The Federal Energy Regulatory Commission (FERC) issued and discussed a new Notice of Proposed Rulemaking (NOPR) that would make significant reforms to interconnection rules and processes for generation developers looking to connect their projects to the transmission grid.
The commission noted at its June 16 meeting that the current “first come, first served” process has created a significant backlog of projects. Chair Glick said there are currently 8,100 projects in the queue representing more than 1,000 GW of new generation capacity and an additional 400 GW of energy storage capacity. He said it takes an average of 3.7 years for a project make it through the queue and be placed into service and that only around 23% of projects make it over the finish line.
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The new rules, the commissioners believe, would increase the speed of interconnection by imposing deadlines on transmission owners to conduct studies (or face penalties) and requiring more stringent financial readiness for developers.
Greg Geller, head of regulatory affairs at Enel North America, assessed the FERC interconnection NOPR from the perspective of a leading renewable energy developer:
“Enel’s criteria for evaluation are: will the NOPR lead to a more expedient, predictable (from cost and timing perspective), and standardized queue process.
First-ready, first-served is largely a standardization of what is now widely regarded as a best practice, so it will require nationwide implementation. However, it is important to note that first-ready, first-served is not substantially different from first-come, first-serve. First-ready, first-serve is, at its core, the implementation of higher readiness requirements and security deposits to enter the line. It does not eliminate the fact that there is a backlogged line, it just reduces the volume of studies slightly for transmission providers.
We welcome higher readiness milestones and the extra planning certainty it will provide grid operators, provided that developers also receive greater certainty on network upgrade cost and schedule. We believe the NOPR strikes this balance based on the materials we have seen to date. In addition, the readiness milestones need to be realistic so that you don’t inadvertently eliminate perfectly legitimate projects from the queue as we believe the PJM interconnection proposal will.
We are still reviewing whether the milestones outlined in the NOPR are realistic as readiness milestones need to recognize that development is inherently complex, regardless of generation type. It is infeasible to complete all development activity prior to entering the interconnection process and would result in millions of dollars of wasted money. Permits would be obtained and expire while waiting for interconnection studies and EPC work, environmental and cultural studies would be performed and expire, land rights would be obtained and expire, and so much more. Interconnection is only one of the many challenging parts of development, and transmission providers should be able to perform studies even if all development steps haven’t been completed.
If the transmission operator deadlines/penalties structure is effectively implemented, it will be one of the most impactful parts of the NOPR, and could meaningfully reduce the 3-7 years it takes in many regions. Effective implementation requires a proper balance between quality and speed. Regulators must provide oversight and ensure that transmission operators are well-resourced, that they properly evaluate solutions, and limit mistakes. This standard must also be applied to transmission owners, who currently need more resourcing and regulatory oversight of their performance. Transmission owners control two of the most significant pieces of the interconnection process: the facilities study, which involves upgrade design and estimates costs and schedules, and the engineering, procurement, and construction of upgrades. The affected system pro forma could also be very impactful and beneficial as it provides much-needed consistency across regions.
If the interconnection process models a resource or technology type to produce in a manner that is inconsistent with their actual performance, it will lead to higher costs and extended timelines that are ultimately passed on to consumers. For example, modeling a storage resource to charge during peak conditions could lead to high upgrade costs as it would exacerbate peak demand when in reality we know storage is unlikely to behave that way. We are reviewing the NOPR to see how exactly this is addressed.”
You can read a full breakdown of the FERC interconnection NOPR here.
