California Pioneers New Path for Interconnecting Large-Scale Distributed Energy Resources

Efforts to remove barriers to interconnecting large distribution system resources, such as community solar and big-box rooftop photovoltaic arrays, are accelerating, reform advocates say.

These distribution system-connected resources, especially projects in the 1 MW to 5 MW range, can flexibly meet peak electricity demand without major power system upgrades. But advocates add that under current interconnection practices, the cost of increasing system hosting capacity makes many projects requiring upgrades uneconomical.

The Limited Generation Profile (LGP) option approved by the California Public Utilities Commission (CPUC) on March 24 will be the first state-level implementation of "flexible interconnection" innovations for distribution system resources, which also include rooftop solar and solar-plus-storage systems owned by commercial and industrial customers, analysts and stakeholders agree.

The LGP option "allows developers to schedule export limits during periods of congestion on the power system to prevent overloads," said Sky Stanfield, an attorney with the Interstate Renewable Energy Council (IREC), an interconnection reform advocacy group, and a partner at the law firm Shute, Mihaly & Weinberger. But she added that the losses from limited generation will be less than the cost of upgrading the power system's hosting capacity.

Policymakers in other states, including New York, Illinois, and Colorado, are moving toward more flexible interconnection practices for these large distribution system resources.

Flexible interconnection "predefines" annual curtailment percentages, said Nadav Enbar, distributed energy resources interconnection program manager at the Electric Power Research Institute (EPRI). He added that the "core calculation" is whether upgrade costs are more economical than generation losses from unscheduled curtailment during periods of power system hosting capacity congestion.

Advocates and analysts say flexible interconnection options allow projects to interconnect faster by accepting limited curtailment, which helps achieve policy goals. But they acknowledge that the rapidly changing dynamics of U.S. distribution systems will make protecting reliability and keeping developer costs predictable challenging.

Interconnection costs

Although there is a lack of validating interconnection data to prove this need, stakeholders and analysts across the country agree that anecdotal reports suggest new interconnection options for distribution system resources appear necessary.

"As distributed energy resource applications and penetration rates rise, more bottlenecks and longer wait times often emerge," said Mari Hernandez, regulatory program director at IREC. She added that public sources have reported distribution system interconnection backlogs in Maine, Massachusetts, Minnesota, and other states.

The California Public Advocates Office reported in April 2023 that a location-based analysis showed "more granular LGPs" would add "considerable" generation to the state's power system.

The U.S. Department of Energy's 2021 Solar Futures Study shows U.S. distributed solar potential of up to 200 GW by 2050, but it did not draw conclusions on interconnection issues, acknowledged Jeffrey Cook, renewable energy policy and market analysis manager at the National Renewable Energy Laboratory (NREL).

The best evidence of the need for streamlined interconnection options comes from project developers.

"In New York, distribution upgrade costs often double developer costs," reported Benjamin Piiru, director of grid integration strategy and policy at Nexamp, with some costs "increasing up to sixfold." He added that without Illinois' flexible interconnection pilot, "we might have walked away from a project rather than paying a $50 million upgrade fee."

The massive backlog of transmission system interconnection applications in California has affected distribution system project interconnections, added Victoria Moroney, senior manager of market development at Forefront Power. As a result, the vast majority of 1 MW to 5 MW projects are delayed, and LGP "can be a viable alternative," she said.

Utilities and advocates say the LGP option will be complex and only possible thanks to years of work by California's investor-owned utilities mapping their distribution systems.

Limited Generation Profiles

IREC's Stanfield said LGP allows developers to voluntarily schedule reductions in project generation when congestion is expected at their location, rather than paying for capacity upgrades.

LGP is possible because of the monthly updated, location-based distribution system hosting capacity analysis maps of California's investor-owned utilities, Stanfield said.

Using these maps, California distributed energy resource providers "will for the first time in the U.S." have the opportunity to eliminate the requirement to pay for capacity upgrades "by proposing export schedules based on system conditions," Stanfield said.

"Utilities need assurance that the necessary power control technology can maintain developers' commitments," Stanfield acknowledged. The CPUC order delays LGP implementation until "nine months after distributed energy resource power control systems are certified under Underwriters Laboratories (UL) Standard 3141," she added.

Stanfield added that as LGP scheduling increases, changes in system load and supply could lead to new congestion points. The CPUC addresses this by allowing utilities to curtail project generation outside the LGP program when there is a "sustained load drop."

The CPUC order allows generation project owners to schedule two periods per day to reduce their generation below 100% of capacity—based on patterns of distribution system capacity at specific interconnection points. If changed monthly, this would create up to 24 generation changes for projects.

