FERC has a new plan to connect clean energy to the grid more quickly

The Federal Energy Regulatory Commission on Thursday unveiled a new plan to speed up and streamline what’s become a slow and expensive process of connecting new solar, wind and battery projects to U.S. transmission grids.

Years-long waiting times and potentially project-killing grid-upgrade costs are preventing hundreds of gigawatts’ worth of clean energy projects from being connected to U.S. power grids. These snarled-up interconnection processes are threatening to drive up energy prices and reduce grid reliability, and have become major barriers to building the carbon-free resources needed to forestall the most catastrophic harms of climate change.

FERC proposed a host of major regulatory changes meant to unclog these bottlenecks. The proposed rules would require transmission grid operators, transmission-owning utilities and energy project developers alike to take on new responsibilities, with the potential for financial penalties if they fail to do so.

The proposed rules now face months of comment and debate between energy developers, grid operators, utilities, state regulators and other stakeholders. FERC could make significant changes to them before it votes on whether to adopt the rules.

And while FERC’s notice of proposed rulemaking would adopt many interconnection reforms long sought by clean energy groups, it does not address the contentious issue of how the costs of upgrading the grid to handle new power projects could be shifted from project developers to the customers served by the grids they’re connecting to.

Clean-energy groups praised FERC’s new proposals, while also highlighting that these cost-allocation issues remain a major problem to be solved. 

“The proposed package of interconnection reforms is extraordinarily important, and would go a long way toward addressing the huge backlogs we’re seeing across the country,” Gabe Tabak, counsel for the American Clean Power Association trade group, said in a Thursday interview. ​“However, the most important aspect not in the proposed rule is how to allocate the costs of network upgrades. We expect that FERC will need to tackle that issue in the near future.”

Enrico Viale, head of renewable energy developer Enel North America, said in a Thursday email that while FERC’s new proposal ​“represents significant progress, there’s still work to be done” — notably ​“addressing the participant-funding piece of this puzzle.”

FERC voted unanimously to propose the rules, underscoring the consensus that today’s interconnection processes need to be reformed to bring energy resources online more quickly to provide low-cost and reliable power to increasingly stressed grids, FERC Chair Richard Glick said in a Thursday press conference.

Glick cited recent analysis showing that projects are lingering for an average of three and a half years in interconnection queues, and that less than one-quarter of the solar, wind and energy-storage projects that have sought to interconnect have actually succeeded in doing so.

“This is not a partisan issue at all,” said Glick, a Democrat appointed by President Trump and named as FERC chair by President Biden. ​“Everyone agrees this is a problem.” While FERC has undertaken interconnection reforms in the past, ​“this is far and away the most aggressive” such effort in the agency’s history, he said.

New standards, deadlines and penalties for transmission operators and utilities

FERC’s plan incorporates many proposals from clean energy developers. Those include requirements for utilities and grid operators to streamline and standardize the studies that determine whether projects can connect to the grid and what grid upgrades those interconnections will trigger.

Clean-energy groups have long complained that these studies have grown too complex and costly as the number of projects seeking to connect to the grid has skyrocketed. This chart from a Lawrence Berkeley National Laboratory survey of the country’s largest grid operators and utilities indicates how rapidly interconnection requests have grown over the past decade.

Some parts of the country are facing backlogs as long as several years. FERC’s rules would set deadlines for grid operators to complete these interconnection studies or face financial penalties.

“The most significant part of these reforms is the built-in accountability for utilities,” Ben Norris, senior director of regulatory affairs for the Solar Energy Industries Association trade group, said in a Thursday statement. ​“For years, utilities have been dragging their feet on interconnection, and this rulemaking would implement deadlines for completing interconnection studies and create penalties for utility inaction. This will add more predictability and transparency to the process, and greatly speed review times.”

The rule would also require grid operators and transmission-owning utilities to standardize their approach to ​“affected-system studies,” which measure the impact on their grids of projects being proposed in another grid operator’s territory, often hundreds of miles away. These affected-system studies have become a major source of uncertainty and delay for project developers.

Commissioner Mark Christie, a Republican, noted that FERC’s proposal is meant to assist, not interfere with, interconnection reforms underway at the regional transmission organizations and independent system operators that manage the transmission grids providing electricity to about two-third of U.S. customers.

