One of the biggest challenges facing our nation’s economic growth – and one of the largest threats to consumer energy costs and the reliability of our electricity system – is the ability to quickly connect new, large-scale energy resources to the transmission grid.
There’s now roughly 2,600 GW worth of energy sources stuck waiting in line to connect to the power grid (more than double the capacity of the current electricity system), held back by an antiquated way of studying and approving transmission grid upgrades. This process, known as ‘generator interconnection,’ was designed for an increasingly bygone era. In an era of more dynamic, more cost-effective, more distributed advanced energy resources, grid operators and electric utilities need a new approach for bringing new energy resources online.
We’re overdue for an overhaul. Last year, the Federal Energy Regulatory Commission (FERC) took an important step in issuing Order No. 2023, which made important, but incremental changes to the generator interconnection process. This week, recognizing that fully resolving interconnection challenges is an ongoing effort, the Commission will hold a two-day workshop (September 10 and 11) to consider further reforms
In celebration of this opportunity to elevate the innovative solutions being discussed at FERC’s workshop, Advanced Energy United is leading a campaign we’re calling #InterconnectionWeek.
Please join us and others in the clean energy industry bringing attention to this critical challenge by using our social media toolkit and the #InterconnectionWeek hashtag in posts by individuals, organizations, and companies.
While FERC Order No. 2023 provided important alignment of nationwide interconnection processes and requirements to filter speculative projects out of interconnection queues and impose more structure and certainty into the process, the rule was limited in scope. Even when releasing Order No. 2023 last year, Chair Willie Phillips made clear that FERC was not finished with interconnection policy reform; he announced plans for this week’s workshops soon thereafter. A new report, Unlocking America's Energy: How to Efficiently Connect New Generation to the Grid by Grid Strategies and The Brattle Group, co-commissioned by Advanced Energy United and the Solar and Storage Industries Institute (SI2), proposes additional reforms that can unlock more efficiencies to speed up interconnection processes. We also featured these reforms in a recent Advanced Energy United webinar, Accelerating Interconnection Reforms for a Stronger, More Affordable Grid, featuring report co-author Rob Gramlich of Grid Strategies, as well as representatives from United member company Clearway Energy Group, R Street Institute, and the Clean Energy Buyers Association.
The recommendations in the paper target the root causes of interconnection challenges:
- lack of available transmission capacity to accommodate new resources connecting to the grid
- lack of upfront cost and schedule certainty that causes project developers to rely on the interconnection process as a cost discovery tool, and
- an overly conservative identification of costly and time- and labor-intensive network upgrades needed to reliably connect new resources to the grid.
These factors together lead to oversubscribed queues, unrealistic study results, project withdrawals, and cascading restudies, all of which add up to an interconnection process that is unnecessarily and unacceptably long, uncertain, and costly and ultimately a grid that is less affordable and reliable. Grid operators earned mostly Cs and Ds in a scorecard we published earlier this year evaluating interconnection outcomes and processes across the country. Order No. 2023 makes critical improvements that will help mitigate these challenges but falls short of fundamentally resolving them.
Unlocking America’s Energy offers a new vision of the interconnection process, one in which proactive transmission planning and efficient use of already-available interconnection capacity are utilized to set an upfront price for interconnection and connect the “most ready” projects to the grid quickly via fast-track processes. As transmission planning catches up with the interconnection backlog, these fast-track processes become the norm, while the current cluster study process serves as a backstop only for projects that require network upgrades beyond those already anticipated. A streamlined and standardized interconnection study process would take full advantage of grid-enhancing technologies and non-wires solutions, and leverage automation—and therefore move projects through more quickly and identify ways to avoid costly network upgrades. After interconnection agreements are signed, transmission construction delays are reduced and cost increases are contained, enabling more projects to reach commercial operation more quickly.
Each day for the rest of this week, which we are declaring #InterconnectionWeek, we will be expanding upon one of each of the recommended reforms from Unlocking America’s Energy.
