A feature of the Equity Accountability System, as established by the Climate and Equitable Jobs Act, is the ability of Equity Eligible Contractors (EECs) to request an advance of a portion of REC Contract value prior to the associated project’s Energization. This capital advancement pre-energization constitutes a significant departure from the standard structure utilized under Illinois Shines REC contracts (which feature payment only after verification of system Energization) and is intended to serve EEC-certified businesses exhibiting true need and to support a more diverse Approved Vendor pool.
To date, the Agency has received over 30 requests for capital advances summing to over $75 million, including many from firms or affiliates of firms with robust existing project portfolios. While the Agency has attempted to review requests on a case-by-case basis, the lack of established review and approval criteria has posed significant challenges in distinguishing between applications to determine genuine need for capital advancement.
Given the risks inherent in advancing capital before a system is developed and the goal of utilizing this tool to support only EECs facing barriers in access to capital, the IPA is diligently working to ensure prudency and transparency throughout the advance of capital process. Thus, the Agency makes the difficult decision to temporarily pause both the submission and the review of advance of capital requests while the IPA builds out a more robust approach to the review and approval of those requests.
Rationale for Pause
Due to the number, scale, and content of the requests for advanced capital that the Agency has received thus far, the Agency has concluded that the original process for requesting such capital is insufficient to provide a fair and transparent process. In the interest of prudent stewardship of State administered funding, collected from Illinois ratepayers, the Agency believes the best path forward is to refine and strengthen the process and criteria for requesting advanced capital under the Equity Eligible Contractor category of Illinois Shines within the framework outlined in the 2022 Long-Term Renewable Energy Resources Procurement Plan. Approved Vendors with pending requests for advanced capital will be able to resubmit those requests in conformance with the final request process and criteria.
The Illinois Power Agency (IPA) understands the difficulties this may cause for some Equity Eligible Contractors and did not make this decision lightly. The Agency looks forward to allowing for resubmission of advance of capital requests in the coming months.
As outlined in the IPA Act, an advance of capital under REC Delivery Contracts is only available “upon a demonstration of qualification or need” by an Equity Eligible Contractor for projects submitted to the Equity Eligible Contractor category of Illinois Shines. Any such capital advancement must be made in a manner “designed to overcome barriers in access to capital faced by equity eligible contractors.” As the entity tasked with implementing the Illinois Shines program, the IPA is responsible for determining whether an EEC has provided a sufficient “demonstration of qualification or need.”
Establishing a sound, consistent, and transparent basis for making those determinations is vitally important, as there is substantial risk in advancing capital prior to successful system development. While all other REC Delivery Contracts issued by the IPA only provide payment upon proof of project completion, capital advancement provides payment of state-administered incentive funding based only upon the promise of performance. As the IPA is not itself the counterparty to a REC Delivery Contract, the Agency is limited in its ability to claw back any prepaid funds that do not result in successful project development. Thus, to guard against waste, fraud, or abuse, an advance of capital must be limited to instances of genuine “demonstration . . . of need” by a firm facing down legitimate “barriers” in accessing capital.
To address these risks, in its 2022 Long-Term Renewable Resources Procurement Plan, the IPA proposed an application process for an advance of capital request consisting of a narrative description of need and milestones for disbursement. However, the 2022 Long-Term Plan did not outline what specific criteria the Agency would consider in evaluating that narrative description, what other characteristics of the equity eligible contractor itself must be considered, and how those criteria would be weighted in determining which advance of capital requests would ultimately be approved.
The need for a more detailed and precise approach to reviewing advance of capital requests has been brought into focus by the nature and magnitude of requests received to date. To further the equity goals informing the IPA Act’s Equity Accountability System, the IPA envisioned that successful requests would serve smaller firms with limited project portfolios working to grow emerging businesses: e.g., firms facing genuine “barriers in access to capital” capable of demonstrating “need.” But in opening the Equity Eligible Contractor category, the IPA has instead received 36 advance of capital requests totaling approximately $75 million, including from a) companies partially owned and primarily managed by large national solar companies featuring thousands of megawatts in their project pipelines, and b) companies having already successfully developed numerous projects under other Illinois Shines categories or under the Illinois Solar for All Program (thus demonstrating their ability to successfully develop projects without capital advancement, calling “need” into question).
