New power projects – namely new wind, solar and battery storage plants – have faced an average wait of up to five years to connect to the grid. FERC’s Order 2023 is aimed at increasing queue efficiency and alleviating the current five-year average wait time for projects to connect to the grid. Those projects have been stuck in massive backlogs while grid managers conduct interconnection studies needed to gauge how bringing them online would affect the broader system and determine whether any upgrades are needed. According to FERC Chairman Willie Phillips, “[t]his new rule will enable America’s vast power generation resources to connect to the grid in a reliable, efficient, transparent and timely manner, and in doing so, help provide more reliable, resilient and affordable electricity for all consumers.” He referred to the Final Rule as “a watershed moment for our nation’s transmission grid.”
In underscoring the need for these reforms, Chairman Phillips noted that the GWs of generation and storage that were waiting in interconnection queues is as much electricity generation capacity as all the power plants now operating around the country.
The Final Rule – at almost 1,500 pages – requires all public utilities to adopt revised pro forma generator interconnection procedures and agreements to ensure that interconnection customers can connect to the transmission system in a reliable, efficient, transparent, and timely manner, and to prevent undue discrimination. Specifically, it contains several key areas of reforms, including, among other changes, shifting from a "first come, first served" to a "first ready" approach – meaning projects that are prepared with land rights and permits would move ahead of those that are not. The Final Rule will also impose financial and other conditions to secure a place in the interconnect queue and establish penalties per day for grid operators if they fail to complete interconnection studies on time. FERC will also allow projects to be studied in clusters instead of one-by-one in hopes of speeding up the process.
We summarize some of the key takeaways from the Final Rule in more detail below:
- Implementation of a “first-ready, first-served” cluster study process, with increased financial commitments for interconnection customers, to improve the efficiency of the interconnection process and minimize delays. Final Rule at PP 16, 1039.
- Projects will be expected to demonstrate readiness through financial deposits and site control prior to moving forward through key phases of the interconnection process.
- Transmission providers will conduct larger-scale interconnection studies on multiple proposed generating facilities at once, in contrast to the current linear model study. This approach will increase the efficiency of the interconnection process, help minimize delays and improve cost allocation by analyzing the transmission system impacts of multiple projects at once.
- Smoother transition process. To smooth the transition, the Commission has adopted three options that can be exercised depending on the progress of the interconnection request. Final Rule at PP 816, 865, 1138.
- Projects that have already received facilities study agreements from their transmission provider may choose to proceed through the existing linear study process or proceed through a transitional cluster study.
- Projects that are already in the queue but have not yet received a facilities study agreement will be eligible to participate in a transitional cluster study.
- Projects that are not yet in the queue will be subject to FERC’s full complement of new interconnection procedures.
- Firm deadlines on interconnection studies and penalties if transmission providers fail to complete their interconnection studies on time. Establishing firm study deadlines for transmission providers eliminates the previous “reasonable efforts” standard for completing interconnection studies. Final Rule at PP 968-987.
- If transmission providers fail to complete interconnection studies on time, FERC will impose financial penalties and other conditions.
- Penalties for delayed cluster studies are $1,000 per business day, rising to $2,000 per business day for cluster re-studies or affected systems studies that go beyond their deadlines. Facilities studies that are behind schedule will face penalties of $2,500 per business day. Transmission providers may appeal these penalties at the Commission.
- Increased financial commitments to remain in the interconnection queue. To promote only viable projects to stay in the queue, the Final Rule includes higher study deposit requirements, stringent site control requirements, and commercial readiness deposits. Additionally, withdrawal penalties will be imposed on customers who withdraw their requests, discouraging speculative and commercially non-viable interconnection applications. Final Rule at PP 502-507.
- Incorporation of technological advancements in the interconnection process. The Final Rule requires transmission providers to evaluate alternative transmission technologies as part of their cluster studies, and to include operating assumptions in interconnection studies to properly reflect the specific charging behavior of each electric storage resource seeking interconnection. Final Rule at PP 7, 23, 1324.
- The Final Rule requires transmission providers to use operating assumptions in interconnection studies that reflect the proposed charging behavior of electric storage resources, and requires transmission providers to evaluate alternative transmission technologies in their cluster studies.
- The Final Rule allows interconnection customers to add a generating facility to an existing interconnection request under certain circumstances without such a request being automatically deemed a material modification.
- Finally, the Final Rule establishes modeling and performance standards for inverter-based resources.
- Streamlining the queue for multiple generating facilities. Related to the incorporation of technological advancement, the Final Rule requires transmission providers to allow multiple generating facilities to co-locate on a shared site behind a single point of interconnection and share a single interconnection request, in addition to allowing interconnection customers to add an additional generating facility to an existing interconnection request under certain circumstances without it being deemed a material modification. This reform creates a more efficient standardized procedure for the configuration of these types of generating facilities. Final Rule at PP 584-586, 1325-26.
The final rule builds on FERC’s Notice of Proposed Rulemaking (“NOPR”) issued in 2022. Notably, in the Final Rule, FERC declined to adopt the NOPR proposals pertaining to informational interconnection studies, shared network upgrades, the optional resource solicitation study, and the alternative transmission technologies annual report. The Final Rule also does not adopt the proposed non-financial commercial readiness criteria from the NOPR, instead requiring only financial demonstrations of commercial readiness.
The Final Rule will take effect 60 days after its publication in the Federal Register, and compliance filings from transmission providers to implement the new requirements will be due 90 days after publication. We will be monitoring for any additional updates as the final rule is set to be published in the coming days.
For more information on the new interconnection rule, contact Neil Chatterjee, or Stephanie Fishman, Associate.