FERC Interconnection Notice of Proposed Rulemaking: What is its Importance to Connecting Renewables to the Grid?

Connecting renewables to the electric grid is either hindered or assisted by interconnection standards. If interconnection standards are clear and transparent, renewable energy developers understand what must be done to legally connect projects. On the other hand, complex interconnection standards may delay renewable energy deployment because of increasingly lengthy queue lines. Leyline provides development capital for renewable energy developers, often to pay unexpected interconnection costs, and therefore we are keenly interested in policies to improve interconnection and bring more clean energy to the grid.

State public utility commissions have their own set of standards customers and utilities must follow. On the federal level, the Federal Energy Regulatory Commission (FERC) has interconnection standards for transmission projects up to 20 megawatts (MW). In 2022, FERC reformed its interconnection procedures to (1) address unwieldy interconnection queue backlogs; (2) improve certainty for interconnection timing and cost; and finally, (3) allow new technologies such as including energy storage on the generator side and transmission upgrades for customers themselves.

Through this Notice of Proposed Rulemaking (NOPR), FERC proposed several key interconnection reforms that when enacted, will make the transmission interconnection process much smoother. Action on the NOPR is expected in the first half of 2023. The most significant aspects of the NOPR are addressed below.

Cluster Study Process vs. "First Come First Served"

FERC's existing transmission interconnection process utilizes a "first come first served" study process but the NOPR seeks to replace that process with a "first ready first served" study process. The figure below graphically illustrates this new process. Under the reform, transmission providers will study multiple generating projects, rather than each individual interconnection request separately. There are also more obligations on the interconnection customer to ensure that a project is ready to move forward; customers must demonstrate site control for their proposed generating facilities when they submit their interconnection request. This avoids speculative interconnection requests that clog the queue (a project might get built or it might not). Withdrawal penalties increase with each phase. In total, the reforms are designed to increase project readiness, reduce late withdrawals, and require fewer restudies. Network upgrade costs also will no longer be the single responsibility of one generator, but many together because it will benefit interconnection customers in later clusters.

Figure 2: Adopted from the White & Case Law Firm Analysis of the FERC NOPR

Require Transmission Providers to Move Faster

The second aspect of the FERC NOPR is increasing the speed at which transmission providers process interconnection requests through better information exchange. By doing so, FERC hopes project developers understand potential upgrade costs and available capacity before securing contracts or moving forward in the interconnection study process. Deadlines are imposed on both sides. For each informational study request, the interconnection customer would be required to pay a $10,000 deposit. Within seven business days of the informational interconnection study request, the transmission provider must provide an informational interconnection study agreement. The prospective interconnection customer would have 10 business days to execute the agreement and deliver it, along with the relevant technical data and study deposit. The transmission provider would then have 45 days to complete the study.

Figure 2: Adopted from the White & Case Law Firm Analysis of the FERC NOPR

Flexibility for New Technologies

The NOPR increases flexibility for developers to use new technologies such as energy storage as a resource in an interconnection request that may be available in lieu of expensive network upgrades. The NOPR requires transmission providers to allow co-location of generation and storage behind a single point of interconnection with a single interconnection request. It also requires transmission providers to evaluate the proposed addition of a generating facility to an interconnection request provided it does not change the requested interconnection service level.

To date, transmission providers vary in their understanding and application of the concept of "material modification." A material modification to a project is one that adversely impacts other projects lower in the queue. The result of a material modification to a project can be losing the project's position in the queue entirely, causing losses and potential restudy delays. The NOPR establishes that the transmission provider must evaluate such a request within 60 days to determine if the addition changes other projects. If not, then the addition is not a material modification and allows interconnection customers to make changes within the interconnection process itself.

FERC will make a final ruling in early 2023. When enacted these reforms will make transmission interconnection much easier and more predictable. Leyline will watch to see when the FERC NOPR becomes final and keep our readers updated on any new developments.