The Federal Energy Regulatory Commission on Thursday approved a rule to speed up clogged interconnection processes that have left power generation and energy storage projects waiting years for permission to connect to the grid.
"Today is a historic day," FERC acting Chairman Willie Phillips said during a media briefing. “This rule will ensure that our country's vast generation resources are able to interconnect to the transmission system in a reliable, efficient, transparent and timely manner.”
The rule, called Order 2023, is the first major change to FERC’s interconnection requirements in two decades.
Interconnection queues around the country grew 40% in 2022 compared with the year before, with more than 10,000 projects — representing 1,350 GW of generation and 680 GW of storage — waiting for approval to connect to the grid, the Lawrence Berkeley National Laboratory said in an April report. The vast majority of the planned projects are solar, storage and wind.
The typical project built in 2022 took five years from its interconnection request to commercial operations, up from three years in 2015, according to the report.
“We've seen long [interconnection] wait lines, which is hurting our reliability, hurting our resilience, and raising costs for all customers,” Phillips said. “This rule is a major first step in our journey to addressing transmission reform.”
Largely following a proposal issued last year, the rule adopts a “first-ready, first-served” cluster study approach for examining what grid upgrades may be needed to safely bring a generator or storage project online. That process will replace the practice of studying individual proposals on a first-come, first-served basis.
In a move aimed at weeding out speculative projects that have little chance of being built, FERC is requiring increased financial commitments for interconnection customers to enter and remain in interconnection queues, Tristan Kessler, an economist with FERC’s Office of Energy Policy and Innovation, said during a presentation on the rule, which hadn’t been released as of Friday morning.
It requires interconnection customers to pay increased study deposits, meet more stringent site control requirements and pay commercial readiness deposits, Kessler said.
The rule also sets firm deadlines for regional transmission organizations and other transmission providers to complete interconnection studies, according to Kessler. It imposes penalties if the deadlines are missed.
The rule reflects advances in technology, such as solar paired with battery storage, to share an interconnection point. It requires transmission providers to consider grid-enhancing technologies when assessing what upgrades may be needed to bring new generation online. It also sets modeling and “ride-through” requirements for solar and other nonsynchronous generators to bolster grid reliability.
Grid operators already use some measures in the rule, but none use all of them, Phillips said.
Transmission operators will have 90 days after the rule is published in the Federal Register to file plans at FERC explaining how they will put the rule in place.
Rule draws praise
The rule represents “significant progress” toward interconnection reform, according to Adam Stern, senior manager for regulatory affairs at Enel North America, a renewable energy developer.
In a change to the proposed rule, FERC adjusted commercial readiness milestones so they line up with typical project timelines, he said in an email Thursday.
The rule codifies best practices that are already used in many interconnection queues, but it is too soon to know how effective it will be at speeding up those reviews, according to Stern.
“We will have to wait and see how the compliance process goes and how RTOs and public utility transmission providers expect to meet the requirements of the rule,” Stern said.
While the rule is “meaningful,” it doesn’t instantly fix the interconnection backlog, Victoria Lauterbach, a partner at the law firm Foley Hoag, said Friday in an email. Even so, a first-ready, first-served cluster approach will likely ease interconnection backlogs in regions that are not using that process, she said.
Transmission providers will be able to deviate from the final rule to reflect regional reliability characteristics, their independent judgment, or if they have a provision they show is at least as good as the rule, Lauterbach said.
Lauterbach highlighted as “significant reforms” the requirements that transmission providers allow projects to be co-located behind an interconnection point and to share a single interconnection request, and that in some cases a resource can be added to an interconnection request without it being deemed a “material modification” that could move it back in the queue.
“These practical reforms should provide greater freedom for developers of projects to structure their interconnection plans in efficient ways that work best for their own unique facility and site characteristics,” she said.
More to do
Various groups said the reform rule was a good first step at reducing interconnection queue backlogs, but that more needs to be done.
“The order does not address some of the root causes of mounting interconnection costs and delays, including an unnecessarily protracted and inefficient study process and unexpectedly high costs of transmission system upgrades, which are ultimately passed through to consumers,” Caitlin Marquis, Advanced Energy United managing director, said in a statement.
Enel’s Stern said that “We must prioritize creating certainty for generators, starting by ensuring interconnection studies reflect real-world operations and least-cost solutions and requiring better coordination between the interconnection and transmission planning processes.”
The interconnection reform package is “underwhelming,” according to Devin Hartman, director of energy and environmental policy at the R Street Institute, a free market think tank.
“The new status quo will still leave years worth of interconnection backlogs, keep grid upgrade costs at multiples of what is necessary, and delay new supply needed for grid reliability and clean [energy] transition,” Hartman said in an email.
FERC should prioritize supplemental efforts to tackle remaining interconnection issues, he said.
Phillips said he expects the interconnection reforms will “significantly” speed up the process, but “there is so much more to do.”
FERC is working to release a rule reforming transmission planning and cost allocation in the “coming months,” he said.
“Together, this interconnection queue reform, with long-term regional planning, [means] we will have the greatest transmission reforms in a generation to come out of FERC,” Phillips said.
