In the fall of 2007, the Federal Energy Regulatory Commission raised concerns about how to manage the unprecedented number of renewable energy projects seeking to connect to the U.S. grid.
The agency is still grappling with the issue more than 15 years later — except now, the problem is worse, and the stakes are higher.
FERC is preparing to issue a final rule changing how new energy projects connect to the grid, a top priority for acting Chair Willie Phillips. The commission outlined a proposed rule on the topic last year, with a goal of more efficiently linking up planned solar, wind and battery storage projects, as well as reducing energy costs and making the power grid more reliable.
Clean energy advocates are concerned that FERC’s efforts may not be enough to solve the issue.
“They’re making tweaks at the edges that are not going to get to the heart of this problem,” said Brett White, vice president of regulatory affairs at the North Carolina-based renewable energy company Pine Gate Renewables.
Speeding up the grid connection system is critical for the success of the Biden administration’s signature climate initiatives and for many states’ clean energy goals. Today’s protracted process for linking new energy projects to the transmission system is widely considered one of the chief hurdles to deploying more carbon-free energy.
Clean energy developers, climate advocates and those with knowledge of the power system fear that FERC’s proposed rule won’t drive the scale of change that they say is needed, for a number of reasons.
Some of the key policies outlined in FERC’s proposed rule last year have already been implemented. For example, the proposed rule would direct regional transmission organizations (RTOs) and similar grid operators to study energy interconnection requests in groups, rather than one by one. Several RTOs, however, are doing that now.
In addition, some potential factors driving grid connection delays are outside of the scope of the proposed rule. For example, grid operators have struggled to hire enough experienced engineers who can process the increasingly large volume of grid connection requests, according to former RTO staff members and experts who follow electric power markets.
Also contributing to grid connection bottlenecks: network upgrade costs. Typically paid for in full by energy developers, these fees fund improvements to the transmission system that may be needed to accommodate new energy projects.
Data from the Department of Energy shows that the network upgrade costs in some parts of the United States are rising sharply. Yet clean energy advocates say that the commission’s proposed rule would not meaningfully address that problem.
“Network upgrades are costing, in some cases, an order of magnitude more than they should,” said Devin Hartman, director of energy and environmental policy at the R Street Institute, a pro-free-markets think tank. “A lot of folks in the know are so concerned that FERC is going to come out with a rule, pat themselves on the back, and not much is going to get better because the most important reforms are not in the [proposed rule].”
FERC’s final rule could ultimately be significantly different than the proposal issued last June. Celeste Miller, a spokesperson for the commission, said in a statement last week that the commission was “thoroughly reviewing all comments” on its proposed rule and that Phillips was committed to addressing grid connection challenges.
“My highest priority in the near term is to finalize a proposed rule that will greatly improve our processes for interconnecting new electric generating resources, reducing the time it takes to bring those resources online,” Phillips said during a hearing before the Senate Energy and Natural Resources Committee in May.
In the meantime, Hartman said a coalition of consumer groups, clean energy developers and others are lobbying FERC to change several elements of its proposed rule. The group is planning to send a letter to the commission next week.
“The main theme of it is that the [proposal] FERC put out there is underwhelming,” said Hartman, who previously worked at the agency.
Staffing and studies
Before a new energy project can start delivering power to homes and businesses, it must be interconnected to the transmission system. That typically requires grid operators or utility companies to study the project and determine whether new infrastructure is needed to accommodate the facility.
As of last year, it took an average of five years for a new energy project in the United States to move through that study process and reach commercial operation, according to the Department of Energy’s Lawrence Berkeley National Laboratory. That’s up from an average of three years in 2015 and less than two years in 2008.
The long processing times are especially notorious in the region served by PJM Interconnection LLC, which spans a large portion of the eastern United States.
Entering the interconnection queue is the first process for projects that want to link up to the transmission system, although it’s common for many projects to ultimately be canceled or withdrawn. In 2022, there were over 3,000 active energy projects in PJM’s grid interconnection queue, more than in any other region in the country, according to Berkeley Lab’s most recent data.
PJM is implementing changes to its interconnection process this summer, which the grid operator says will enable it to promptly study and connect about 2,500 proposed energy projects — most of which are renewable energy facilities — over the next three years. It has also introduced a tool called Queue Scope that will make it easier for developers to assess the viability of their projects before entering the queue, said Jeffrey Shields, a spokesperson for the grid operator.
Still, while clean energy advocates have welcomed PJM’s changes and nationwide reforms proposed by FERC, they also see them as too little, too late — particularly given that the challenges are not entirely new.
In December 2007, FERC held a conference to address emerging queue-related issues. At the time, “unprecedented” amounts of new renewable energy projects were requesting to connect to the power system, and grid operators were struggling to study and connect them in a timely manner, FERC said in announcing the conference the month before.
This was shortly after some states first established renewable energy requirements and goals.
But in 2008, the commission concluded that it would make the most sense for each regional operator to “propose its own solution.” FERC directed grid operators to file reports detailing the size of their interconnection queues and policy changes they were considering.
“No grid operator can really seriously come forward and say, ‘We didn’t expect this [problem],'” Dana Ammann, a policy analyst at the Natural Resources Defense Council, said in a recent interview.
One challenge for many grid operators today is their “finite capacity” to study and approve interconnection queue requests, said Jonathon Monken, principal at consulting firm Converge Strategies LLC and a former senior director of system resilience and strategic coordination at PJM.
There are several studies that regional grid operators — RTOs and independent system operators (ISOs) — must perform to process queue requests, Monken said. And each one takes time.