Southern California Edison believes LGP helps achieve clean energy goals and protect reliability but adds "operational complexity," said Jeffrey Monford, a spokesperson for the utility. He added that the special load loss curtailments, UL hardware certification, and limited scheduling changes required by the CPUC will ensure reliability.

But utilities "still need to develop systems and operational practices to implement LGP," and this complex implementation will require "clear and timely" CPUC guidance, Monford said.

Nexamp's Piiru said California's LGP rules "are an important first step toward flexible interconnection" and "could be a game changer because they allow for granular calculations of project financial viability." But he added that under more flexible interconnection rules that set specific maximum annual curtailment percentages, developer decisions "might be easier."

Developers, utilities, and analysts say more flexible interconnection rules are already advancing.

More flexibility

Most stakeholders agree that timely and cost-effective interconnection can be achieved in ways that give developers greater benefits and utilities more control.

"Flexible interconnection is a set of approaches that may not always be the right choice, but it does expand options for project developers," said Samantha Weaver, senior director of interconnection and grid integration policy at the Coalition for Community Solar Access.

California's LGP is "one end of the spectrum," while New York, Illinois, and other states are piloting more flexible approaches at "the other end of the spectrum," Weaver said.

Weaver continued that flexible interconnection requires utilities to have advanced communications and distributed energy resource management systems (DERMS) "to handle unscheduled but capped curtailments." For these approaches, tariffs, curtailment rules, and caps will be important.

Commonwealth Edison's flexible interconnection pilot "successfully achieved 6.75 MW of solar capacity" with only 17 curtailment event days over seven months in 2022, reported David O'Dowd, a spokesperson for the utility. He added that the pilot showed "curtailment events and durations are not broadly predictable," and scheduling them "would result in unnecessary curtailment."

IREC's Hernandez said DERMS-managed flexible interconnection is also valuable because hosting capacity analyses in most states, including New York and Illinois, are insufficient for interconnection. She added that national standards are needed to specify the frequency of data reporting and how to validate data reporting for interconnection decisions.

Nexamp's Piiru said upgrade cost sharing can also be tested in pilots. When multiple projects interconnect to the same feeder and upgrades are needed, "all developers, not just the last applicant, can share the costs," he added.

Xcel Energy's flexible interconnection pilot anticipates Colorado Senate Bill 24-218, which calls on the state's regulators and stakeholders to "modernize the energy distribution system," said its primary sponsor, Democratic State Senator Chris Hansen. The bill was signed on May 22 by Democratic Governor Jared Polis.

Xcel spokesperson Kevin Coss reported that the utility is reviewing existing policies and gathering stakeholder feedback. He added that a plan for a "small-scale demonstration pilot" will be finalized "within the next six months" to evaluate "the policy and technical considerations needed for broader deployment."

"Flexible interconnection is a tool," Senator Hansen said. "As curtailment increases in Colorado, it gives project developers incentives to add storage options to increase generation utilization during peak demand periods (when not curtailed), which increases the value of projects to the system and to DER builders and owners," he added.

Ultimately, new technologies will be needed to address potential complexities in flexible interconnection approaches, Hansen, Xcel, and others agree.

Open questions

Solutions that apply to interconnection under certain conditions may become obstacles to interconnection under others.

"The dynamics of power system operation make precise curtailment forecasting difficult," said EPRI's Enbar. "Even if developers interconnect at unconstrained locations and are allowed full export, other interconnected projects may eventually exhaust that feeder's capacity and require developers to pay for upgrades," he added.

But cost sharing for upgrades among developers "is not a simple issue because their revenues will be modified," Enbar said. "Flexible interconnection can serve as an effective transitional measure while building upgrades and addressing cost-sharing issues," he said.

Defining "the difference between flexible interconnection curtailment and curtailment in grid service programs like demand response" is also crucial, said Karyn Boenker, chief researcher and project manager in the Electricity Infrastructure and Buildings Division at Pacific Northwest National Laboratory.

"Developers with flexible interconnection agreements may face curtailment and financial losses, while demand response programs that protect system reliability are voluntary and compensated," Boenker said. Policymakers must decide "how to differentiate compensation," and regulators must decide "whether ratepayers or developers pay" for the new technologies required, she added.

But the "current paradigm" of relying on system upgrades "eliminates potential innovation," said NREL's Cook. "Interconnection processes can be tailored, and best practices will vary depending on DER penetration levels, utility, customer and developer characteristics and preferences, power system attributes, and other factors," he added.

"There may be complex puzzles to solve, but streamlined distribution system interconnection can save billions of dollars, reduce emissions, and greatly improve reliability," Colorado Senator Hansen responded.