FERC Proposes Overhaul of Interconnection Procedures

On June 16, 2022, the Federal Vitality Regulatory Fee (“FERC” or “Commission”) issued a Notice of Proposed Rulemaking (“Generator Interconnection Reform NOPR”) looking for feedback on proposed reforms to FERC’s professional forma interconnection procedures present in transmission suppliers’ Open Entry Transmission Tariffs (“OATTs”).    

The Generator Interconnection Reform NOPR comes at a time of renewed deal with the necessity for capital funding to modernize the grid to fulfill the wants of the altering technology combine.  The NOPR targets perceived inadequacies in FERC’s generator interconnection processes that could be creating boundaries to the environment friendly and cost-effective integration of technology sources.  FERC took the unanimous, bipartisan motion beneath mounting stress to handle clogged interconnection queues and lengthy delays—usually greater than three years—for brand new sources looking for to come back on-line.

The central goal of the proposed reforms is to transition the at the moment efficient “first-come, first-served” method discovered in lots of transmission suppliers’ OATTs to the first-ready, first-served cluster mannequin.  The “first-ready, first-served” cluster method—which is already in place in most organized impartial system operator (“ISO”) or regional transmission group (“RTO”) markets—is meant to extend effectivity and reduce the quantity of speculative technology initiatives that enter interconnection queues.  As well as, the Fee proposes reforms to speed up the interconnection course of, together with penalties for transmission suppliers that fail to well timed conduct research.  The Fee additionally seeks touch upon a set of reforms supposed to incentivize the use of new grid and transmission applied sciences. 

These proposed reforms—many of that are broadly seen as non-controversial, common sense measures—are described in additional element beneath.  Feedback on the NOPR are due 100 days after publication of the NOPR within the Federal Register, which has not but occurred.  We anticipate that feedback shall be due within the late September or early October timeframe.

PROCEDURAL CONTEXT

The Generator Interconnection Reform NOPR is an element of a holistic re-evaluation of FERC’s insurance policies concerning each generator interconnection processes and transmission planning.  Particularly, the Generator Interconnection Reform NOPR is a follow-on to FERC’s July 15, 2021 Advanced Notice of Proposed Rulemaking (“ANOPR”).  The ANOPR—which was a broad request for feedback—recognized a large scope of attainable transmission reforms into account, together with reforms to the generator interconnection course of.  Along with the Generator Interconnection Reform NOPR, and in addition instantly stemming from the ANOPR, on April 21, 2022, FERC requested feedback in a Discover of Proposed Rulemaking on proposed reforms for long-term transmission planning (“Long-Term Transmission Planning NOPR”). 

If efficient, the Generator Interconnection Reform NOPR—along with the Lengthy-Time period Transmission Planning NOPR—may speed up the interconnection of proposed technology initiatives in addition to shift transmission funding happening by the technology interconnection course of to the transmission planning course of. This important continuing requires the eye of, and participation by, trade stakeholders, together with however not restricted to transmission suppliers, transmission homeowners and technology builders. 

Notably, PJM Interconnection LLC (“PJM”) just lately filed at FERC, in Docket No. ER22-2110-000, proposed interconnection course of reforms that instantly overlap with many of the problems FERC is looking for to handle generically within the Generator Interconnection Reform NOPR.  Amongst different issues, PJM proposes to shift to a first-ready, first-served cluster method, with guidelines that require the interconnection buyer to fulfill sure benchmarks with the intention to enter and stay within the queue. 

The problems that prompted PJM’s submitting are the exact same points that underpin the FERC Generator Interconnection NOPR.  Earlier than submitting the proposed reforms, PJM carried out a two-year pause on new interconnection requests and has represented that it has a big backlog of interconnection requests.[1]  Certainly, in 2022, PJM represented that it has roughly 2,500 initiatives in its queue.  The quantity of new technology capability pending within the PJM interconnection queue probably far exceeds projections of PJM’s precise wants for technology capability (renewable or in any other case). 

In PJM and elsewhere, there was a proliferation of renewable power initiatives ensuing from, amongst different issues, state insurance policies selling renewable technology and elevated company demand for digital energy buy agreements that permit companies to fulfill “renewable” or “green” power targets.  The FERC Generator Interconnection NOPR acknowledges that a good portion of the technology initiatives in transmission suppliers’ queues is not going to attain business operation.  Each PJM’s submitting and FERC’s Generator Interconnection Reform NOPR try to steadiness necessities supposed to expedite processing of interconnection requests, on the one hand, with extra stringent necessities for technology initiatives to enter and stay within the queue, however. 

