Order No. 2023: Interconnection Reform Is Finally Here

• Publication year: 2024
• Citation: Vol. 2 No. 1

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Ruta K. Skucas, Chimera N. Thompson, Kimberly B. Frank, Theodore J. Paradise, and Jennifer L. Mersing ^*

In this article, the authors discuss an order issued recently by the Federal Energy Regulatory Commission, implementing reforms to its generator interconnection agreements and procedures.

The Federal Energy Regulatory Commission (FERC) has issued Order No. 2023, ¹ implementing reforms to its generator interconnection agreements and procedures aimed at alleviating the backlog of generation and storage projects pending in interconnection queues throughout the country. ² Acting Chair Willie Phillips said, "[t]he final rule is one of the largest in FERC's history," and "represents the largest and most significant set of interconnection reforms since the pro forma interconnection procedures were created two decades ago." ³

Currently, the waiting period for a generation or storage project to connect to the grid can be up to five years and possibly longer in some regions. Figure 1 shows the regional distribution of proposed solar, wind, storage, and gas capacity. ⁴

Studies have quantified these delays and also highlighted the impact of queue withdrawals. ⁵ With solar, wind, and storage projects making up approximately 94 percent of the total capacity in interconnection queues, ⁶ this backlog is one of the primary obstacles for the clean energy transition. Generation interconnection has posed a massive problem for at least the past five years. By the end of 2022, over 2,000 gigawatts of proposed generation and storage projects were waiting in interconnection queues.

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Figure 1. Regional Distribution of Proposed Solar, Wind, Storage, and Gas Capacity

Executive Summary

Order No. 2023 makes numerous changes to current interconnection processes. The most significant elements include:

■ Transition from a first-come, first-served (serial) study process to a first-ready, first-served process studying groups of interconnection requests that may be served by the same transmission upgrades (cluster studies);
■ Increased financial commitments, site control requirements, and withdrawal penalties for developers;
■ Firm study deadlines and penalties for transmission providers or transmission owners conducting the studies;
■ Requirements to evaluate alternative transmission technologies;
■ Increased opportunities for proposed projects to make use of a single interconnection (co-location) and changes to the material modification process to permit the addition of electric storage or other facilities that do not change the requested interconnection service limit;
■ Public sharing of interconnection information, including a "heatmap" of interconnection capacity;
■ Standardization of affected system studies; and
■ Mandated modeling updates.

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Order No. 2023 requires that transmission providers submit compliance filings that include tariff provisions implementing the changes mandated by the rule in their interconnection agreements, both LGIA and SGIA, and interconnection procedures, both LGIP and SGIP, within 90 days of the date of the rule's publication in the Federal Register.

With Order No. 2023 published in the Federal Register on September 6, 2023, transmission providers' compliance filings were due on December 5, 2023.

Key Provisions

First-Ready, First-Served Cluster Study Process

Order No. 2023 replaces the current serial interconnection process with an annual cluster study process, which allows for the study of a group of interconnection requests by multiple generating facilities at the same time rather than individually and sequentially. Under the cluster study process, all interconnection requests received before the close of a cluster request window—that is, a 45 calendar-day period, during which all interconnection customers must submit their interconnection requests—will be considered equally queued and of equal study priority. Transmission providers must assess the viability of all interconnection requests during this 45 calendar-day request window. Customers that submit invalid interconnection requests must cure all deficiencies within 10 business days of receiving a deficiency notice but no later than the close of the cluster request window. If the customer does not respond by the deadline, the interconnection request is immediately deemed withdrawn.

Following the close of the cluster request window, transmission providers will begin a 60 calendar-day "customer engagement window," during which transmission providers must post on their OASIS websites—within 10 business days—details on the makeup of the cluster, including information on the amount of interconnection services and the location of proposed generating facilities. An interconnection customer may withdraw its interconnection request without penalty during the customer engagement window. Any interconnection customer that submits a valid interconnection request during the customer request window will become part of

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the cluster if the customer executes a cluster study agreement by the end of the customer engagement window. Any request that is not deemed valid at the close of the customer engagement window will not be included in the cluster.

FERC has expressed its intent to make more information available to interconnection customers for the purpose of encouraging informed decision-making. As a result, the new rule adds the 60-day "customer engagement window" precisely so that more information is available to customers to assess the continued viability of their proposed generating facilities earlier in the interconnection process; that is, prior to the start of the cluster study and before withdrawal of the interconnection request will incur a penalty.

At the close of the customer engagement window, transmission providers will have 150 days to conduct initial cluster studies, pursuant to which they will collectively evaluate in groups the interconnection requests for those who executed a timely cluster study agreement. FERC rejected requests that the cluster study process should only permit transmission providers to conduct one cluster study at a time, choosing instead to give transmission providers the option to conduct multiple cluster studies at any given time. Network upgrade costs will be allocated among interconnection customers in the same cluster through a proportional impact method.

Versions of a first-ready, first-served cluster method are already in place in many independent system operators and regional transmission organizations (ISOs/RTOs) and a number of transmission providers in the Western Interconnect. This change is likely to be far more profound where individual utilities not part of an ISO/ RTO are still processing interconnection requests on a first-come, first-served basis. Significantly, FERC has declined to permit transmission providers to process interconnection requests by a method other than the annual cluster study process. As such, the move to a cluster study process is mandatory and must be implemented by all transmission providers.

Increased Financial Commitments for Developers

Transmission providers have raised concerns that developers have been "squatting" on multiple interconnection requests, only one of which would eventually proceed, which led to greater delays

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in the serial interconnection process. By requiring significant application and readiness deposits, withdrawal penalties, and bolstered site control requirements, the new rule seeks to reduce speculative or duplicative interconnection requests with more stringent requirements for entering and remaining in the queue.

Under FERC's new approach, interconnection customers must submit a nonrefundable $5,000 application fee during the cluster request window to enter the interconnection queue. They must also pay a single initial study deposit to enter the cluster, the amount of which varies (between $55,000 and $250,000) based on the size of their project.

The new rule also requires the interconnection customer to make commercial readiness deposits at the beginning of each study in the cluster study process (i.e., the initial cluster study, the cluster restudy, and the facilities study). Initial commercial readiness deposits will be two times the initial study deposit and remaining commercial readiness deposits will be based on a percentage of the interconnection customer's assigned transmission network upgrade costs (5 percent for the cluster restudy and 10 percent for the facilities study).

When executing an LGIA or requesting the filing of an unexecuted LGIA, interconnection customers must also submit a deposit to increase the total commercial readiness deposit to 20 percent of estimated network upgrade costs. This deposit will be treated...