“FERC can certainly set requirements out there in terms of how to manage the queue process. But the real question is, even if they did, can the ISOs and RTOs do it?” he said.
Connection requests at RTOs are handled by specialized senior engineers who go through a lengthy training process after they’re hired, said John Simonelli, who spent more than three decades at ISO New England prior to retiring in 2018.
“There was a general consensus that it took a good three to five years to take a college grad and really get them up to speed so they understood the tools and the system they were overseeing … and not have to be watched constantly and monitored and mentored,” said Simonelli, who now works as a consultant.
Today, there are not enough young engineers who are interested in working in the field, and experienced individuals are retiring in droves, added John Chiles, principal of transmission services at the energy consulting firm GDS Associates Inc.
In addition, electric utilities, renewable energy companies and others in the private sector are also looking to hire engineers with knowledge of interconnection issues, Chiles said. So while the grid operators are trying to increase staffing, poaching is common, he said.
“Everyone is looking for the same thing,” Chiles said.
PJM’s Shields said the grid operator has made hiring and automation a priority, but he said project delays are often due to factors outside of its control. Since Jan. 1, 2021, PJM has increased staff for interconnection issues by approximately 50 percent and increased its outside contractors by 25 percent, he said.
“PJM is completing studies as expected in our plan, but the larger problem we see at this time is that projects that are completing the study process are not getting built, due to a combination of non-PJM factors such as siting, supply-chain and financing,” Shields said in an email.
Other observers said there may be more that FERC can do.
Johannes Pfeifenberger, a principal at the Brattle Group who focuses on electricity markets, said FERC could include changes in a final interconnection rule to cut down the study process, borrowing from best practices in the United Kingdom and Texas.
In the current interconnection process in most of the United States, projects are sometimes restudied up to 10 times before they’re approved to connect, he said. In addition, the study process will sometimes identify network upgrades that may not be necessary to connect the proposed facility in question, he said.
By changing the current study process and prioritizing building transmission, the U.K. has been able to shorten its average interconnection timelines by several years, Pfeifenberger said.
“The study approach is not really addressed in the FERC [proposal] at all,” he said.
‘On the right path’
Among the factors driving the ballooning size of interconnection queues are the existing, FERC-approved regulations governing the process, said Mike Jacobs, a senior energy analyst at the Union of Concerned Scientists.
For example, in 2003, FERC issued an order that sought to standardize the queue processing system. But at the time that the rule came out, the electricity system was still largely a “closed business,” dominated by monopoly utilities, Jacobs said.
Under the current rules in place, independent developers have been permitted to file multiple connection requests in different locations to find the cheapest, faster option, according to Jacobs.
“This is FERC’s problem, and it’s primarily about the makeup of the commission: how many votes there are and how many can they achieve,” he said. “But it’s also about implementation by the transmission owners.”
FERC’s proposed rule has sought to prioritize energy projects that are commercially viable and ready to be built in order to reduce the number of “speculative” projects in the queue. It would do so by directing grid operators to no longer study connection requests in the order in which they are received. Instead, they would process and approve projects that have reached certain commercial milestones.
But the renewable energy industry has argued that the proposed readiness requirements do not reflect the realities of how energy projects are financed and developed. In particular, it’s unrealistic to expect project developers to have most of their permits and contracts in place before they have gone through the interconnection process, Pfeifenberger said.
“Renewable developers have a ‘chicken and egg’ problem. They can’t be ready with all the other permitting until they know that where they want to interconnect is actually feasible,” he said.
Ben Norris, senior director of regulatory affairs at the Solar Energy Industries Association, said in an interview in December that independent energy companies “could be significantly shut out of the energy transition” if FERC’s proposed rule were finalized as it stood at the time.
He said the proposed rule would make certain information about network upgrade costs available to utility companies that own transmission lines. But energy project developers would not have access to the same cost estimates, Norris said.
FERC staff has been understanding of those concerns, according to Norris.
“We understand the need for compromise in the context of a rule that has this many far-reaching consequences,” he said. “We don’t think the staff have proposed a rule intentionally to discriminate against independent power producers. We think it’s based on a lack of understanding of the project development cycle.”
For some clean energy advocates, many of the difficulties in the interconnection process could theoretically be improved through a different rule that FERC is working on.
That rule, proposed last year and not yet finalized, would change how transmission lines are planned, with the goal of developing lines in a way that anticipates changes in the energy resource mix.
“Interconnection has always been the gigantic symptom. It’s not the virus,” said Theodore Paradise, chief policy and legal officer for the offshore wind developer Hexicon who previously worked at ISO New England. “The actual cause is the limited grid.”
The thinking goes like this: Massive quantities of solar and wind being developed are struggling to come online because there is not enough transmission infrastructure to go around. By building more power lines where these projects are being developed, the United States may be able to more quickly interconnect large amounts of clean power — in the mode of “if you build it, they will come,” according to Paradise and others.
Ted Thomas, the former chair of the Arkansas Public Service Commission who now works as a consultant, said FERC’s task is undeniably difficult given the widespread changes in the energy system over the last several decades.
Historically, the electric grid was dominated by large, centralized power plants. But as the clean energy transition continues, Thomas said, the grid will become increasingly decentralized due to the nature of solar and wind.
“The system was designed to handle large, fewer units rather than smaller units. Whenever you’re doing wind and solar, you’re getting smaller units,” Thomas said. “I do think [FERC is] on the right path in terms of what they’re trying to fix.”