Reforming the US Interconnection Process: FERC Order No. 2023

The new Federal Energy Regulatory Commission (FERC) Order No. 2023 ‘Improvements to Generator Interconnection Procedures and Agreements’ addresses the growing problem of interconnection queues for generation projects. This has become a major impediment to new energy asset connections in the US. The new approaches that System Operators and Transmission Operators must now adopt should go some way towards addressing the estimated 2 TW backlog and typical several year delays that have been building up in the US.

Regarding the scale of the problem, the US is in a similar position to other advanced energy economies countries that are experiencing a fast energy transition and are bumping hard against the issue of grid capacity and connection processes. Across the board, grid access, grid capacity and the interconnection process have been falling behind the pace of development of clean power resources – see a similar, if smaller than FERC Order 2023, initiative from the UK system operator and regulator, Ofgem.

What the deficiencies in the interconnection process typically mean for energy project developers is excessive timescales to connect, lack of adequate grid capacity, high costs of connection and uncertainty over each of these issues. This is not a recipe for fast progress on renewable and battery technology connection and the clean energy transition. Microgrid Knowledge provides a good high-level overview of the problem and solutions being brought forward by FERC.

Commentary on the FERC Order mainly focuses on the up-front interconnection process. However, there is more to it seeing as that front-edge reflects the longer lifecycle from Interconnection to Transmission planning to Cost Allocation to Construction to Physical Connection and then into several years of Operation for the grid and the individual generation and storage projects.

Some of the remedies to these challenges ushered in by the FERC Order include:

• Moving to a “First-ready, first-served” principle throughout the interconnection process and contrasting with the typical “First-come, first-served” prior approach.
• Adopting a ‘cluster study’ approach for identifying the grid capacity access, interconnection terms and grid upgrades required. Project developers now pay a single up-front study fee to enter study process when the application window is open.
• Speculative applications are disincentivised through a process of milestones of readiness with financial commitments at key steps towards connection with penalties and loss of queue position acting as incentives for project progress. Commercial readiness deposits are paid at key milestones through the study process towards interconnection agreement dependent on the size of the project.
• Accountability is made to work in both directions with deadlines for Transmission Operators to conclude studies and offer interconnection with penalties for delays.
• Provisions are made for shared connections (e.g. co-located solar and storage) with more realistic modelling of the expected operating profile of the hybrid sites avoiding the perverse study outcomes from assumptions of extreme operating patterns that are neither likely or fixed (the main benefit of the hybridization being schedule and profile flexibility). This treatment of hybrid projects extends to no loss of queue position for some adjustments to technology choices at the proposed project site.
• Bringing modelling and enhanced capabilities for non-synchronous generators up to common standard ensures that grid stability and performance issues can be studied more effectively and quickly during the interconnection process (and that the grid is truly more stable in operation afterwards).

Commentary in Utility Dive notes that these improvements are good and welcome but that they may not speed up interconnection, especially where some of the proposed best practice is already in place (some ISOs have moved further and faster on interconnection process improvements than others, for example in the area of cluster studies). The unprecedented interconnection demand is severely testing the limits of existing grid infrastructure with increasingly thinner capacity headroom available for newcomer connection applicants.

The Rocky Mountain Institute (RMI) notes that underinvestment in grid capacity is a key factor in this acute grid hosting capacity problem. In a blog on the topic that assesses the measures embedded in the FERC order, RMI points the finger at the fundamental issues of a grid at full capacity, outdated interconnection and planning study processes, and grid operator staffing and resources that are not able to address the scale and nature of the challenge at hand.

Early commentary from media and industry veterans (in the days after FERC publication into early August 2023) welcomes the changes while noting that even more must be done to address the fundamentals of grid hosting capacity for new energy projects. Interconnection Studies and Transmission Planning processes identify the necessary grid infrastructure developments needed to accommodate the new projects and the Cost Allocation methodology seeks to fairly share the costs among project developers and the Grid Operators (and their rate paying customers and shareholders). The process of selecting the best set of conventional grid reinforcements to meet the needs of interconnection and then gaining the consents and financial sanction to construct is everyday business for Grid Operators.

The FERC Order promotes the use of Grid Enhancing Technologies (GETs) such as power electronics power flow controllers that optimize routing of power flows to balance the loading across circuits and make optimal use of the grid infrastructure, typically with advanced grid analytics to compute the best control settings. Dynamic line rating technologies enable the operation of individual circuits closer to their thermal and physical limits and also extend the capacity of the system and the ability to host additional generation projects. This is especially welcome given the challenge and cost of constructing transmission lines in new geographic corridors.

In addition to GETs, flexible operation of generation and storage (and demand) has been shown to extend the capabilities of grid infrastructure on an economic and sometimes temporary basis. Flexibility does feature highly in the Order but only in terms of process flexibility in the studies process or flexibility in the implementation of Cost Allocation. The RMI note that redispatch and curtailment of generation and storage under a ‘connect and manage’ rather than an ‘invest and connect’ philosophy is a missed opportunity to get more projects onto the grid quicker and more economically. Perhaps a combination of new grid assets, GETs and flexibility would provide the optimal, more economic outcomes – they would certainly provide a richer set of options to project developers to overcome the grid interconnection challenge faced.

At Smarter Grid Solutions, our mature, robust technology methods for flexible interconnections and grid flexibility services (e.g. Non Wires Alternatives and market-procured Load Relief Services) overcome grid hosting capacity challenges and are increasingly being considered as an essential solution for interconnection problem. The implementation of DER Management Systems (DERMS) addresses the specific problems for distribution utilities and DER developers with hosting capacity and interconnection. DERMS use cases go further in addressing the increasing impact of DER on transmission system operation, at and beyond the transmission-distribution boundary – this will be crucial for the full implementation of FERC Order 2023. DERMS also extends the scope of system management from those interconnection and distribution hosting capacity issues through local resilience from microgrid coordination to increasingly incorporating Demand Response Programs, aggregating transmission ancillary services from DER and facilitating wholesale market participation from aggregated DER as envisaged by FERC Order 2222. With a “first things first” principle of prioritization in mind, interconnection is an immediate priority to resolve and we expect to see the role of flexible interconnection and related DERMS use cases feature in the FERC Order 2023 implementation debate, especially as state regulators and utilities embrace the changes foreseen by the Order.

Transmission Operators have 90 days from the 28^th July publication to file their compliance plans. Many in the industry will examine those plans closely to see whether compliance and innovative thinking can address this critical interconnection problem.

For more information see the following:

• Canary Media, ‘FERC takes a big step to get more clean energy on the US grid’, July 31^st, 2023
• Some detailed analysis of the issues at hand and the provisions of the Order 2023 from Vinson & Elkins at https://www.velaw.com/insights/improvements-to-generator-interconnection-procedures-and-agreements/
• Further perspective from Stoel Rives at https://www.lawofrenewableenergy.com/2023/08/articles/energy-policy/ferc/ferc-issues-final-rule-on-improvements-to-generator-interconnection-procedures-and-agreements/