Missed (Inter)connections

This Week's Trend In Brief:

• At FERC’s open meeting today, the commission is expected to take up a proposal from June 2022 to make the interconnection process more efficient.
   

• Yet while there is broad support for interconnection reform in general, the wide range of interested stakeholders – including renewable developers, grid operators and utilities, environmental activists, and consumer groups – remain split on what those reforms should include.
   

• For example,  utilities have split with “consumer groups” and independent developers over commercial readiness requirements, and regulatory commissioners and developers disagree with utilities and RTOs over deadlines and penalties.
   

• FERC is reportedly taking stakeholder views seriously, and today’s action could vary significantly from the 2022 proposal, as the commission has indicated it was putting significant emphasis on the many public comments it has received.
   

• Regardless of what actions FERC does or does not take, these divisions will continue to play out in many different venues, as policymakers at the federal, regional, state, and local level continue to shape the interconnection process, meaning interested parties must ensure they fully understand the range of views and how those views are influencing policymakers.

Digging Deeper:

At FERC’s open meeting today, the commissioners are expected to consider, and possibly finalize, a 2022 proposal to change how energy projects connect to the grid. According to the agenda posted last week, FERC will consider “Improvements to Generator Interconnection Procedures and Agreements.” This comes more than a year after FERC unanimously voted to advance a notice of proposed rulemaking on interconnection queue reforms in June 2022. The meeting comes at a crucial moment for the energy industry. As we noted recently, many view the interconnection queue as “the No. 1 barrier to deploying renewable energy.” Tackling interconnection queue reform is acting-FERC Chair Willie Phillips’ top priority, and just last month he told a congressional committee he hoped to finalize a rule regarding the interconnection queue, in “the coming months.”
 
Yet while there is broad agreement amongst stakeholders that interconnection queue reform is needed, FERC’s unanimously advanced proposal has prompted significant advocacy from diverging interests. Stakeholders including the solar industry, federal and state policymakers, engineers at Lawrence Berkeley Lab, and environmental activists all agree interconnection queue reform is badly needed. Yet despite this near-universal agreement that some type of reform is needed, FERC’s unanimously adopted proposal has prompted significant advocacy. Indeed, so many “comments were filed in the NOPR proceeding, some of which included alternative proposals for consideration,” the commission ultimately extended the reply comment deadline at the behest of groups representing a wide range of interests, including Edison Electric Institute, Advanced Energy Economy, American Clean Power Association, American Council on Renewable Energy, and Solar Energy Industries Association. R Street’s Devin Hartman noted “a coalition of consumer groups, clean energy developers and others are lobbying FERC to change several elements of its proposed rule.”
 
Those diverging interests include independent power developers and “consumer groups” who are wary of overly cumbersome commercial readiness demonstrations, as well as utilities and regulatory commissioners who see such requirements as vital to preventing speculative projects from entering the queue and delaying review of those ready to bolster the grid. FERC’s 2022 proposal created significant divisions amongst key stakeholders, including on the inclusion of commercial readiness requirements. Indeed, R Street’s Devin Hartman, who is leading a coalition of “consumer groups,” has urged FERC to “ensure commercial readiness requirements are not unduly burdensome.” The American Council on Renewable Energy (ACORE) similarly expressed concerns regarding the “balancing act to make sure that all the demonstrations of commercial readiness actually meet the reality of project development.” Conversely, Edison Electric Institute, the trade association for electric utilities suggested that Commercial Readiness Demonstrations proposed by FERC “may not go far enough,” to discourage “speculative projects that enter the process only to withdraw later,” which can result in restudies, impacting projects that are ready to connect to the grid. The National Association of Regulatory Utility Commissioners similarly supports “enhanced … commercial readiness criteria.”
 
FERC’s proposal has also led to divisions over deadlines and penalties for interconnection studies, with RTOs and utilities opposing the proposal, and NARUC and developers supporting it. RTOs and utilities have “opposed FERC's proposed penalties for missing interconnection study deadlines,” with EEI alleging “a regime of deadlines and penalties… will ultimately hinder efforts to reform the interconnection process.” Conversely, “NARUC supports holding transmission providers accountable for failing to meet study deadlines,” and has suggested any penalties should be sufficient to incentivize action by the transmission provider.” The Solar Energy Industries Association also praised the penalties and deadlines proposal.
 
The 2022 proposal has also led to broad calls for FERC to go further on a range of issues, including network upgrades. According to the R Street-led coalition, FERC’s 2022 proposal was “underwhelming,” due to its failure to address network upgrades, among other issues. Among their demands, the R Street coalition urged FERC to “re-examine the role of regional transmission planning to drive cost-effective network upgrades.” ACORE similarly called for FERC to consider rules regarding cost allocation for network upgrades. Environmental group NRDC lamented that while the rule might “get rid of what you might call the unforced errors,” more would likely be required to relieve interconnection queues. As Caitlin Marquis of the clean energy advocacy group Advanced Energy United noted, “there were some things in the proposed rule that were beneficial, and some things that were troubling… Even if FERC issues the best final order it can on that [proposed rule], there will be more work needed on generator interconnection to reform the process to where it needs to be to be efficient and functional for the grid transition we’re undergoing.” 
 
While this advocacy has reportedly shaped FERC’s thinking on the rule, regardless of what FERC ultimately does, these divisions will continue to play out in various venues at the federal, regional, state, and local level, making it key for interested parties to ensure they have a clear understanding how different stakeholders are influencing various policymakers. E&E News recently reported, “FERC’s final rule could ultimately be significantly different than the proposal issued last June,” as a spokesperson for the commission indicated the commission was placing an emphasis on all the comments the commission had received. While it remains to be seen precisely what action FERC will take later this morning, this policy debate will continue to play out in venues across the country, including Congress, DOE, RTOs, state legislatures, and public utility commissions. As debate continues to unfold, interested parties will need to ensure they fully understand what various stakeholders are trying to shape the debate, which policymakers may be listening to them.

Trends in Energy is your weekly look at key trends affecting the energy industry, brought to you by the competitive intelligence experts at Delve. As the political and regulatory landscape continues to shift, reach out to learn how our insights can help you navigate these challenges.