PROPOSED GENERATOR INTERCONNECTION REFORMS

I. First-ready, First-served Cluster Course of

A. Cluster Course of Reforms to Enhance the Velocity of Queues

FERC proposes to make the first-ready, first-served cluster research mannequin the universally required interconnection research technique.  Beneath a first-ready, first-served cluster research course of, interconnection requests are studied in teams (which means, particular person requests submitted throughout a sure time window are processed along with the identical precedence) and interconnection clients face rising monetary commitments and readiness necessities as they proceed by the queue.  In distinction, a serial research method assigns every interconnection request a singular queue place primarily based on after they enter the queue. 

FERC means that requiring cluster research will make interconnection processes extra environment friendly by permitting transmission suppliers to carry out bigger interconnection research that cowl quite a few interconnection requests and eventualities, versus performing research on a person interconnection request foundation.  FERC additionally maintains that cluster research will assist alleviate interconnection queue backlogs by decreasing the danger of cascading re-studies, that are triggered beneath the serial method when a higher-queued interconnection buyer withdraws or modifies its interconnection request.  The Fee’s transfer from the serial technique to the cluster technique is unsurprising, provided that variations of a first-ready, first-served cluster method are already in place in most RTOs, with a PJM proposal to maneuver to a cluster method is at the moment pending earlier than the Fee.  It is also price noting that these ISOs that have already got shifted to the use of a first-ready, first-served method have continued to expertise important challenges in effectively processing interconnection requests, with interconnection clients’ progress by the queue frequently hampered by research delays, research errors, and the necessity for restudies triggered by buyer withdrawals and different components.

B. Shared Community Upgrades

Notably, the Fee additionally proposes to make later-in-time clusters accountable for parts of shared community upgrades initially necessitated by a earlier cluster.  Beneath this proposal, which is meant to extra pretty allocate improve prices to their beneficiaries, a later-in-time undertaking might be accountable for shared community upgrades in a single of two methods: (1) if it instantly connects to a community improve or substation the place community upgrades have been accomplished within the prior 5 years, or (2) if an influence stream evaluation reveals that the later-in-time undertaking will use and profit from a community improve funded and positioned into service within the previous 5 years.  Within the occasion the transmission supplier identifies a shared community improve, the later-in-time buyer shall be accountable for a one-time lump sum fee that may then be disbursed to the interconnection clients that funded the prior undertaking. 

C. Elevated Monetary Commitments to Lower Speculative Technology Tasks

A key theme of the Generator Interconnection Reform NOPR is the Fee’s repeatedly said need to create a disincentive for the submission of speculative interconnection requests.  To that finish, the Fee proposes to incorporate steadily rising monetary commitments and readiness necessities all through the cluster research course of.  The aim of these reforms is to require interconnection clients to exhibit the viability of their initiatives, and their intention to develop these initiatives, earlier within the interconnection course of to discourage the submission of speculative interconnection requests. 

For instance, on the outset of every part of the brand new research processes, the Fee proposes to require initiatives to supply the next deposits to the transmission supplier, primarily based on undertaking dimension:

  • For amenities between 20 MW and 80 MW, a $25,000 deposit plus $1,000 per MW;

  • For amenities between 80 MW and 200 MW, a $150,000 deposit; and

  • For amenities bigger than 200 MW, a $250,000 deposit. 

As well as, the Fee proposes to require initiatives to supply a deposit that’s 9 occasions the relevant research deposit upon the execution of an interconnection service settlement, which deposit could be topic to any relevant withdrawal penalties however could be totally refunded on the time the ability achieves business operation. 

Although withdrawing interconnection clients are eligible to obtain a refund of their research deposits to the extent their deposits exceed the research prices incurred by the transmission supplier, such refunds are topic to any relevant withdrawal penalties, which have the potential to wipe out potential refunds.  The dimensions of withdrawal penalties is determined by the stage at which the undertaking withdraws and whether or not the positioning has demonstrated business readiness or submitted a deposit in lieu of such demonstration.  Withdrawal penalties can vary from one to 9 occasions the research deposit, with increased penalties the place a undertaking submitted a deposit in lieu of its business readiness demonstration.  Nevertheless, an interconnection buyer could also be exempt from such withdrawal penalties if the withdrawal doesn’t hurt different interconnection clients or follows a big unanticipated improve in community improve prices estimates. 

FERC additionally proposes to require extra stringent website management necessities and proposes a brand new business readiness assemble. 

For website management, initiatives shall be required to exhibit 100% website management on the outset of the interconnection course of after which repeatedly all through the research course of.  The Fee proposes a restricted choice for a deposit in lieu of website management, however solely the place regulatory limitations prohibit the shopper from acquiring website management. 

