Going the Distance on Interconnection Queue Reform

FERC’s rulemaking takes us only part of the way to effective and efficient interconnection.

On July 27, the Federal Energy Regulatory Commission (FERC) released Order 2023 in an effort to reform the backlogged interconnection queues that are causing extensive delays to new clean generation trying to connect to the US grid. According to a recent Lawrence Berkeley National Laboratory study, nearly two terawatts (TW) of clean energy — 1.6 times the current US grid capacity — now languishes in regional queues. Long queue wait times and rising interconnection costs are currently a primary obstacle to a rapid and reliable US energy transition.

FERC’s rulemaking, which was initiated almost a year ago, contains several key reforms that could help alleviate these obstacles, including:

• Shifting from a “first-come, first-served” serial approach to a “first-ready, first-served” cluster approach. This new approach groups projects by location and time of queue entry and studies them together, instead of running a separate study process for each project. It also requires projects to demonstrate readiness through financial deposits and proof of site control at key checkpoints. FERC pairs these enhanced readiness requirements with withdrawal penalties to disincentivize developers from entering the queue until they are relatively certain about their project’s viability.
• Enhancing accountability and standardization in the administration of the interconnection process. This includes establishing financial penalties for transmission providers that fail to meet interconnection study deadlines and requiring a streamlined affected systems study process, which is triggered when a project in one region affects a neighboring grid region’s system.
• Accommodating new technologies and hybrid resources in queue study processes. The rule allows co-located resources (e.g., solar-plus-storage projects) to submit one request, making it easier for storage resources to be added to queue requests without forcing a reset on the entire process. It also directs transmission providers to use study operating assumptions for storage resources based on developers’ proposed charging behavior. This is important, as many transmission providers have been using operating assumptions for storage resources that do not reflect how they would dispatch in practice (e.g., that batteries co-located with renewables would charge during times of peak load).
• Requiring the evaluation of select alternative transmission technologies, including certain grid-enhancing technologies (GETs), in interconnection studies. GETs have the potential to provide lower-cost, more rapidly deployable solutions compared to traditional network upgrades, and their consideration during the interconnection study process is a promising step toward their more widespread deployment.

While FERC’s rulemaking is an important step in the right direction, more systemic changes are needed to fully address today’s interconnection challenges. Most RTOs today, for instance, already use a clustering methodology, yet they are still experiencing long interconnection wait times. To truly move the needle on interconnection, we must start focusing on the three root causes of queue delays.

1. Our transmission system is at capacity, and expansions are being planned in a reactive way that ignores the massive investments needed to bring new generation resources on line. Most transmission planners today, for instance, include only those resources with signed interconnection agreements in their assessment of transmission needs and ignore the gigawatts of capacity in each of their regional queues. This leaves it up to the interconnection process to build the infrastructure needed to connect these new resources — an inefficient, piecemeal approach to grid expansion that places the financial burden on individual projects to build network upgrades that benefit the entire system.
2. The interconnection study process is outdated and overly restrictive. Today’s interconnection process was created for an energy system in which a small handful of primarily thermal generators were seeking grid connection each year. That energy system and its legacy study process are becoming increasingly obsolete, as thousands of new and lower-cost generators now seek to connect to the grid.
3. Grid operators lack adequate staffing and resources, including advanced study software, to keep pace with the rapidly rising amount of new generation entering the queues. This not only contributes to the lengthy interconnection wait times, but also exacerbates the information deficit that developers face in trying to determine where they could most cost-effectively connect to the grid. Grid hosting capacity data is frequently out of date or inaccurate and does not provide developers with an easy way to estimate network upgrade costs, causing many developers to submit multiple queue entries to discover that information through the study process. This exacerbates both the initial volume of requests needing to be studied and eventual queue dropouts that trigger time-consuming restudies.

To begin to address these root causes in the short term, grid operators can focus on technological and process fixes that can enable faster deployment of the clean resources stuck in the queues, including:

• Analyzing and facilitating deployment of GETs to maximize available capacity on the existing transmission system, as Order 2023 requires transmission providers to do for certain types of GETs as part of interconnection studies;
• Establishing more streamlined interconnection study for resources that make use of existing interconnection infrastructure and rights (e.g., generation replacing a retiring unit or supplementing an existing unit), where such processes don’t exist;
• Updating interconnection study assumptions and utilizing best-in-class software tools to expedite study processes and provide useful information about the existing system to developers; and
• Hiring and retaining more, qualified staff.

In the long term, however, addressing these root causes requires re-envisioning what interconnection and grid expansion looks like in the United States. While we currently have an “invest and connect” approach in much of the United States, other regions (e.g., the UK and ERCOT) operate under a “connect and manage” model, which allows resources to connect to the grid expeditiously, addresses any immediate transmission bottlenecks through generation redispatch and curtailment, and manages grid upgrades through a centralized evaluation process. This more flexible approach could help bring resources on-line faster but requires concurrent proactive, long-term transmission planning to prevent excessive curtailment and ensure reliability, as well as the potential rethinking of existing capacity procurement mechanisms in parts of the United States.

Reforms to interconnection processes are coming at a critical time; significant clean generation deployment and the requisite transmission buildout are necessary to enable the energy transition at the scale and speed we need. The recent FERC order should be viewed as a step on the path to holistic grid reform, which we must keep traveling. By linking a more rapid and realistic interconnection process with a more proactive, holistic transmission planning process, we can create the grid of the future in a way that quickly and cost-effectively connects new clean resources, enables economy-wide decarbonization, and keeps the lights on.