Released August 16, 2021 | SUGAR LAND
en
Researched by Industrial Info Resources (Sugar Land, Texas)--An ineffective interconnection process is hindering the development of power projects in the U.S.
In short, the process for obtaining an interconnection agreement with an Independent System Operator (ISO) or Regional Transmission Organization (RTO) is widely seen as broken among project developers. Even though changes are being made to the system, it still has a long way to go.
There are seven ISO/RTOs in the U.S.; California ISO (CAISO), Electric Reliability Council of Texas (ERCOT), New York ISO (NYISO), New England ISO (ISO-NE), PJM Interconnection (PJM), Midcontinent ISO (MISO) and Southwest Power Pool (SPP).
Industrial Info is tracking more than $260 billion worth of high- and medium-probability U.S. power generation projects that are in the planning and engineering stages. High-probability projects have an 81%-to-99% chance of moving forward as planned; medium-probability projects have a 70%-to-80% chance.
Click on the image at right for a graph showing high- and medium-probability, planning- and engineering-stage power generation project activity in the U.S. by the top six fuel types.
In 2003, the U.S. Federal Energy Regulatory Commission (FERC) developed standardized guidelines in the interconnect agreement process. FERC Order No. 2003 outlined the evaluation process to determine what integration, upgrade or additions to the transmission system would be needed to facilitate the interconnection of a new generation asset.
The process seems simple, and from a bird's eye view, shouldn't take very long.
However, it takes two to three years to obtain an interconnection agreement, which requires environmental impact studies and an archaic "one-for-one" review of every proposed project instead of a single study for multiple projects in the same area.
Under FERC Order No. 2003, the project owner is responsible for the total integration cost of a project. On the face of it, this seems fair, but the system does not give the owner exclusive usage rights, excluding the connection at the facility's location. As a result, developers pay millions of dollars for a system modification or upgrade that can also benefit utilities and the surrounding area.
The costs of making system upgrades to incorporate a generation asset have been on the rise. For example, MISO has seen a 20% increase in such costs since 2018, while the PJM has experienced a 98% rise, and costs in the SPP have jumped 45%.
Some of the major transmission upgrades are being funded through the interconnection process; project developers see this as ineffective and unfair. Within the interconnect queues for ISOs, there are projects with all kinds of fuel and megawatt capacities. The costs of significant system upgrades are unknown to developers during certain stages of the agreement process. Because of this, some developers will submit multiple interconnection agreements that vary in generation capacities, configuration and location. This only increases the issues surrounding the interconnect agreement approval process and sometimes results in additional cost increases.
These issues have caused a significant backlog in the ISO interconnection queues across the country. Backlogs and interconnection costs have caused numerous projects to be withdrawn over the last couple of years. For this year, 178 projects have been withdrawn in the PJM, and 93 projects in the MISO have been removed from the interconnect queue; most of these were solar or solar and battery projects.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
In short, the process for obtaining an interconnection agreement with an Independent System Operator (ISO) or Regional Transmission Organization (RTO) is widely seen as broken among project developers. Even though changes are being made to the system, it still has a long way to go.
There are seven ISO/RTOs in the U.S.; California ISO (CAISO), Electric Reliability Council of Texas (ERCOT), New York ISO (NYISO), New England ISO (ISO-NE), PJM Interconnection (PJM), Midcontinent ISO (MISO) and Southwest Power Pool (SPP).
Industrial Info is tracking more than $260 billion worth of high- and medium-probability U.S. power generation projects that are in the planning and engineering stages. High-probability projects have an 81%-to-99% chance of moving forward as planned; medium-probability projects have a 70%-to-80% chance.
In 2003, the U.S. Federal Energy Regulatory Commission (FERC) developed standardized guidelines in the interconnect agreement process. FERC Order No. 2003 outlined the evaluation process to determine what integration, upgrade or additions to the transmission system would be needed to facilitate the interconnection of a new generation asset.
The process seems simple, and from a bird's eye view, shouldn't take very long.
However, it takes two to three years to obtain an interconnection agreement, which requires environmental impact studies and an archaic "one-for-one" review of every proposed project instead of a single study for multiple projects in the same area.
Under FERC Order No. 2003, the project owner is responsible for the total integration cost of a project. On the face of it, this seems fair, but the system does not give the owner exclusive usage rights, excluding the connection at the facility's location. As a result, developers pay millions of dollars for a system modification or upgrade that can also benefit utilities and the surrounding area.
The costs of making system upgrades to incorporate a generation asset have been on the rise. For example, MISO has seen a 20% increase in such costs since 2018, while the PJM has experienced a 98% rise, and costs in the SPP have jumped 45%.
Some of the major transmission upgrades are being funded through the interconnection process; project developers see this as ineffective and unfair. Within the interconnect queues for ISOs, there are projects with all kinds of fuel and megawatt capacities. The costs of significant system upgrades are unknown to developers during certain stages of the agreement process. Because of this, some developers will submit multiple interconnection agreements that vary in generation capacities, configuration and location. This only increases the issues surrounding the interconnect agreement approval process and sometimes results in additional cost increases.
These issues have caused a significant backlog in the ISO interconnection queues across the country. Backlogs and interconnection costs have caused numerous projects to be withdrawn over the last couple of years. For this year, 178 projects have been withdrawn in the PJM, and 93 projects in the MISO have been removed from the interconnect queue; most of these were solar or solar and battery projects.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
