ARE SOFT COSTS AND INTERCONNECTION QUEUES EATING UP THE PROFITABILITY OF YOUR RENEWABLE ENERGY PROJECT?
- Nov 23, 2021 7:39 pm GMT
*******There may be ways to dislodge your project from the interconnection queue.**************
Renewable energy, and solar energy in particular, are experiencing exponential growth nationally. Solar capacity is expected to more than double over the next five years as interconnection queues from Texas to California to Hawaii fill with solar projects. The U.S. EIA projected wind and solar accounted for 75% of new generation in 2020. Battery energy storage systems (BESS) are rapidly evolving into an increasingly cheap and effective technology frequently paired with 6% of wind and 34% of pending solar projects and the pairing is poised to explode. Despite the rapid growth, not all is rosy.
Interconnection queues and “soft costs” for renewable energy projects (the non-hardware costs associated with going solar, e.g. permitting, financing, installation, etc.) are a growing share of total development costs. Applying for and getting an interconnection agreement — a long, complicated, and expensive process — is a key component of the development of renewable power. Soft costs are driven up when processes and expenses for going solar are slow or inefficient.
Americans for a Clean Energy Grid (ACEG) reported that at the end of 2019, an eye-popping 734 gigawatts of proposed generation were waiting in backlogs, with wind and solar projects making up about 90% of the backlog. ACEG reported these costs have dramatically risen and interconnection charges now make up as much as 50 to 100% of the generation soft costs. With wait times stretching into 3-5 years, and developers expected to burden millions in interconnection and upgrade costs, is it any surprise many developers (some with already negotiated PPAs) pass on costs to customers or drop out of the queue all together?
In some regions FERC is taking two steps to address soft costs and interconnection queues. First, in July, it issued an Advance Notice of Proposed Rulemaking in which the Commission will consider a more holistic transmission planning and cost allocation, developer interconnection processes, and planning the grid of the future resulting in rates that are just and reasonable. Second, in October and jointly with NARUC, it initiated a Joint Task Force on transmission (including queue issues) with the first meeting set for November 10th.
But what about in areas where FERC is not active or where wait times are making project abandonment a stark reality? Are developers simply left to accept long interconnection queues and sky-high costs as a simple fact of life---gambling on the future viability of their project? Maybe not. #renewableenergy #electricity #solar #solarenergy #interconnection #FERC #PUC #solarenergy attorney #utilityscalesolar #rooftopsolar #PV
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