Christie cited a new reform proposal from grid operator PJM, the country’s largest, that would address many of the concepts laid out in FERC’s proposed rule. That includes a switch from studying projects one at a time to studying them in ​“clusters” to simplify and streamline the process.

But PJM is also proposing to delay studying more recent interconnection requests in order to prioritize older requests. That could speed the process for about 1,200 projects but leave about 1,250 newer ones waiting until mid-decade for consideration.

New responsibilities and proving points for project developers

At the same time, FERC’s proposed rules would also place more burdens on energy project developers to prove that they’ve secured land rights, construction permits and customers for the energy or services they will provide.

That’s meant to reduce the number of duplicative or speculative interconnection requests that have caused queues at the country’s biggest grid operators to swell to thousands of projects. Many parts of the grid have far more projects seeking interconnection than they could possibly absorb.

Glick described the sharing of responsibilities between transmission operators and project developers as the ​“yin and yang” of interconnection reform, with ​“additional burdens on both transmission providers and on generators in order to expedite the process.”

Many grid operators and utilities have been shifting from ​“first-come, first-served” processes, which have few safeguards to weed out speculative interconnection requests, to ​“first-ready, first-served” processes, which put more burdens on project developers to demonstrate that their projects have a significant prospect of being completed as planned.

FERC’s new proposal on this front ​“continues and expands the types of reforms that have been put in place over the last 15 years,” Rob Gramlich, founder and president of consultancy Grid Strategies, said in a Thursday email. ​“It’s the obvious thing to do, probably necessary, and will surely thin out the queues.”

“The unfortunate aspect of such rules is that they can become a barrier to entry to smaller companies,” he said. Those companies may have a harder time securing land rights or paying deposits, some of them nonrefundable, to secure their place in line.

Gabe Tabak of the American Clean Power Association questioned the use of the term ​“speculative” projects. ​“It’s probably more accurate to call some interconnection requests today ​‘exploratory,’” he said. ​“In most cases, it’s impossible to know what the upgrade costs will be, or the interconnection capacity available, until there’s an interconnection request.”

FERC’s proposal would seek to fix this by ordering grid operators and utilities to create ​“informational connection study” processes that would allow developers to assess the available capacity and potential upgrade costs at different parts of the grid without filing interconnection requests.

The rule would also call on grid operators to create ​“interactive visual representations” of grid capacity. That’s a similar concept to the hosting-capacity maps that many state regulators have ordered utilities to create to give developers and customers a clearer view of where the grid can support new energy projects.

This kind of visibility is important for developers if they’re going to take on additional financial burdens under the ​“first-ready” structures being proposed, Tabak said. So is requiring transmission providers to get studies done more quickly and transparently, he added.

“Our members can generally live with those increasingly stringent requirements on them,” he said. ​“The flip side is equally stringent requirements on the transmission provider to get the studies done in time. If generators have to pay more, with deposits that may not be refundable, and gain site control, but don’t get any certainty on the timing of the studies or the costs that come out of the studies, it’s a very lopsided arrangement.”

Standards and technologies for bringing clean energy and energy storage onto the grid

FERC’s notice of proposed rulemaking aims not only to standardize how transmission operators share grid information with developers but also how they assess the kinds of energy projects being built today. For example, there’s a proposal to require utilities to set reasonable standards for how they interconnect projects that combine batteries with solar and wind power.

Such ​“hybrid” projects make up a rising share of those seeking connection to the grid, as indicated in this LBNL chart of the types of projects awaiting interconnection across the country’s major grid regions.

But many of these projects have been subjected to interconnection processes that incorrectly assess their grid impacts using ​“highly unrealistic assumptions” that can saddle them with high upgrade costs or bar their interconnection altogether, Tabak said. For example, some grid operators assume that batteries will be discharging their maximum amount of power at times when the grid is already overloaded, he said. But battery systems can easily be controlled to avoid doing that, and they would most likely lose money if they did discharge at those times.

FERC’s proposal would standardize how storage and hybrid projects are treated in interconnection studies, which would open the door to ​“study resources based on how they actually operate,” Gramlich said. ​“I’m glad they are changing the rules on batteries and hybrids, and they should do the same for renewables,” he suggested.

