The Interconnection Queue is Broken - Episode 88

The US has enough renewable energy stuck in the permitting process to fully replace every single gas and coal facility on the current power grid. But the interconnection process, a convoluted analysis of impact, costs, siting and permitting requirements, has become a chokepoint for getting new renewable projects built. Only a percentage of those projects being developed are likely to ever come to completion.

In this episode, Paul discusses some of the reasons as to why the interconnection queue has swelled to more than 2 Terrawatts of proposed capacity - and what we can do about that.

For further research:

"FERC approves PJM’s ‘first-ready, first-served’ interconnection reform plan, steps to clear backlog" - Utility Dive

"Explainer on the Interconnection Final Rule" - FERC

"Why the energy transition broke the U.S. interconnection system" - Utility Dive

"Queued Up: 2024 Edition - Characteristics of Power Plants Seeking Transmission Interconnection As of the End of 2023" - Lawrence Berkeley National Laboratory

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Transcript

This is Eight Minutes – a podcast helping you understand the energy and climate challenge in just a few minutes – I’m your host, Paul Schuster.

According to the Lawrence Berkeley National Laboratory, over 95% of all *proposed* new generation in the States is wind, solar or some form of renewable energy. What’s more is that the total amount of renewable generation being developed is around 2 Terrawatts of capacity – which is more than the total EXISTING capacity of the power grid TODAY!

But … as incredible as those numbers are, the reality is that only a percentage of those projects will likely see completion due to the complexities of the interconnection process here in the US. The number of projects in the interconnection queue, waiting for the approval to come online, has skyrocketed in the past few years – and delays are becoming longer and longer. A utility scale solar project could take 6 or more years to fully develop – and that’s just too long.

So - What’s driving this backup? Why has interconnection become a critical chokepoint in transforming to a clean energy system and what are federal and state governments doing to address this critical issues?

Eight Minutes – it’s how long it takes the sun’s rays to hit earth – or 3 minutes 57 seconds and 5 one-hundredths of a second longer than it took Leon Marchand, the superstar French Olympic swimmer, to break the Olympic Record in the 400M Individual Medley this past weekend. Viva La France – and Let’s get it on!

As I mentioned in my intro, the LBNL issued a report that, at the end of 2023, almost 2 terrawatts of renewable energy generation was in some stage of development and had applied for interconnection to our power grid.

That’s a LOT of renewable power … that is just sitting in development limbo as we try to figure out how best to connect it all.

While we’ve made a ton of progress in lowering solar module costs or improving battery storage or building bigger wind farms – our interconnection process has not evolved nearly quickly enough to support this clean energy transition. Why is it that we currently have more than enough renewable generation lined up to FULLY REPLACE every coal and gas power plant in the US … but we can’t get them approved fast enough?

To understand the interconnection queue, we have to understand a bit about how the US power grid evolved in the first place. as Emma Penrod points out in an excellent piece in Utility Dive, the US was an early adopter of electricity and, as such, an early developer of transmission. And, because of that, there wasn’t really a central planning function for developing the grid in the most efficient, overall way. Rather, decisions were left to the local or state level as to what power plants to build and what transmission would be needed.

Generally speaking, that state level model still exists – and though the Federal Energy Regulatory Commission holds some limited authority over transmission, siting and permitting of new generation is still controlled at the state level.

Which means that coordination BETWEEN states is … not always very fruitful. Whereas a wind project in Iowa may be the best, low cost, low emissions option for delivering electricity to, say, Chicago in Illinois … the cross-border politics can be messy. And sometimes it’s easier for an authority to permit a new gas facility in their state because the approvals and permitting can get done while an interstate transmission project would be a dead end.

But it’s not just the cross-border issues that are holding back project development. Let me step back and let’s understand that every power project coming online is going to affect the grid in some way. And utilities, regional transmission operators, independent system operators – these entities want to understand the impact of that addition and whether other parts of the grid are at risk. For instance, if a new solar plant comes online, will it require an upgrade to a local substation or new capacity on a transmission line?

Each new generation project, then, applies for interconnection and the governing authority conducts an impact assessment. That analysis then gives the developer a sense of the costs that will be needed to safely connect their project.

There are three big issues with the way that those impact assessments are done right now. First, is that a project has to apply for interconnection IN ODER TO run the analysis in the first place. Project developers have very little information or a clear line of sight into how much those interconnection costs could be UNLESS they apply. And those costs could be enormous – maybe as much as twice the capital cost of the facility in the first place.

Because the end costs can be so opaque – some project developers have taken to proposing projects into the queue JUST TO GET the analysis done – and with only the bare minimum of development effort done for the project, itself. Kind of a speculative effort, if you will.

That’s created a frothy queue as more projects are being proposed than could possibly be actually built – that 2 terrawatt number I’ve referred to a couple of times? Only about 10-15% of that is likely to *actually* see completion.

The second big issue regarding the interconnection process is how those costs are determined in the first place. A holdover from our history of localized, decentralized decision making is that each new project coming online is ultimately responsible for the entirety of the costs to interconnect to the grid. A systemic look, where the overall grid stability and operational efficiency is considered and where *all* projects bear marginal investment costs … well, that’s not the way it’s done. And that makes some *really good* projects prohibitively expensive because the burden to bear the full interconnection costs are too much.

And then the third issue is around the prioritization of how assessments are made. For the most part, this prioritization has followed a “first-in, first out” process, where the system authority looks at whichever project got into the queue first. PJM (and later FERC) realized that this was putting a lot of strain on administrators and analysts who were doing a lot of assessments for … speculative projects that weren’t nearly ready for completion. In 2022 and 2023 respectively, both of those authorities issued rules that changed the prioritization to one of “first-ready, first out” … applying priority to those projects that were most shovel ready.

That was a necessary first step, but hardly the panacea for interconnection reform. Other steps need to be taken, such as having transmission managers opening up their information systems and sharing data more publicly so that developers can anticipate costs better ahead of time. And breaking down the barriers for cross-state transmission, something that the Infrastructure act instructed the FERC to take a look at.

And then there are work-around solutions that are emerging from an industry that is getting a bit fed up with the lack of progress on the transmission front. This includes new grid enhancing technologies that coax additional capacity from exiting assets. Or battery storage, which can allow grid operators a lot more flexibility in how they connect renewable assets to the grid.

But the underlying issues of the permitting process remain – and will take time to sort out. The good news – there is a LOT of pent up renewable generation that is waiting to come online. But without systemic reform of the interconnection process, it’s just going to take a LOT of time for us to see those new projects come to completion. 

I’m Paul Schuster – and this has been your eight minutes.