For business readiness, initiatives shall be required to indicate a stage of business readiness on the outset of the interconnection course of, after which shall be required to fulfill a extra stringent set of necessities previous to executing a amenities research settlement.  For instance, a technique an interconnection buyer can exhibit business readiness is to indicate a time period sheet for the sale of the ability—or its power, capability, or ancillary providers—for a time period of a minimum of 5 years.  On the time of execution of the amenities research, nonetheless, the Fee proposes to require clients to indicate an executed settlement (versus a time period sheet).  There are different obtainable strategies of demonstrating business readiness, however all are supposed to indicate an interconnection buyer’s rising stage of dedication over the course of the interconnection course of.  The Fee additionally proposes to permit an interconnection buyer to submit a deposit in lieu of a business readiness demonstration, although exercising this feature additionally will increase the quantity potential legal responsibility within the occasion of withdrawal, as defined above. 

As well as, the Fee proposes information-access reforms.  Particularly, the Fee proposes to require transmission suppliers to supply an “informational interconnection study” to equip potential interconnection clients with higher data to make use of in deciding whether or not to enter the queue.  Relatedly, to supply superior data to potential interconnection clients, the Fee proposes to require transmission suppliers to take care of and publicly submit sure technical data pertaining to generator interconnection, together with an interactive visible illustration of obtainable interconnection capability and sure interconnection metrics.  By offering interconnection clients with extra details about the supply of interconnection capability at areas on the transmission grid, these reforms are supposed to scale back the motivation for builders to submit interconnection requests at a number of areas throughout the grid with the intention to receive details about the supply of interconnection capability, solely to withdraw these requests after figuring out that interconnecting on the location would require the development of pricey community upgrades.

D. Transition Course of

FERC proposes three paths for the processing of pending interconnection requests in the course of the transition to the brand new interconnection course of guidelines:

Path 1: Proceed beneath present guidelines (solely obtainable to late-stage interconnection clients with executed amenities research agreements);
Path 2: Proceed beneath a transitional serial research course of; or
Path 3: Proceed beneath a transitional cluster research. 

Interconnection clients at the moment pending in a queue that haven’t but executed a amenities research settlement shall be given the choice between Path 2 and Path 3.  Tasks selecting to proceed beneath the Path 2 transitional serial research course of shall be required to supply a deposit equal to 100% of the allotted prices recognized by the undertaking’s system impression research outcomes and supply proof of website management.  Tasks looking for to proceed beneath the Path 3 transitional cluster research course of shall be required to execute a transitional cluster research settlement, permitting them to be processed by a mixed system impression and interconnection amenities research.  Nevertheless, these entities should choose both Vitality Useful resource Interconnection Service (ERIS) or Community Useful resource Interconnection Service (NRIS) and shall be required to make a $5 million deposit along with demonstrating website management.  In alternate for assembly these extra onerous necessities, the Path 3 transitional cluster research initiatives shall be permitted to proceed beneath an expedited course of. 

II. Accelerating Interconnection Queue Processing

FERC proposes to incorporate a brand new “stick” for transmission suppliers to well timed course of interconnection research.  In lieu of the “reasonable efforts” normal that beforehand ruled transmission suppliers’ research timeliness, the Fee proposes to require transmission suppliers to incorporate categorical deadlines that, if not met, will end in a penalty of $500 for every day that the research is late, capped at 100% of the entire research deposit obtained for the late research.  Transmission suppliers might not recuperate such penalties by transmission charges.  Acknowledging that RTOs/ISOs are not-for-profit entities, the Fee proposes to require RTOs/ISOs to file requests to recuperate penalty prices beneath FPA part 205, and should embody a tariff provision allowing the RTO/ISO to hunt to allocate penalties to the transmission proprietor(s) accountable for the delay. In his concurrence to the Generator Interconnection Reform NOPR, Commissioner Mark Christie highlights the difficulty of how ISOs would cowl such penalties as they don’t seem to be investor owned.[2]

FERC proposes new guidelines (together with new professional forma agreements) for initiatives that impression affected methods, i.e., methods apart from the area during which the undertaking could have a direct interconnection.  The proposed course of requires preliminary notification of the affected system, a required affected system scoping assembly, a research course of, price allocation procedures, the sharing of research outcomes and evaluation, and a monetary penalties evaluation.  The said objective of this proposal is to extra intently contain affected methods from the outset of the interconnection course of. 

FERC additional proposes new necessities offering for the use of an elective useful resource solicitation research by a useful resource planning entity (usually state and native entities that develop useful resource plans or useful resource solicitation processes).  Beneath the proposal, a useful resource planning entity can facilitate and arrange interconnection requests that may help such entity in reaching its useful resource planning objections.  These necessities are supposed to formalize coordination between transmission suppliers and state and native entities looking for to carry specific varieties of sources onto the grid in step with their coverage aims. 

III. Incentivizing the Examine and Deployment of New Applied sciences

The Generator Interconnection Reform NOPR additionally proposes a range of revisions to assist promote the consideration and attainable adoption of new applied sciences by the interconnection course of.  These modifications embody:

  • Flexibility in Co-Location: The Fee proposes to require transmission suppliers to permit multiple useful resource to co-locate on a shared website behind a single level of interconnection and share a single interconnection request.

