United States: FERC's Generator Interconnection Technical Conference Elicits Debate On Need For Interconnection Process Reforms

On May 13, 2016, the Federal Energy Regulatory Commission (FERC or the "Commission") held a technical conference on generator interconnection issues in partial response to a June 2015 Petition filed by the American Wind Energy Association requesting a formal rulemaking to revise FERC's pro forma Large Generator Interconnection Procedures and Large Generator Interconnection Agreement.

During the daylong conference,1 representatives from Regional Transmission Organizations and Independent System Operators (RTOs/ISOs), generation project developers, investor-owned utilities, transmission owners and independent power producers (IPPs) covered topics including: (1) generator interconnection queue management and performance metrics and the causes of, and mitigation options, for backlogs; (2) transparency and timing in interconnection study processes, including restudy triggers; (3) certainty in cost and construction time estimates; (4) queue coordination and management issues, including addressing project withdrawals; and (5) the interconnection of energy storage resources.2

Panelists generally agreed that reforms are needed to address delays in interconnection queue processing and uncertainties regarding interconnection costs and timelines. However, the discussions revealed clear preferences for, on one side, flexibility to account for regional differences (generally supported by RTOs, ISOs and transmission owners), and, on the other side, comprehensive reform and standardization across regions (generally supported by project developers and IPPs).

Comments on the issues addressed during the technical conference, and numerous specific questions set forth in a postconference notice inviting comments, are due June 30, 2016.

Panel 1 – The Current State of Generator Interconnection Queues

Panel 1 explored the causes of interconnection queue delays and potential methods of mitigating such delays. Panelists generally agreed that, across regions, interconnection queue processing is not as fast as it could be, due in part to restudies resulting from project withdrawals. In the Midcontinent Independent System Operator, Inc. region, for example, which "clusters" projects for system impact studies, withdrawals of higher-queued projects often trigger the need for restudies, increasing costs and extending processing times, which causes additional withdrawals, resulting in a cycle of withdrawals and restudies. To reduce withdrawals, panelists noted that several regions have set stringent queue entry requirements, including demonstration of site control and high financial security posting requirements, which can help keep nonviable projects out of the queues.

Panel 1 also focused on interconnection issues related to renewable energy projects, which sometimes face greater interconnection challenges than traditional energy projects, because they include newer technologies and may require more extensive modeling and data collection and additional time for initial studies or restudies. One panelist also noted that the geographic remoteness of some renewable projects from load sometimes requires significant network upgrades to reliably interconnect them. On this point, FERC staff asked whether broader transmission planning processes could be used to address such issues. While some panelists suggested that this could be effective, others noted that using broader transmission planning processes to address geographically remote renewable energy projects could lead to increased costs to load.

Panel 2 – Transparency and Timing in the Generator Interconnection Study Process

Panel 2 discussed the accuracy and transparency of information provided by transmission operators during the interconnection process, with some panelists arguing that certain regions are better than others in this area. One project developer noted that "some RTOs do not have adequate resources to administer their interconnection queues" and that interconnection processes can last anywhere from approximately a year to as long as six to seven years depending on the region, with a timeline of three years or more capable of "kill[ing]" even the most viable projects.

During this panel, Commissioner LaFleur asked whether a more uniform "best practices" approach should be considered to foster more consistent timelines across regions. Panelists' responses highlighted the above-referenced divide, with RTOs, ISOs and transmission owners generally favoring flexible, regional solutions, such as those arising from stakeholder processes, while the project developers on the panel advocated for uniformity.

Commissioner Clark concluded the panel by expressing some skepticism regarding regional flexibility with regard to interconnection processes and asking for examples as to why different market constructs justify differences in interconnection process management. He also asked the panelists if there was "anything wrong" with ramping up interconnection requirements, in a "non-discriminatory way" so as to "weed out projects that realistically don't have a chance [of] getting on." In response, some panelists noted that, while certain regions already have high financial bars, some projects initially expected to drop out of the queue have continued to invest deep into the process only to ultimately withdraw, triggering restudies. Others expressed concern that setting higher financial bars favors larger players, suggesting instead that the issue is not one of raising financial bars, but rather improving the quality and timeliness of transmission providers' interconnection study analyses to enable better decisionmaking.

Panel 3 – Certainty in Cost Estimates and Construction Time

During Panel 3, FERC staff explored a wide range of issues regarding the accuracy of final interconnection costs and construction times compared to initial estimates provided by transmission providers. Panelists' comments on this panel highlighted the "tension . . . between the desire for the study process to go faster versus the desire for more accurate information." On one hand, project developers want "accurate, stable results information . . . in the shortest time available to enable investment decisions." On the other hand, certain transmission providers countered that "the right balance . . . is key"; rushing through the study process just to give an interconnection customer something does not make sense, in part because not every project is ready to move through the interconnection process at the same pace. One transmission provider also noted the difficulty in hiring outside consultants with the technical expertise necessary to accurately perform interconnection studies for its system, which sometimes is necessary to process interconnection requests within tariff timelines.

Panel 4 – Other Interconnection Queue Coordination and Management Issues

Panel 4 focused on preventing nonviable projects from entering interconnection queues and coordinating interconnection requests with "affected systems."3 Regarding nonviable projects, panelists suggested that more transparent, accurate information up front, such as access to transmission system models and more accurate network upgrade cost estimates, could better inform decisions about whether to remain in a queue. In addition, adding or enhancing "off-ramps"—pivotal points in the process when an interconnection customer has to decide whether to proceed or withdraw—could "reduc[e] the likelihood of Interconnection Customers dropping from the queue once the final Study to identify Network Upgrades has commenced," which would reduce the need for lengthy, costly restudies at that late stage.

Regarding affected systems, many panelists agreed that better coordination is needed for interconnection requests "on the seams" between systems, especially where differences in study processes and timelines are not aligned and can cause significant delays and cost increases.

Panel 5 – Interconnection of Electric Storage Resources

The final panel of the day explored whether FERC's current pro forma interconnection procedures and agreement adequately account for interconnections of energy storage resources. Panelists seemed generally satisfied, but highlighted certain challenges arising from the relative infancy of, and "learning curve" related to, energy storage resources. One such challenge relates to modeling practices for energy storage resources, with panelists noting that storage must be modeled in a way that accurately accounts for such resources' flexible operational characteristics, including whether to model storage as load when charging.

Commissioner LaFleur concluded the panel by asking panelists to envision the characteristics of an ideal system "built from scratch" that could accommodate energy storage resources, and whether or not such an "ideal system" would treat storage as another form of generation. Certain panelists noted that it is difficult to adequately value the operational flexibility of energy storage resources in markets designed for the physics of traditional generation, with one panelist opining that the Commission must act quickly to create separate rules for energy storage resources and avoid placing it into "existing constructs," since "storage is very much its own asset class that touches just about every other asset class that hits the grid."

Footnotes

1 A transcript of the technical conference is available here, and a webcast recording is available here (until August 13, 2016). Prefiled comments from the panelists are available here.

2 The final agenda for the technical conference includes a detailed list of all of the discussion topics addressed.

3 "Affected systems" are electric systems other than the transmission provider's transmission system that may be affected by a proposed interconnection.

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