FERC Unanimously Approves New Grid Interconnection Rules
The Federal Energy Regulatory Commission (FERC) voted unanimously on July 27 to approve the most sweeping changes in twenty years in how electricity from new sources gets connected to the transmission grid. Previously, first in time, first in right was the rule. Those who filed grid connection plans first got them approved first.
There is nothing inherently wrong with that approach, but in practice it led to thousands of interconnection proposals from prospective energy suppliers who were using their applications to reserve their place in line. Meanwhile, many had no actual plans to generate electricity. Those would come after their interconnection request was approved. Working their way through the mountains of pending requests jammed up the approval process at regional transmission operators (RTOs).
As of the date of the new rule, the US had 1,250 GW of installed capacity while 2,000 GW of new capacity sat waiting for permission to connect. The system in place previously often meant a delay of 5 years from the time an interconnection request was approved until electrons from a new project started flowing. As the demand for more electricity skyrockets due to hotter temperatures across the nation, the new capacity needed was stalled in the interconnection approval queue.
The new rule shifts away from the previous “first filed, first approved” process to a “first ready, first served” approach. To make the change work, FERC is now requiring applicants for interconnection to adhere to much more stringent procedures. No more, “Let’s wait and see if we get approved before we start down the road toward actual planning.” Now applicants must show they have a fully formed plan in place. If so, and if they can get their project up and producing electricity quickly, they move to the head of the line.
CleanTechnica readers may chose to look at it this way. When an electric car manufacturer burst upon the scene, it may begin taking “reservations” with no commitment from buyers. Sometimes a modest, fully refundable deposit is required, but not always. Presto! Within days (sometimes minutes if we are talking about the Tesla Model 3), the manufacturer can claim to have millions of orders pending.
Those who reserve first get their cars first. Sounds simple, huh? But some of those reservation holders have no intention of actually buying a car. They figure maybe they can flip their reservation to someone else and make a little money in the process. Some may have placed their order just so they can brag about it to their friends. Others may simply not have the money to buy the car when it becomes available. A simple, straightforward process now has disruptions that jam things up and slow the whole process down.
The new FERC rule basically says, “Put your money where your mouth is and we will do everything we can to get you connected as soon as possible.” Another change allows one interconnection request to include both generation and storage. Previously, if a solar farm wanted to include an onsite battery, that counted as two separate requests. What if one got approved but not the other? Uncertainty leads to delays and higher costs.
Utility Dive reports the new rule is aimed at weeding out speculative projects that have little chance of being built. FERC is now requiring increased financial commitments for interconnection customers to enter and remain in interconnection queues, said Tristan Kessler, an economist with FERC’s Office of Energy Policy and Innovation. Interconnection customers now must pay increased study deposits, meet more stringent site control requirements, and pay commercial readiness deposits, he added.
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 those deadlines are missed.
An Historic Day For FERC
“Today is an 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. We’ve seen long [interconnection] wait lines, which is hurting our reliability, hurting our resilience, and raising costs for all customers. This rule is a major first step in our journey to addressing transmission reform.”
Phillips noted that “getting to this day required significant effort from all involved and was truly an unprecedented undertaking.” He pointed out that the record in this proceeding was “one of the largest in FERC history. There were over 4,500 pages of comments filed for the Commission to review and consider.” As a result of the “lengthy record, this final rule is one of the longest in FERC’s history. It represents the largest and most significant set of interconnection reforms since the pro forma interconnection procedures were created two decades ago.”
Phillips added that “this is FERC’s first major transmission reform in a generation. Our country has a severe interconnection backlog. Currently, there are 2,000 gigawatts of resources in interconnection queues — the largest backlog in history. We have wait times of over five years. The average project needed today won’t even begin construction until 2028. Interconnection reforms are desperately needed to speed up this process. Connecting new resources to the grid quicker and more efficiently will help provide more reliable, resilient and affordable electricity to everyone.”
The Nuts & Bolts Of The FERC Rule
According to the Public Power Association, the final rule adopts the following reforms:
Implement a first-ready, first-served cluster study process
- Transmission providers will conduct larger interconnection studies encompassing numerous proposed generating facilities, rather than separate studies for each individual generating facility. This approach will increase the efficiency of the interconnection process, help minimize delays and improve cost allocation by analyzing the transmission system impacts of multiple projects at once.
- To ensure that ready projects can proceed through the queue in a timely manner, interconnection customers will be subject to specific requirements, including financial deposits and site control conditions, to enter and remain in the interconnection queue.
Speed up interconnection queue processing
- The final rule imposes firm deadlines and establishes penalties if transmission providers fail to complete interconnection studies on time, but transmission providers may appeal their penalties at the Commission.
- Additionally, the rule establishes a detailed affected systems study process, including uniform modeling standards and pro forma affected system agreements.
Incorporate technological advancements into the interconnection process
- The final rule requires transmission providers to allow more than one generating facility to co-locate on a shared site behind a single point of interconnection and share a single interconnection request. This reform creates a more efficient standardized procedure for these types of generating facility configurations.
- The final rule allows interconnection customers to add a generating facility to an existing interconnection request under certain circumstances without such a request being automatically deemed a material modification.
- The final rule requires transmission providers to use operating assumptions in interconnection studies that reflect the proposed charging behavior of electric storage resources.
- The final rule requires transmission providers to evaluate alternative transmission technologies in their cluster studies.
- Finally, the final rule establishes modeling and performance standards for inverter-based resources.
Positive Feedback From Industry Observers
CNBC reports that the response from industry experts has been positive. “This order was a major undertaking. It’s impressive that a major nationwide rule was supported unanimously by all four Commissioners given the divisions in energy policy,” said Rob Gramlich, the head of Grid Strategies. “I think it will have a modest impact on moving projects through interconnection queues. The final order preserves the balance from the proposed rule in which transmission providers and generators both have stiffer requirements.”
Joseph Rand, an energy policy researcher at Lawrence Berkeley National Laboratory, told CNBC the “rules are an incremental step in the right direction.” In general, the new rule structure is about what he expected, but said he was surprised to see the financial penalties for transmission operators that don’t deliver interconnection studies. “The financial penalties imposed on transmission providers for delayed studies could make a big difference, if they are indeed implemented with real teeth,” Rand said.
Also, the changes that facilitate hybrid power generation and battery storage “could be a very big deal for unlocking storage and hybrid projects in the queues,” Rand said, pointing to the massive amount of battery storage in the interconnection queues already. Gramlich was also “encouraged” to see some advanced transmission technologies, like advanced power flow control devices and advanced conductors, considered in the new rules.
“To be clear, the new rules, if implemented in tandem with the FERC’s separate proposed rule changes to transmission planning, could make an even bigger difference. Much of the current backlog can be attributed to fundamental constraints and under-investment in transmission — especially the longer range, inter-regional variety — and the proposed transmission planning rules would help with that issue,” Rand stated.
For years, the way renewable energy projects got permission to connect to the energy grid has been spiraling out of control. Interconnection requests increased 40% between 2021 and 2022. Everyone was frustrated by the inability to get approvals processed and new generating capacity installed.
Now it seems FERC has cut the Gordian Knot. The hard work isn’t done yet. America still needs thousands of miles of new transmission lines to unlock the potential of all the renewable energy resources it has available. Consider this a good first step. Perhaps the most hopeful aspect of the new rule is that it was approved unanimously by the commission without the hyper-partisan wrangling that has become the norm in America today.
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