While the data center provision drew the most public controversy, other parts of the bill were being negotiated until the last minute, reflecting a lack of consensus among activists, industry groups and other stakeholders.

The bill also would outline a battery storage incentive program, similar to how the state incentives solar energy. Advocates for the program said it would spur historic levels of private sector investment in renewable energy.

Nannicelli said a part of the measure was opposed by some labor organizations, contributing to the bill’s demise.

“These are critical issues to get right for consumers and working families that shouldn’t be forced by a deadline,” Joe Duffy, executive director of the labor-affiliated group Climate Jobs Illinois, said in a statement. “We look forward to continuing conversations over the summer to take the time needed to get it right.”

The program also drew serious concerns from some industrial groups. The Illinois Manufacturers Association worries the rate increases to pay for the battery program would have cost businesses too much.

An estimate from the American Petroleum Institute, which represents businesses that operate refineries, pegged the cost of the program over the next 11 years at about $9 billion.

“My main argument at the macro level is that it’s very expensive for very little return,” said Jim Watson, who handles API’s efforts in Illinois. “And it does little to address capacity issues.”

An analysis from the Solar Energy Industry Association found the savings from a battery storage program would outweigh the costs, saving consumers money in the long run.

“Unfortunately, Illinois’ spring legislative session ended without a lasting solution to the continued and unprecedented energy cost increases that are taking money out of families’ wallets,” Lesley McCain, head of the Illinois Solar Energy & Storage Association, said in a statement. “While this was a disappointing conclusion to the session, we have every reason to believe leaders in Springfield remain committed to moving Illinois’ clean energy transition forward.”

While the bill contained several other provisions, another major issue on the table was lifting the state’s long-standing moratorium on new nuclear power developments.

The state loosened restrictions two years ago, allowing for the development of small nuclear reactors that have become possible in recent years thanks to technological breakthroughs. Those remain in the early stages of commercial development.

Ending the nuclear moratorium for large nuclear reactors was one of the least controversial issues in the bill. While some environmentalists were opposed, others did not feel strongly about it. Business groups were broadly in favor of it.

Like other aspects of the bill, it may return in a future legislative session. But for a broader reform package, it’s back to the drawing board.

“If you kick the can down the road, even a month, things could have pretty significant impact,” Nannicelli said. “We need to make a clear decision: who’s going to pay for these costs of unprecedented load growth that’s coming in large part from data centers?”