The Federal Energy Regulatory Commission’s pending interconnection reform proposal doesn’t go far enough, leaving potential cost savings untapped, a coalition of consumer and industry groups and the R Street Institute told the agency Thursday.
"It is a common misperception that interconnection reform benefits only generators and the clean agenda,” said Devin Hartman, director of energy and environmental policy at R Street, a free market think tank. “However, rapidly escalating interconnection costs are being heavily incurred by consumers.”
A recent study by the Lawrence Berkeley National Laboratory found the average interconnection costs for projects in the PJM grid operator’s interconnection queue increased to $240/kW in the 2020 to 2022 period from $29/kW in the previous two years. The cost increases were largely driven by network upgrades beyond the interconnecting substation, according to the lab.
At the same time, interconnection queues around the country grew 40% year-over-year in 2022, with more than 1,350 GW of generation and 680 GW of storage waiting for approval to connect, the Berkeley Lab said in an April report.
To address these issues, FERC a year ago proposed interconnection reforms that include requiring transmission providers to adopt a “first-ready, first-served” cluster study approach.
The proposal is “underwhelming,” according to Hartman. FERC’s proposal fails to address network upgrades, a key to reducing queue backlogs that delay new electricity supply from coming online in an era of tight reserve margins, he said.
FERC should consider how regional transmission planning can drive cost-effective network upgrades, according to the coalition, which includes the American Chemistry Council, Electricity Consumers Resource Council, the Electricity Customer Alliance, the Industrial Energy Consumers of America and the National Association of State Utility Consumer Advocates.
The cost of network upgrades can be dramatically reduced with proactive regional transmission planning that enables major reductions in generation interconnection requirements and delays, the groups said. The changes would affect a pending rulemaking on regional transmission planning, the groups said.
FERC should also consider a focused interconnection study approach that uses transparent, realistic study assumptions, the groups said.
They urged FERC to require improvements to how interconnection queues are managed, such as through advanced computing methods. If FERC doesn’t want to include the proposed reforms in the current proposal, it should issue a supplemental proposal that covers them, according to the groups.
“The commission could then confidently issue a comprehensive final rule that holistically addresses the root causes of excessive [generation interconnection] costs and queue backlogs,” they said.
Issuing a supplemental proposal would extend the rulemaking process, but would ensure “a more durable, effective final rule,” the groups said. As an alternative, the agency could issue a final rule based on the pending proposal, but commit to launching a fast-track rulemaking to cover the other interconnection topics, according to the filing.
The interconnection and regional transmission planning proposals have completed the public comment process. FERC acting Chairman Willie Phillips has said he aims to issue an interconnection reform rule as soon as possible.