Reform One: Adopt An Interconnection Entry Fee (September 10 Update)
Reform Two: Implement A Fast-Track Interconnection Process (September 11 Update)
Reform Three: Further Optimize Interconnection Studies (To Be Added September 12)
Reform Four: Speed Up the Transmission Construction Backlog (To Be Added September 13)
Reform One: Adopt anInterconnectionEntryFee
Lack of available transmission grid capacity (“headroom”) to accommodate new resource entry, as well as uncertainty with respect to interconnection costs and timelines, result in oversubscribed queues and a process that is less efficient and cost-effective than it should be. Unlocking America's Energy proposes an “entry fee” approach as the first step to make the interconnection process more predictable and efficient. Conceptually, an “entry fee” transforms the interconnection process from a very expensive and time-consuming cost discovery process that many projects won’t survive to a process focused on actually interconnecting projects ready and willing to pay the known cost to connect to the grid.
Under this approach, system capacity is assessed and proactively built through a long-term, multi-driver, and scenario-based planning process that accounts for projected new generator interconnection needs. Interconnection costs are set prior to the interconnection process based on the cost of expanding interconnection capacity. In effect, this proposal is the confluence of combining the long-term transmission planning process and the interconnection study process, a concept that has long been discussed among interconnection reform advocates.
Once system capacity has been planned or identified (in the case of existing capacity), or both, interconnection customers with ready-to-develop projects compete to gain access to this available capacity based on their willingness to pay the posted entry fee and reasonable exit penalties (as applicable). Grid operators would subsequently confirm, through a streamlined process, the reliability of specific interconnection requests, and identify any local upgrades not addressed in the proactive planning process. This will greatly reduce risk and uncertainty around interconnection costs and timelines for developers, ultimately translating to more efficient and cost-effective market entry and more competitive electricity markets.
Former Chair of the Arkansas Public Service Commission, Ted Thomas, wrote in Utility Dive recently about this “innovative solution” to removing uncertainty. Thomas added, “an entry fee model works best when combined with proactive transmission planning that anticipates future generation development needs and expands the grid accordingly — instead of a piecemeal, facility-by-facility expansion that ultimately costs consumers more.”
An example of an interconnection process that follows this structure is the “fast-track” approach which we will discuss in tomorrow’s post about Reform Two.
Reform Two: Implement a Fast-Track Interconnection Process
Reform Two explains how to make best and fastest use of existing and pre-planned available grid capacity (“headroom”) through “fast track” processes.
Fast-track processes reduce interconnection timelines and provide greater schedule certainty by expediting interconnection requests that require no or minimal upgrades because they utilize existing and already-planned grid capacity. In addition to existing headroom and new headroom that will be opened up through proactive planning (as discussed in Step One), over 100 GW of aging existing generating resources are projected to retire over the next decade, creating additional opportunities for new resources to interconnect without requiring significant upgrades. For projects that do not require system upgrades, requiring them to proceed through time consuming cluster study processes is unnecessary and less efficient for all parties—including projects moving through the cluster study process.
In concept, the “fast-track” process is relatively simple, and follows an approach already in place in regions that offer workable “generator replacement” processes. Once headroom is transparently identified, the transmission provider would screen whether interconnection requests result in no or only minimal adverse impacts on the system. Those that pass the impact screen would advance on an expedited basis to the interconnection agreement phase of the process, while those that don’t pass the impact screen would proceed through the full interconnection queue process to identify necessary upgrades. If interest in the fast-track exceeds availability, a fair and transparent prioritization would limit entry.
Over time, as proactive planning catches up with backlogged interconnection queues, most projects should be able to advance through fast-track processes, with the existing cluster study process serving as a backstop rather than the default.
In parallel, interconnection process reforms (Reform Three, to be discussed next) will both expand availability of the fast-track and expedite and improve the process for those projects still moving through the existing cluster study process.
