FERC’s New Interconnection Rule Modernizes the Process to Bring Clean Energy Online

This summer, the Federal Energy Regulatory Commission (FERC) issued a new major rule, Order No. 2023, to revamp and revitalize the interconnection process by which new energy resources get hooked up to the power grid. In the order, FERC raised the bar for electricity market operators and utility companies around the country to connect new resources through faster, more efficient, and more transparent processes.

Right now, more than 2,000 gigawatts of solar, wind, and battery storage projects are waiting to connect to the grid, a process that often takes five years and keeps getting more costly. While the changes take aim at one of the major bottlenecks to bringing clean energy to the power system, more comprehensive action linking interconnection processes with transmission planning is needed to successfully speed up decarbonization of the electricity sector.

The Interconnection Queue Problem

Though interconnection processes vary across the country, they have one unfortunate commonality: interconnection takes way too long.

In order to connect a new resource to the power grid, the grid operator must perform studies to determine the network upgrades that might be needed for the grid to accommodate new resources. And because one upgrade should benefit multiple future energy resources, the grid operator must also determine which energy resources should pay how much.

Unfortunately, the time and money it takes a proposed project to get through this interconnection queue and study process continues to grow. Nationwide, the study process takes an average of five years. In the country’s largest electricity market, PJM, interconnection queues became so backlogged that the grid operator stopped taking new interconnection requests under a two-year “freeze.” The cost of interconnection has doubled in many regions over the past few years; cost containment measures are urgently needed. From 2000 to 2017, only 21 percent of proposed projects had reached operation.

This rule is the first major change to interconnection processes in 20 years—and it is long overdue. As evidenced by the growing wait time for clean energy resources, the current interconnection process has not kept up with the significant shifts in the power sector over the past two decades.

Ensuring that new clean resources can come onto the power grid more quickly and efficiently is critical to achieving state and federal climate goals. As the rising human and financial costs of fossil fuels lead to the retirement of old dirty power plants, interconnecting clean new energy will be essential to environmental justice and to meet growing energy demand at a price that is affordable to consumers.

FERC’s Interconnection Reforms for the Modern Grid

FERC’s new interconnection rule standardizes common-sense reforms to how new energy resources are studied and how power grid information is shared. The most blockbuster of these reforms shifts how the studies themselves will be conducted: rather than the serial, sequential processing of the queue, grid operators will now be required to study potential new generation in groups. This “cluster” study approach has been increasingly adopted in larger electricity markets, such as CAISO in California, PJM in the Mid-Atlantic, MISO in the Midwest, and NYISO in New York, but the standardized requirement is expected to improve processing times significantly in areas that were still processing requests with the first-come, first-served method.

The rule also adds bite to the timeline requirements for grid operators to study and offer contracts to potential new generation. Previously, the timeline was essentially toothless guidance that grid operators simply had to make “reasonable efforts” to keep up with applications. Under the new rule, grid operators that do not meet these deadlines will face significant financial penalties based on the extent of the delay.

The new rule requires grid operators to provide greater public information about congestion on the grid so that developers of new resources can make more informed decisions about where new energy resources would be least costly to develop. While the rule doesn’t go as far as we would like – as detailed below – it is an improvement from the current lack of information. Previously, many clean energy resources entered into the interconnection queue without a good estimate of what the total costs of upgrade might be. If project costs turned out to be more than a developer could afford, the project was killed. From 2001 to 2017, for instance, 72 percent of proposed projects ended up with drawing from queues. The significant number of projects that drop out of the queue exacerbates the backlog of studies — when one project drops, it can trigger the need to redo studies with those parameters updated.

Finally, the new rule modernizes some components of the interconnection process to align with today’s more technologically advanced grid and power sector. FERC will require that grid operators allow resources of different but complementary types (such as wind and solar, or solar and storage) to connect at the same point and in a single request, further accelerating the process of getting these resources online. FERC will also require grid operators to consider grid-enhancing technologies will further lower costs.

These changes won’t be immediate, but they will provide a lifeline to clean energy projects currently stuck in the queue and jumpstart the process for future projects soon. Grid operators have 90 days to submit their compliance plans. The order also provides a transition period for markets that do not currently use cluster studies, and markets that already have cluster studies will follow their existing timelines where applicable.

More Comprehensive Grid Fixes are Necessary

While these long-overdue reforms are intended to speed up interconnection of clean energy resources, more sweeping action is needed to process requests at the pace needed to reach climate goals.

As we explain in our request for clarification and rehearing from FERC, some of the proposed elements of the rule could have been strengthened. For example, while increased public information on power grid congestion will help developers plan better, expanded information on the type and age of existing infrastructure would allow for better estimates of what upgrades might be needed. Additional information could also serve environmental justice purposes, such as revealing which projects would serve populations that are already overburdened by higher prices or higher pollution. On the grid modernization front, grid operators should be required to pursue cost-saving grid-enhancing technologies, not just study them.

FERC must also take action on categories of reform they considered “out of scope” for the recent rulemaking. This includes taking action to reduce the monopoly power of incumbent generation owners, and in turn, drive down costs for consumers. For example, FERC should encourage competition for the interconnection of “replacement” generators that utilize the infrastructure and interconnection rights no longer being used by a dirty retired generator. Doing so would also be a bridge to considering how interconnection processes can help address environmental justice issues, as old, dirty peaker plants are disproportionately located in low-income and communities of color.

Finally but perhaps most importantly – and as the Commission recognized when it first began its reconsideration of the interconnection process – clogged interconnection queues are just one of the grid bottlenecks preventing faster decarbonization. In order to realize the benefits of its new interconnection rule, FERC must pursue complementary action on transmission planning, siting, and development. At a minimum, we must double current transmission capacity by the end of this decade, but the existing regulatory framework does not yet prioritize construction of new transmission to drive development of necessary large-scale projects.

One of the main concerns of an interconnection process is how to allocate the limited amount of available capacity on transmission lines. Thorough transmission planning to rapidly expand the amount of transmission capacity available in strategic locations will make interconnection a faster and less costly process and unleash the rapid deployment of clean energy projects across the U.S..