U.S. Clean Energy Interconnection Backlog Reaches 2.5 Terawatts, Innovative Solutions Accelerate Breakthrough

The backlog of generation and storage projects in U.S. transmission system operator interconnection queues continues to grow, but a range of innovative solutions are emerging that could help alleviate this pressure.

According to a report released by Lawrence Berkeley National Laboratory (LBNL) in April 2024, the scale of proposed generation and storage projects awaiting interconnection is approximately twice the size of existing U.S. generation capacity (estimated at 1,280 GW). The report also notes that projects started before 2015 took an average of about 17 months from application to operation, while for projects completed between 2022 and 2023, this cycle has approached nearly 5 years.

In response to the approval by the Federal Energy Regulatory Commission (FERC) in July 2023 ofOrder No. 2023, U.S. transmission providers and system operators are accelerating the development of new plans. The order imposes significant new requirements on the two-decade-old interconnection process, including prioritizing viable projects that meet readiness standards and imposing financial penalties on transmission providers and system operators to improve efficiency.

LBNL energy policy researcher Joseph Rand stated that Order No. 2023 "prioritizes more viable projects that have met readiness standards and imposes financial penalties requiring transmission providers and system operators to improve efficiency." However, regulators and stakeholders alike believe the order only marks the beginning of interconnection process optimization and is not yet sufficient to address the rapid growth of new load.

Former FERC Commissioner Allison Clements wrote in her concurrence that Order No. 2023 "is an important step in addressing the interconnection backlog," but transmission providers, interconnection customers, and other stakeholders should "treat the rule's requirements as a solid foundation rather than a ceiling" and continue to pursue deeper reforms.

Analysts point out that Texas's simplified "connect and manage" interconnection model may be viable in its energy-only market; the Southwest Power Pool (SPP) is advancing cross-state efforts to link system planning with the interconnection process, which, if completed, could become a breakthrough in reducing queue backlogs.

California, with itsnewly approved interconnection enhancement plan, is leading innovation, as it has already taken the lead in linking transmission planning, generation procurement, and project interconnection processes. However, some believe that scoring projects on viability, commercial readiness, and system value may fail to balance the interests of utilities and developers, and could even hinder the achievement of load growth goals.

California's Innovative Enhancement Plan

The California Independent System Operator (CAISO) Board voted 5-0 on June 12 to approve a plan that prioritizes identifying and scheduling project interconnections in areas where planning shows "existing transmission capacity or approved new transmission." The enhancement aims to prioritize interconnecting projects with the highest operational readiness, commercial value, and system value.

Danielle Mills, CAISO's head of infrastructure policy development, stated that the plan delineates "areas" where "transmission capacity is available or will be built." This zonal approach "is the cornerstone of the entire reform effort," with other "procedural reforms" designed to "support the new methodology." The plan guides developers into "Transmission Plan Deliverability" areas identified in CAISO planning as having available transmission, and incentivizes utilities and other load-serving entities (LSEs) to procure from these projects.

In the total project "score," 35% is based on viability criteria such as site control and engineering design completeness; another 35% is based on the project's value as system-level or local resource adequacy. The remaining 30% depends on proof of LSE commercial interest in the project, but CAISO and stakeholders alike acknowledge this may give LSEs negotiating leverage, allowing them to pressure developers who need LSE interest to improve their scores.

Mills added that within each area, CAISO will select the highest-scoring projects for detailed study, and if scores are tied, the project's value to the area's local distribution system serves as the primary tiebreaker. If still tied, "the developer willing to pay more in a sealed-bid auction to qualify for interconnection study wins, and its project enters the study process."

CAISO stated that developers of generation and battery system projects may also apply for interconnection in areas without available or planned transmission capacity, but must self-fund all necessary grid upgrades, with only a portion of upgrade costs eligible for recovery.

Mills said these procedures limit CAISO studies "to the most viable projects," but will include projects equivalent to 150% of available transmission capacity to ensure LSEs have sufficient options. "This is the most original part of the new process, ensuring enough new generation to meet state goals while limiting the interconnection queue to prevent backlogs."

The CAISO Board unanimously agreed that the new enhancement brings "significant but not perfect change," and that the process urgently needs reform to manage the interconnection queue and achieve the state's energy transition goals.

Two Controversial Issues

In the early stages of developing the enhancement, LSEs and developers debated whether LSE influence in scoring project commercial interest was fair. Susan Schneider, a consultant for the Large-Scale Solar Association (LSA) representing solar developers and principal of Phoenix Consulting, said LSEs could leverage their influence to obtain exclusive rights to projects or压低 power purchase prices by expressing commercial interest.

Schneider noted that "CAISO encourages stakeholders to communicate about projects," but "there are no guidelines or regulations for LSE project scoring." Comments from the American Clean Power Association and the Clean Energy Buyers Alliance also supported Schneider's concerns.