  • Adjustments to Materials Modification Provisions: The Fee proposes to change the fabric modification evaluation in order that it’s extra permissive for technological modifications that don’t end in a change in a facility’s output. 

  • Surplus Interconnection Service: The Fee proposes to permit interconnection clients to entry surplus interconnection service previous to business operation, as a substitute permitting entry to this service as soon as the unique interconnection buyer has executed an interconnection settlement.  The aim is to permit unused interconnection capability to be accessed at an earlier level than what’s at the moment usually allowed. 

  • Incorporating Different Transmission Applied sciences: The Fee proposes to require transmission suppliers, upon request of an interconnection buyer, to guage different transmission options akin to superior energy stream management, transmission switching, dynamic line rankings, static synchronous compensators, and static VAR compensators. 

Lastly, the Fee proposes a range of modifications concerning modeling and assumptions utilized in interconnection research to, for instance, higher research the incorporation of non-synchronous amenities onto the grid.  Though challenges introduced by non-synchronous sources seem like a “one off” from the core focus of the NOPR, it seems that FERC seeks  to resolve these points on an expedited foundation together with the interconnection queue points. 

CONCLUSION AND TAKEAWAYS

As famous above, to date, FERC’s 2021 ANOPR has resulted within the Lengthy-Time period Transmission Planning NOPR along with the Generator Interconnection Reform NOPR mentioned on this replace.  There are points raised within the ANOPR that haven’t but been addressed in a follow-on NOPR, to incorporate interregional transmission planning (separate from the regional planning reforms proposed within the Lengthy-Time period Transmission Planning NOPR); transmission incentive reforms; participant-funding reforms; and transmission growth reforms (probably targeted on price management associated to transmission growth).  FERC has previously expressed considerations in regards to the want for enhanced oversight of funding in transmission and associated price restoration to make sure that ratepayers are usually not accountable for transmission funding that isn’t unneeded or imprudent.  FERC has prompt the involvement of state commissions or impartial oversight to watch transmission spending in every transmission area. 

The juxtaposition of PJM’s at the moment pending interconnection reform proposal and the Generator Interconnection Reform NOPR highlights factors raised in Commissioner Danly’s concurrence to the Generator Interconnection Reform NOPR.  He means that whereas the prevailing generator interconnection provisions is probably not simply and cheap—thereby satisfying the primary “step” or “prong” beneath FPA part 206—it might be tough for FERC to prescribe what provisions are simply and cheap.  Fee Danly famous that transmission suppliers and ISOs ought to be succesful of proposing their very own generator interconnection reform OATT revisions, akin to these just lately submitted by PJM.  Commissioner Mark Christie’s concurrence additionally cautioned “strongly” that FERC ought to averted disrupting modifications being developed within the stakeholder course of at ISOs to resolve queue points, noting: “The queue reforms proposed in today’s NOPR should be seen more as guideposts or general standards rather than unyielding mandates that refuse to take local solutions into consideration.”  He conveyed his desire that the necessity for such flexibility be memorialized in any last rule.    

Additionally of curiosity is the coordination of any reforms to the generator interconnection course of with the FERC’s Lengthy-Time period Transmission Planning NOPR.  That NOPR, issued on April 21, 2022, highlighted FERC’s considerations in regards to the tendency for interconnection-related must be recognized repeatedly in interconnection research, just for these must go unresolved as a result of withdrawal of technology sources from the method.  To handle that situation, FERC’s Lengthy-Time period Transmission Planning NOPR proposes to require that transmission suppliers consider for attainable choice within the regional transmission plan and corresponding price allocations, regional transmission amenities to handle interconnection-related wants which were recognized in a minimum of two interconnection queue cycles in the course of the previous 5 years; have a voltage of a minimum of 200 kV and/or an estimated price of a minimum of $30 million; and haven’t been developed as a result of withdrawal of interconnection clients.  FERC’s proposal within the Lengthy-Time period Transmission Planning NOPR represents a small step in the direction of harmonizing the generator interconnection course of with regional transmission planning—processes that traditionally have employed completely different assumptions when evaluating reliability wants, with the outcome that reliability points recognized within the generator interconnection course of have gone unaddressed.



ENDNOTES

[1] It’s price mentioning that the queue backlog and PJM’s choice to “pause” the generator interconnection queue has had vast and surprising penalties, affecting initiatives apart from new technology growth.  Present technology initiatives are required to enter the interconnection queue to the extent that they search to materially modify their sources, together with modifying the technical traits of their sources or including further capability behind the identical level of interconnection.  Additionally, sure requests for transmission service are required to be processed by the PJM queue and have been affected as a result of pause in PJM’s queue. 

[2] FERC Commissioner Christie seeks to make sure that customers don’t pay for such penalties – both instantly or not directly.

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