In light of these challenges, the IPA is pausing consideration all advance of capital requests. To move forward, the IPA believes that it must first outline the specific criteria it will utilize in reviewing advance of capital applications. While the IPA and its Program Administrator have attempted to gather relevant information from Equity Eligible Contractors requesting an advance through several requests for clarification from our Program Administrator, responses received indicate that the market needs additional clarity regarding the criteria for receiving an advance of capital.
Consequently, the IPA plans to spend the coming months outlining a more detailed and precise application review and approval process to ensure that only advance of capital requests that demonstrate genuine need for overcoming barriers to accessing capital are approved. That process will include a new application template and other supporting materials to help guide entities requesting a capital advance, further improving the transparency and consistency of the process.
Our aim is that this process will provide clarity and certainty back to Program participants while ensuring that the advance of capital mechanism reliably benefits entities with genuine need and supports a more equitable clean energy economy.
|IPA to develop review and approval process||September – October 2023|
|IPA to publish finalized review and approval process||November 2023|
|IPA to publish supporting resources for Approved Vendors to help navigate the advance of capital request process||November 2023|
|IPA to lift pause on advance of capital request submissions and reviews||November 2023|
*Deadlines outlined here are tentative and subject to change
Questions & Answers Related to Advance of Capital Pause
- Will submitted Part I applications that have requested an advance of capital along with the application be on hold or permitted to move forward while this process gets sorted out?
- Approved Vendors will be offered the choice of either holding their projects until the advance of capital pause is lifted OR moving their projects forward through the application process while the advance of capital pause is in effect. The Program Administrator will contact Approved Vendors to confirm whether to hold or move forward any such applications.
- What if I choose to move my pending Part I application forward and the application is Part I or Part II verified prior to the conclusion of the pause on advance of capital requests?
- If an application is Part I verified and ICC-approved, the applicable utility will execute the REC Contract. Under the contract terms, the Approved Vendor is then required to execute the REC Contract within seven business days and post collateral within 30 days. Approved Vendors that do not execute a REC Delivery Contract and post collateral after project selection, the Commission’s approval, and the utility’s contract execution may face disciplinary measures impacting their status as an Approved Vendor in the Program moving forward; any such discipline will be based on the Program Administrator and IPA’s review of the circumstances under which the contract was declined to be executed. Discipline may include a possible suspension or termination of the Approved Vendor’s status under the Program. Approved Vendors are permitted to hold applications that are ready for ICC approval until the advance of capital request is resolved; see question one above for this process.
- If a Part I application that was submitted with an advance of capital request is Part II verified prior to the end of the pause on advance of capital requests, the Approved Vendor will be able to invoice for the incentives for the project according to normal invoicing processes.
- What happens to my pending advance of capital request?
- Any advance of capital requests that have already been submitted to the Program will not be reviewed or processed during the advance of capital pause.
- Once the pause of advance of capital concludes in November, all Approved Vendors that originally submitted a request for advance of capital will be able to rework and resubmit their request(s) in line with the Agency’s newly published guidance.
- If you believe that the original advance of capital request submitted aligns with the published guidance, once finalized, and does not require resubmission, that is permitted. The Agency will work to review all pending requests (resubmitted or previously submitted) once the pause concludes.
- Will I be able to resubmit my already submitted advance of capital request after the IPA completes and publishes its final review and approval process?
- Yes, all Approved Vendors that have submitted advance of capital requests will have the opportunity to rework and resubmit their requests after the IPA releases the finalized review and approval process and lifts the advance of capital pause.