Ryan Millard, Senior Director of Western Regional Regulatory and Political Affairs at independent power producer NextEra Energy Resources, said at the June 12 board meeting that the lack of strict guidance for LSEs has already led LSEs to seek additional concessions. He cited an example where an LSE recently told NextEra that "to receive LSE score allocation, developers must grant right of first refusal and pay a $5 per kilowatt deposit." For "a 300 MW storage project, this means paying a $1.5 million deposit 10 years before the expected start date just to enter the queue."

CAISO President and CEO Elliot Mainzer responded that CAISO will "monitor the new process to prevent manipulation," but the responsibility for regulating procurement lies with state and local agencies. Pacific Gas and Electric and Southern California Edison, meanwhile, insisted that regulatory oversight will protect developers and ratepayers.

Ed Smeloff, a consultant at the Center for Energy Efficiency and Renewable Technologies, said the need to address the interconnection backlog is "urgent," commercial interest is "critical," and he believes "the existing governance structure is sufficient to ensure developers' concerns are heard by LSEs."

Will Gorman, a research scientist in energy and environmental policy at LBNL, noted that CAISO's interconnection applications exceed 500 GW, "more than 10 times its approximately 50 GW peak load," which keeps it focused on reducing the queue.

But some stakeholders say existing transmission capacity may not be sufficient to meet California's projected load growth of 8 GW per year. LSA consultant Schneider said the 541 projects in the 2023 Cluster 15 may be lost because available Transmission Plan Deliverability areas were occupied by more than 300 projects from the 2021-22 Cluster 14. She added that to interconnect in areas without remaining transmission capacity, "developers must self-fund expensive upgrades and face the risk of not being compensated."

Neil Millar, CAISO's Vice President of Transmission Planning and Infrastructure Development, said a June 14 CAISO report shows approximately 30 GW of Transmission Plan Deliverability areas have been allocated to Cluster 14 projects, with another 30 GW or more allocated to pre-Cluster 14 projects, totaling over 60 GW of allocations that should meet projected load growth and policy goals through 2030. Millar said "additional analysis will be provided in August showing remaining deliverability capacity for Cluster 15," but "ultimately it is up to LSEs to procure to move projects forward."

Former FERC Commissioner Clements told Utility Dive that CAISO's enhancement "reflects the reality of the queue backlog," and "the solution is not yet fully defined, but California is exploring the path." Observers say other innovative approaches are even less mature.

Three Alternative Innovations

LBNL's Gorman said California's enhancement "may be the most significant change to the existing interconnection process in the nation." But to comply with Order No. 2023, other ISOs, RTOs, and transmission providers are also developing new approaches.

The Southwest Power Pool (SPP) plans to integrate planning, procurement, and interconnection, but the proposal still needs about a year before it can be submitted for FERC approval. Steve Gaw, Senior Vice President of the Advanced Power Alliance and a member of multiple SPP advisory committees, said the proposal aims to "use planning and procurement results to guide the interconnection process, avoiding the time and cost of duplicative studies."

Gaw noted the concept is similar to California's approach but "more difficult to achieve" across SPP's 14 states, especially as its "Strategic and Creative Re-engineering Integrated Planning Team" faces challenges in "allocating transmission upgrade costs." But former FERC Commissioner Clements believes "SPP has a history of state cooperation, and in this new era of load growth and new energy demand, utilities and states are more inclined to cooperate."

In the Electric Reliability Council of Texas (ERCOT) system, developers can interconnect without bearing system upgrade costs if they are willing to accept curtailment costs. This "connect and manage" model was described in a February 2024 paper by Grid Strategies and the Brattle Group as a "relatively fast and consistent interconnection process." The model was introduced in the UK in 2010 and helped Texas lead the nation in new generation interconnection in 2021 and 2022.

But Rob Gramlich, founder and president of Grid Strategies, said "proactive transmission planning is needed to manage congestion," and "because Texas renewables still face significant congestion and curtailment, some developers are critical of the connect and manage model." A 2023 Nicholas Institute paper noted that Texas's interconnection success "is strong evidence that the connect and manage model is viable in energy-only markets," but it may not be applicable in non-energy-only markets, especially in multi-state RTOs, where cost allocation and resource adequacy requirements make it difficult to replicate.

LBNL's Gorman said that currently, no region other than Texas has adopted the connect and manage model, but researchers are exploring ways to "decouple resource adequacy from the interconnection process."

Former FERC Commissioner Clements wrote in her concurrence to Order No. 2023 that these interconnection innovations are critical because "the U.S. is facing a grid infrastructure crisis," and the order's changes "will help alleviate the interconnection backlog, but alone they are still insufficient."