The Interconnection Queue Continues to Be a Barrier to American Economic Competitiveness

Here’s how to improve it.

The race is on to power the artificial intelligence (AI) revolution. As AI becomes increasingly central to national security and US economic competitiveness, demand for electricity is surging. Yet companies seeking to build data centers — and other large loads like new manufacturing plants — are struggling to secure sufficient power in a timely fashion, delaying the construction and operation of facilities or requiring the addition of expensive and polluting backup systems.

To solve this, we need interconnection reform. There are two types of interconnection: load and generator, each of which follows a separate process. Load interconnection is connecting electricity-consuming facilities to the grid (e.g., data centers), while generator interconnection involves connecting electricity-producing resources to the grid. Last fall, the US Department of Energy (DOE) directed the Federal Energy Regulatory Commission (FERC) to initiate a rulemaking for load interconnection to accelerate the interconnection of large loads like data centers, signaling a federal push to streamline and speed access to grid capacity. Load interconnection has historically not been federally standardized, so DOE’s directive is notable.

However, accelerating load interconnection alone will not resolve the underlying challenge: connecting new loads more quickly only increases the urgency of bringing new generation online so the grid can supply the power they will require. Unfortunately, generator interconnection processes remain slow and plagued by high, uncertain costs, driving generator attrition and constraining the amount of new generation connecting to the grid in recent years.

Today, more than 2.2 terawatts of generation and storage projects are waiting in interconnection queues — nearly double the installed capacity on the grid today and more than enough to meet anticipated load growth. But only a handful of these projects are actually being interconnected each year; many are waiting multiple years for studies to be completed, and a sizable fraction are dropping out due to delays and/or unmanageable costs to connect. In 2024, the average time from initial interconnection request to commercial operation had risen to nearly five years, compared to under two years in 2008. Just 19% of projects that requested interconnection between 2000–2019 had reached commercial operations by the end of 2024. Interconnection costs, driven by network upgrades, have grown over time as well and can drive projects to withdraw from the queue when they exceed roughly 10% of a project’s overall capex.

Fortunately, there are many remaining, untapped solutions that can streamline processes and speed up generator interconnection timelines.

Exhibit 1: The interconnection process and the different reforms that could streamline it

To better understand the problem and the viability of possible reforms, it’s important to look at how generator interconnection works today. Every new power plant that wants to connect to the transmission grid must go through an interconnection process: (1) developers submit a request; (2) the system operator or transmission provider conducts interconnection studies to determine what transmission system additions (also known as “network upgrades”) are needed to maintain reliability once the new generation is online, and system operators allocate costs of the necessary equipment and network upgrades; finally, if the developer is willing to pay those costs, they sign an interconnection agreement (3) and proceed to construction of the project (4).

The primary drivers of today’s interconnection queue bottleneck are legacy, time-intensive study processes and transmission capacity constraints that are leading to highly uncertain, and growing, interconnection costs for developers. Other reasons for delay include understaffed transmission and interconnection planning teams, permitting challenges, and supply chain constraints. And while grid operators have started to make modest reforms to the interconnection process, with significant load growth poised to accelerate over the next several years, those changes will almost certainly prove insufficient to address the corresponding need for even more generation.

Reforms underway but are not a full fix

Recognizing the need for accelerated generator interconnection processes, in summer 2023 FERC issued Order 2023, which mandated that utilities adopt certain reforms, including a shift to cluster studies as opposed to serial processing, attempts to deter speculative or “ghost” interconnection requests, and firm deadlines for studies with financial penalties for delay. This served primarily to raise the floor on interconnection study performance, institutionalizing best practices that existed in several regions already.

While implementation is still nascent (and some regions have submitted compliance filings that do not achieve all of the order’s stated goals), Order 2023 was a good first step. More remains to be done, however, and past and current FERC commissioners and staff have acknowledged the need for continued efforts to streamline the generator interconnection process. As interconnection reforms continue to be proposed and discussed, it will be important to ensure that the reforms advance open, competitive access to the transmission system, do not discriminate between generation resources, and deliver faster, better results.

Additional solutions can further speed interconnection

FERC Order 2023 raised the bar on interconnection processes nationwide. Numerous additional solutions exist that could further speed up generator interconnection, some of which have been implemented in leading regions with impressive early results.

To address the primary problems facing generator interconnection today, we focus on reforms that speed study processing, reduce costs, or do both.

Reforms that deliver faster studies:

• Leveraging advanced software that can level-up study processes. Available third-party software exists that can provide workflow enhancements (reducing friction or lag time between study phases), automation of formerly manual, labor-intensive processes, and AI assists, enabling interconnection staff to focus their time and attention on the study tasks where their expertise is most needed. This can significantly reduce interconnection study timelines. For example, Pearl Street Technologies’ software has been deployed in MISO to automate parts of the study process, cutting a study phase down from months to days while maintaining high accuracy. Tapestry has recently unveiled a new AI-powered tool to analyze and provide a readiness review of interconnection applications in PJM, relieving engineers of a time-consuming study task. Such tools should be identified and deployed wherever practicable, facilitated by RTO-led RFP processes.