That could be done by allowing wind and solar projects to volunteer to limit their power exports at times when they could otherwise overburden grid circuits. FERC’s new proposal also calls for ​“market mechanisms” — such as congestion pricing that discourages generation when parts of the grid can’t handle it — to be applied to how projects’ grid impacts are assessed.

Another component of FERC’s proposal calls for grid operators to ​“evaluate alternative transmission solutions” when developers ask for them. That’s a nod to the potential for ​“grid-enhancing technologies” that can help mitigate the potential grid impacts of projects.

For example, dynamic line rating systems that use sensors to collect real-time data on power lines have been shown to increase the amount of wind power that can be moved across transmission networks. And advanced power flow controls and ​“topology optimization” can analyze and route electricity across less-congested parts of the network.

Commissioner Willie Phillips, a Democrat, said during Thursday’s meeting that these grid-enhancing technologies could be deployed more cheaply and quickly than major grid upgrades, which ​“could save customers money as we move forward and make these investments.”

Cost allocation: The missing piece 

FERC’s new plan does include proposed rules that would spread the costs of grid upgrades now borne by individual project developers across an entire group of projects within the same interconnection-study ​“cluster.” But that change doesn’t get at the heart of which parties should be responsible for paying for grid upgrades that benefit not only projects seeking interconnection but also the power grid at large, said Elise Caplan, director of electricity policy for the American Council on Renewable Energy trade group.

“It appears from today’s discussion that the use of a cluster approach could at least partially ameliorate that outcome,” Caplan said in a Thursday email. ​“But this approach would not necessarily address the need for a wider cost-allocation framework, which would more accurately reflect the widespread distribution of the benefits of these upgrades.”

Tabak noted that California grid operator CAISO uses a system that allows project developers to recoup the costs of grid upgrades over time, through transmission charges collected from utility customers across the grid operator’s region. Utilities outside the parts of the country that are organized into regional transmission organizations and independent system operators use similar cost-recovery methods that reduce the financial burden on project developers, he said.

But the country’s other six grid operators use ​“participant funding” methods that assign most or all of the costs of grid upgrades to the project that triggers them, he said. Those grid-upgrade costs have risen from an average of 10 percent of a project’s overall costs to as much as 50 to 100 percent of a project’s costs over the past five years, according to analysis from Grid Strategies.

“New network upgrades, which almost always benefit all users, still get charged exclusively to generators” in most cases, Gramlich said. ​“Hopefully, FERC will follow up and address participant funding next.”

Glick said that FERC is planning to issue proposed rules on cost allocation ​“sooner rather than later” as part of its broader work on transmission policy reform. ​“There are a lot of items we haven’t addressed yet, and this is one of them,” he said. ​“We’re going to address it. I can’t tell you exactly when.”

A consensus that interconnection problems need to be solved

Thursday’s notice of proposed rulemaking is the second major transmission policy proposal to emerge from a broader FERC review launched last year to tackle a host of transmission grid challenges. The first, issued last month, focused on jump-starting long-term transmission planning that’s fallen by the wayside over the past decade, which has left large swaths of the grid without the capacity to connect the massive number of projects seeking to be built.

But expanding the grid takes a long time, and FERC must take action in the meantime to help reduce interconnection problems, Glick said. ​“Our queues are clogged” with more than 8,100 active projects awaiting interconnection around the country, he said, representing more than 1,000 gigawatts of generation capacity — about 90 percent of it solar and wind — and more than 400 gigawatts of energy storage.

“That’s gigawatts, not megawatts,” he emphasized. ​“Clearly, we need to move things along much more speedily. It’s important for reliability; it’s important for consumers to access that lower-cost power.”

FERC Commissioner James Danly, a Republican, noted in Thursday’s meeting that he voted against last month’s proposal on the grounds that it improperly privileges renewable energy over dispatchable fossil-fueled power plants.

But ​“that’s not the case here,” he said of the interconnection reforms. ​“I think the problems with the interconnection queue are widespread and manifest.” 

Commissioner Allison Clements, a Democrat, highlighted that FERC’s proposed rules will require ​“give and take from all stakeholders,” including project developers and transmission providers, to work through bottlenecks. But in the end, those compromises should ​“make transmission interconnection faster, more predictable and more cost-effective,” she said.