Without Interconnection Reform, the Pace of the Energy Transition is at Risk

Posted by Jon Gordon and Doug Pietrucha on Mar 16, 2023 1:10:31 PM

Interconnection is key to unlocking the advanced energy states need

Generator interconnection – the process of studying and assigning the cost of grid upgrades to enable new resources to connect to the electric grid – is a technical and lengthy process that effectively sets the pace of the clean energy transition. Across the country, interconnection queues are growing longer and more costly, preventing new clean resources like wind, solar, and battery storage from being built.   

Reforms underway at the Federal Energy Regulatory Commission (FERC) and at some of the regional Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs) aim to streamline the interconnection process to address long wait times and high costs. The question is: Will they go far enough and fast enough to avoid the looming slowdown of clean energy development across the country and mitigate the cost, reliability, and climate impacts that slowdown will bring?   

The posterchild of the broken interconnection process is PJM, where there are currently 2,700 projects in the interconnection queue – 95% of which are wind, solar, storage, or hybrid resources that are essential to meeting individual state climate targets. A recent analysis from Lawrence Berkeley National Laboratory found this backlog has grown 240% since 2019; over the same timeframe, forecasted costs for projects in the queue have increased eightfold. Other regions are experiencing similar, though less severe, backlogs.  

In June 2022, FERC issued a Notice of Proposed Rulemaking (NOPR) (Docket No. RM22-14-000) and invited comments on a series of proposed reforms to the interconnection process. The NOPR is pending at FERC, awaiting a final Order, but the Commission has no deadline to act. 

 Meanwhile, some regions have brought forward their own interconnection reforms. In December 2022, FERC approved PJM’s proposed reforms aimed at addressing long wait times and high costs.  However, the transition phase of the reforms is not expected to start until the second quarter of 2023, with a goal to clear the 2,700 projects by 2026. During that time, PJM will not be accepting new interconnection requests, so it is unlikely any new projects could be built in PJM before 2030. Further, there is uncertainty over whether PJM can hit these targets, resulting in some developers diversifying into markets outside of PJM while the queue is cleared.  

The headwinds caused by these time lags in interconnection have real-world impacts, including renewable energy and storage projects that are withdrawn and never completed. Projects can fall out of an interconnection queue for a range of reasons, but the long wait to connect to the grid, along with uncertainty around timelines and eventual costs to connect, are the primary reasons developers cite for withdrawing projects.  

Failure to quickly implement interconnection reforms will result in: 

  1. Risks to grid reliability: The inability to expeditiously bring new resources on the grid to replace older, inefficient retiring units threatens grid reliability. New wind, solar, and storage resources are an integral component of a balanced, diverse and reliable grid.  PJM currently has 6,600 MW of generation deactivations scheduled between June 2023 and June 2024; new resources must come online in a timely manner to replace them. The 1,000 clean energy projects withdrawn from the PJM queue over the past five years could have powered more than 18 million homes
  2. Loss of jobs and economic development: Renewable and storage developers – and the jobs and economic development their projects bring – will continue to slow down and look elsewhere rather than enter dead-end queues in regions like PJM. Over the past five years, developers have withdrawn more than 1,000 clean energy projects from the PJM interconnection queue. That includes over 77,000 MW of solar, wind, and battery storage projects that could have created 400,000 jobs. Virginia, Pennsylvania, and Ohio have lost the greatest energy and job potential in the PJM region due to lapsed projects. Virginia tops the list, with developers in the Commonwealth shelving at least 225 projects since 2016 that could have created more than 18,000 jobs. 
  3. Failure to meet clean energy targets on time: A growing number of states across the country are setting clean energy targets, which will require significant deployment of new advanced energy resources. 
  4. Diminished competition and cost-effectiveness: Addressing barriers to market entry is critical to allow new resources to compete with existing resources to meet customer needs most cost-effectively. As long as interconnection remains a barrier to market entry, it threatens the cost-effectiveness and competitiveness of electricity markets.
  5. Inefficient infrastructure buildout: The combined failures of long-term transmission planning and backlogged interconnection processes result in an inefficient, piecemeal approach to identifying and paying for transmission upgrades. Developers pay the immediate costs of this approach in the form of high interconnection costs, but consumers are ultimately paying more than they should as a result of this inefficient transmission planning process of last resort.
  6. Delayed retirement and replacement of older, inefficient, high-emitting resources: Because new resources are not able to come online, existing, older resources are exacerbating community and environmental impacts. In PJM, there have been 21,000 MW of generation withdrawn from scheduled retirements between April 2004 and July 2019. At the time of their deactivation requests, 29% of these generating plants were over 40 years old, and 27% were at least 50 years old. Without new generation to replace aging infrastructure, more inefficient facilities seeking to retire will be forced to stick around, at great cost to consumers and grid reliability.   

States can take an active role in fixing the outdated and inefficient interconnection process by driving necessary improvements at FERC and directly at the RTOs/ISOs, especially when they work together and speak with one voice on these critical issues:  

  • States can urge FERC to finalize its proposed reforms as soon as possible to ensure incremental improvements to the interconnection process.  
  • States can encourage FERC to go a step further to address the interconnection study process itself and improve predictability and transparency and set reasonable thresholds for upgrades to be assigned to interconnection customers.  
  • States can engage transmission providers such as PJM to encourage bottom-up reforms and to advocate for adequate staffing and resources to address interconnection needs. 

For those interested in how they can engage in improving the PJM interconnection process, Advanced Energy United has prepared a summary with suggested actions states can take, read it here.



Advanced Energy Perspectives is Advanced Energy United's blog presenting news, analysis, and commentary on creating an advanced energy economy. Join the conversation!

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