Reforms that reduce costs to interconnect:

• Ensuring that the fastest, least-cost transmission solutions are studied and deployed as network upgrades where feasible. Grid-enhancing technologies (GETs) and other advanced transmission technologies should be evaluated from the start of the study process to determine if they are viable as network upgrades. While FERC Order 2023 encouraged this, such evaluation is not yet rigorously conducted in many regions. These tools are so much faster and cheaper to install than traditional network upgrades that they are no-brainers to deploy where they make sense; it is imperative that studies seriously evaluate that potential. RMI analysis has shown that incorporating GETs could enable 6.6 GW of new generation to interconnect more quickly in PJM, yielding approximately $1 billion annually in production cost savings at a $0.1 billion installation cost. Quanta’s ATT Planning Guide provides industry best practices on integrating these technologies into interconnection studies. Software vendors like GridAstra offer products and services that automate and streamline such analyses.
• Improving the transparency and accountability around network upgrade construction. It’s not just network upgrade costs that can be high and burdensome; the construction process itself can be lengthy and lacks transparency. To alleviate this and create cost discipline for these projects, system operators or FERC could publicly post and regularly update a timeline for network upgrade completion for each project, either on the RTO’s website or in a centralized tracker kept by FERC. Further, interconnection customers should be duly informed of any changes to network upgrade timeline or cost estimates, on fixed schedules.
• Integrating the planning and operation of new load with new generation. Co-locating generation and load has the potential to reduce network upgrade costs for both, as this “hybrid resource” could be operated in ways that limit the extent the new load will draw on the grid at peak times, and vice versa. FERC recently issued an order directing PJM to develop better guidance for such co-location options. Going a step further, integrating the planning for new load, generation, and transmission, as Southwest Power Pool has proposed to do with its Consolidated Planning Process, can help ensure efficiencies and optimal investments by reducing piecemeal grid buildout from network upgrades and encouraging outcomes that are best for meeting all three needs.

Reforms that can speed studies and reduce costs:

• Standing up fair, competitive, fast tracks. In some cases, resources might merit quicker and less rigorous study processes because of their lower impact on the grid (which would also lower their costs to interconnect). It is critical to have defensible reasons for such fast tracks, and to ensure these maintain the principles of open access and non-discrimination that underpin wholesale electricity markets. Energy-only interconnection, surplus interconnection service, and generator replacement processes are three promising pathways for fast tracks that can both speed interconnection AND reduce costs.
  • Energy-only interconnection (ERIS) applies to resources that agree to operate on a “non-firm” basis, meaning they can deliver their power when there is available transmission capacity, and the grid operator reserves the right to curtail them when there are constraints. Thus, they do not require the same extent of network upgrades that resources seeking firm interconnection (capacity or “NRIS” service) might trigger. FERC has sanctioned separate study processes for such resources, since they are willing to be flexible, but quicker, more streamlined processes do not exist in many RTOs. That can and should be corrected. The California ISO (CAISO), for example, has a formal, separate track for ERIS studies. Only the local interconnection point and immediate transmission network are analyzed. Full deliverability modeling (as required for NRIS) is not performed.
  • Surplus interconnection service refers to adding new generation at the site of an existing plant, which would continue to operate. The capacity of the new generator would be sized to reflect the “unused” interconnection rights that the existing generator might not be fully utilizing in its current operations. Because the surplus resource would be leveraging existing interconnection rights, these studies can be completed in as fast as 180 days (or 6 months), and should avoid network upgrade costs altogether. FERC Order No. 845 sanctions the practice, but it is not yet utilized to its full potential because grid operators vary in how they implement surplus procedures; some require studies nearly as long and detailed as new requests, and others have created procedural issues that prevent certain types of generators from accessing this opportunity.
  • Generator replacement refers to adding new generation at the site of a retiring plant. The capacity of the new generator would not be able to exceed the interconnection rights of the retiring generator, and certain requirements around ownership and the timeline for replacement must be followed. The study process and lack of network upgrade costs are similar to the surplus process, for related reasons of essentially recycling an existing interconnection site. This process exists in some regions of the country (MISO, SPP, some utility territories, and was recently approved in PJM), but there is no FERC order standardizing the practice.

In order to ensure that interconnection processes can keep up with — and provide power for — the technological innovations reshaping the 21st century economy, grid operators and regulators must embrace a spirit of continual improvement. The reforms listed above are tried and true, and they should be scaled nationally with all possible haste. At the same time, more flexible interconnection paradigms, coupled with robust, scenario-based transmission planning, should continue to be developed and tested, as we work to build a grid that can support American success in this decade and those to come.

Interconnection reform will support American competitiveness

America’s economic and national competitiveness depend on a grid that can keep pace with private investment and innovation. The interconnection backlog isn’t just a technical issue — it’s a barrier to growth, jobs, and reliable power. While the studies themselves are necessary, we cannot let them become burdensome red tape that artificially slows grid buildout. Rather, interconnection should be modernized into a smarter, faster process, drawing from best practices across the RTOs and standardizing them at the federal level. By continuing the vital work of reforming the generator interconnection process, we can unleash private capital, strengthen energy security, and ensure the grid supports, rather than slows, America’s next industrial and technological boom.