FERC's Interconnection Reform: Why It Matters for the Clean Energy Transition

On July 28, 2023, the Federal Energy Regulatory Commission (FERC) issued a 1,500-page rule on a seemingly obscure topic: how to improve the process for plugging new power plants into the grid. So how did the obscure topic of connecting new generation to the grid cross over into popular media Interconnection is about safely and efficiently getting power from where it’s being generated to where it gets consumed. It’s like a train with engines and stations; if one doesn’t work, it could interrupt the entire system. Here’s how the process of getting things interconnected works: a new generation project proposes where it wants to connect to the grid and the utility then conducts a series of reliability studies to determine whether the project can connect safely. The interconnection story is a classic good news/bad news story. The good news is that there are over 2,000 gigawatts (GW) of proposed generation facilities waiting in interconnection queues across the country—enough generation to replace every existing generator in the country twice over. The bad news—and it’s pretty grim—is that these clean energy programs are so popular that interconnection queues across the country buckled under the demand. On average, it now takes more than half a decade for the average proposed generator to fully proceed through the interconnection study process to commercial operation. Anecdotal evidence suggests that a combination of inflationary pressures, supply chain concerns, siting and permitting restrictions, speculative interconnection positions, and lengthy interconnection study timelines are all contributing to the high rate of failures. The Non-Technical Barriers Initiative at Columbia University’s Center on Global Energy Policy (CGEP) recently launched a survey of PJM generation developers aimed at uncovering the root causes of the high failure rates. This low success rate has alarmed state regulators and grid planning officials, who were counting on new generation to replace conventional fossil fuel generation resources that are retiring due to project economics or new state and federal environmental regulations. FERC noted that “[b]acklogs in the generator interconnection process … can create reliability issues as the needed new generating facilities are unable to come online[.]” Against this troubling backdrop, regulators at FERC began a process to overhaul the interconnection process on July 15, 2021, culminating in the release of a national standard for interconnection two years later. Order No. 2023, as it is known, moves the system from a “first-come, first-served” methodology to a “first-ready, first-served” cluster study system (Figure 2). While establishing new best practices for interconnection is a critical step forward, more fundamental reforms will likely be required. The number of projects coming through the interconnection queues in the US has increased more than tenfold over the past decade, and continues to be well in excess of the collective ability of all the RTOs to process those requests, even under the new rules adopted by FERC. Indeed, large swaths of the country Below the authors briefly discuss what next-generation interconnection reforms might look like and assess FERC’s proposals. Experience shows that an upgraded grid leads to cheaper and faster interconnections. A topic that FERC does not address in its final rule is the question of whether the current suite of interconnection studies needs to be replaced with a more “focused” set of interconnection studies, an approach often referred to as “Connect and Manage.” Under this, utilities focus first on what grid upgrades are necessary to allow the generator to safely connect to the grid, leaving questions around more significant grid upgrades to subsequent studies or a holistic transmission planning process. In exchange for speed, interconnecting generators effectively accept higher congestion and curtailment risk, at least until additional deliverability studies are complete and any necessary grid reinforcements built. FERC did not tackle this fundamental rethink of the interconnection study process, but in a promising sign that it remains open to a Connect and Manage approach, FERC commissioner Allison Clements noted in her concurrence that “a more ‘focused’ interconnection process that streamlines study scope and reduces the need for restudies for projects requesting energy-only service” was a “promising idea.” While many commenters highlighted the potential value of GETs, One major interconnection process improvement is Order No. 2023’s directive for utilities “to maintain and make publicly available an interactive visual representation of available interconnection capacity” (commonly known as a “heat map”), as well as provide a host of additional information about how the grid would respond to injections of power at various points. FERC’s heat map mandate is a critical step toward requiring utilities to provide more grid transparency. Access to upfront information limits the number of speculative interconnection requests and provides interconnecting customers more certainty about the cost and scope of upgrades. Grid operators in both Australia Interconnection policy is a significant test of whether the US will be able to get its electric grid ready to meet the challenges of a decarbonized future. While FERC’s recent actions help, the next generation of interconnection reforms will likely need to simplify the interconnection process, incorporate better study technologies, and encourage holistic transmission planning. Finally, the complex procedural delays hindering generator interconnection are not unique to the United States, and many European countries are exploring innovative strategies for accelerating interconnection. Many of these programs hold important lessons for the US, which will be the subject of a future Energy Explained article. https://www.ferc.gov/news-events/news/ferc-transmission-reform-paves-way-adding-new-energy-resources-grid. https://www.youtube.com/watch?v=9PlWqdCj8_g. https://www.npr.org/transcripts/1176462647; and Brad Plummer, “The U.S. Has Billions for Wind and Solar Projects. Good Luck Plugging Them In,” New York Times, February 23, 2023, https://www.nytimes.com/2023/02/23/climate/renewable-energy-us-electrical-grid.html. https://emp.lbl.gov/sites/default/files/queued_up_2022_04-06-2023.pdf(“All Queued Up”). https://www.pjm.com/-/media/library/reports-notices/special-reports/2023/energy-transition-in-pjm-resource-retirements-replacements-and-risks.ashx. https://sipacolumbia.co1.qualtrics.com/jfe/form/SV_8uFBXni3r6JWQce. https://www.pjm.com/-/media/library/reports-notices/special-reports/2023/energy-transition-in-pjm-resource-retirements-replacements-and-risks.ashx. See also Order No. 2023 at p. 3. https://cdn.misoenergy.org/20220725%20Board%20of%20Directors%20Item%2002a%20Reliability%20Imperative%20LRTP625714.pdf. https://www.smart-energy.com/news/gets-can-pay-for-themselves-with-transmission-line-savings-in-under-one-year-report-says/; Jonathan Spencer Jones, “Energinet’s Dynamic Line Rating Improves Capacity up to 30%,” Energy and Grid Management, Smart Energy International, June 1, 2023, https://www.smart-energy.com/industry-sectors/energy-grid-management/energinets-dynamic-line-rating-improves-overhead-capacity-by-up-to-30/; Department of Energy, “Grid-Enhancing Technologies: A Case Study on Ratepayer Impact,” 2022, https://www.energy.gov/sites/default/files/2022-04/Grid%20Enhancing%20Technologies%20-%20A%20Case%20Study%20on%20Ratepayer%20Impact%20-%20February%202022%20CLEAN%20as%20of%20032322.pdf; Bruce Tsuchida, Linquan Bai, and Jadon Grove, “Building a Better Grid: How Grid Enhancing Technologies Complement Transmission Buildouts.” Watt Coalition and the Brattle Group, https://www.brattle.com/wp-content/uploads/2023/04/Building-a-Better-Grid-How-Grid-Enhancing-Technologies-Complement-Transmission-Buildouts.pdf. https://www.aemo.com.au/energy-systems/electricity/national-electricity-market-nem/participate-in-the-market/network-connections/connections-simulation-tool. https://www.terna.it/en/media/press-releases/detail/econnextion-dashboard-online.