The New Kids On The (Power) Block Get A Green Light

You probably have noticed how Google Traffic maps uses different shades of red to let drivers know how bad traffic is. There is light red, medium red, and what some call bloody hell red. The traffic jam below surely qualifies as bloody hell red! This shade of red is probably what power generators have been seeing over the last decade. The current wait time in the interconnection queue for new power generation or storage is over five years, up from less than two years in 2008. In fact, at the end of 2022 there were more than 2,000 gigawatts waiting to be connected across the United States, an amount that if built would double the nation’s current generation capacity (double!). 

It must come as great relief to both electric generation developers and grid operators that the U.S. Federal Energy Regulatory Com-mission (FERC) unanimously approved a final rule reforming interconnection procedures and agreements. And while the rules were written from a place of neutrality, make no mistake: this reform is a great victory for renewable energy since the vast majority (>90%) of the queue is zero carbon-focused infrastructure. 

The aspirations of the new rule include: 

  • Implement a first-ready, first-served cluster study process, which allows FERC to evaluate (and approve) projects in groups instead of singularly. Developers will have to put down financial deposits as well as meet other conditions in a timely matter, which should go a long way towards weeding out the numerous unlikely-to-proceed projects that help clog the queue. 
  • Speed up interconnection queue processing. Transmission providers will have firm deadlines and be subject to penalties if they fail to complete interconnection studies on time. 
  • Incorporate technological advancement into the interconnection process. This essentially provides more flexibility for both generation developers and transmission providers to adjust the terms of a proposal without having to restart the process. This is seen as a major positive for energy storage, which previously found it difficult to make their way into an ongoing project without potentially setting back interconnection approval. 

Not to be confused with the old NKOTB, the new kids on the (power) bloc stand to gain the most from improvements to grid accessibility. We’re talking of course about renewable energy like solar and wind, and related energy storage (e.g., batteries). Some experts also believe this queue does NOT include much of the upside related to the Inflation Reduction Act (IRA), which believe it or not only recently passed its first year anniversary. In other words, a huge chunk of the queue is pre-IRA, and so the potential for renewable energy development is only scratching the surface. 

Why does this matter? To meet the goals of energy transition, we need more zero carbon energy generation and we need it fast. Providing grid access is an absolutely necessary component of achieving our net zero goals. Providing more grid access for renewables can benefit adoption in a variety of ways. 

  • Increased reliability: Increased grid connectivity can help to improve the reliability of renewable energy by allowing for the transmission of electricity from areas with surplus generation to areas with excess demand. 
  • Increased efficiency: By connecting power from areas of abundant renewables supply to areas without, increased grid connectivity can help to reduce the need for new power plants and transmission lines, which can save money and reduce emissions. 
  • Increased access: Increased grid connectivity can also help to increase the access to renewable energy by allowing for the transmission of electricity from remote areas to urban areas. This can help to bring the benefits of renewable energy to more people. 
  • Reduced costs: Increased grid connectivity can also help to reduce the costs of renewable energy by allowing for the economies of scale to be realized. This is because it allows for the transmission of electricity from large renewable energy projects to multiple locations. 
  • Sustainability: Increased interconnection can also help to increase the use of renewable energy sources. This can help to reduce the reliance on fossil fuels and make the power grid more sustainable. 

Interconnection is an important part of ensuring the reliability, efficiency, and sustainability of the power grid. Adding renewables to the grid has a number of benefits, including increased resilience to extreme weather events, improved access to renewable energy, and reduced greenhouse gas emissions. FERC Chairman Willie Phillips said of the new ruling: “This is a watershed moment for our nation’s transmission grid”. Regulatory gridlock is not easy to unstick. While his statement might be a bit hyperbolic, we are extremely pleased to see this meaningful progress being made.

Curt Pabst, Managing Director, Energy Infrastructure, Eagle Global Advisors