Western US embraces grid reforms but solar queues will linger

Faster grid approval schemes for clean power are spreading into unregulated Western U.S. markets but it could take years before surging grid queues are tamed.

U.S. clean power projects are soaring on the back of rising electricity demand and tax incentives in the 2022 Inflation Reduction Act, placing huge pressure on regional grid authorities.

Power capacity in grid connection queues rose by 27% in 2023 to 2,600 GW and solar (1,086 GW) and energy storage (1,028 GW) represent 81% of grid connection applications, the Lawrence Berkeley National Laboratory (Berkeley Lab) said in its annual “Queued Up” grid report. Much of this capacity may not be built but the high number of applications are delaying project approvals and pushing up costs.

The volume of projects in grid connection queues was highest in the West non-ISO region, where 706 GW of projects were awaiting connections following an influx of developers in just the last few years. Due to its large network, Bonneville Power Administration (BPA) had 210 GW of projects in its grid queue, almost a third of all West non-ISO applications. California’s CAISO had 523 GW in grid queues, followed by the midwestern MISO (311 GW), Eastern PJM (287 GW) and the Texas ERCOT market (269 GW).

New solar added to grid connection queues in 2023

                                 (Click image to enlarge)

Source: Berkeley Lab, April 2024

Clean power applications will continue to rise in the next few years but reforms to federal grid rules over the last year should help to ease the pressure on grid operators over time, industry experts told Reuters Events.

Reforms by the Federal Energy Regulatory Commission (FERC) require grid operators to study projects in clusters and eliminate speculative projects that are clogging up the queue. Alongside this, proactive planning by grid operators will make more transmission available.

Capacity in grid queues will probably increase in the short term, but within three to five years, queues should start to ease “due to the new FERC rules and other reforms being enacted,” Joseph Rand, Energy Policy Researcher at Berkeley Lab, said.

Grid backlogs

Dwindling spare grid capacity and long approval times for new connections are delaying solar and wind projects and inflating costs. The typical timeframe from connection request to commercial operation hit five years in 2023, up from four years for the 2018-2023 period and two years for projects built in 2000-2007, Berkeley Lab said in its report, based on data from the country’s seven ISOs/RTOs alongside 44 non-ISO utilities.

Rising clean power applications and uncertainty over queueing times led to developers applying early in the process and without full financial backing. These developers would then "withdraw if the costs are greater than anticipated," Elise Caplan, Vice President of Regulatory Affairs at the American Council on Renewable Energy (ACORE), told Reuters Events.

                 Power generation in grid connection queues at end of 2023

                                                             (Click image to enlarge)

Source: Berkeley Lab, April 2024

Some developers have shifted to markets with shorter queueing times, such as ERCOT in Texas, where solar and storage activity is surging, Rand said. Texas operated 23 GW of solar power at the end of 2023 and is forecast to install a further 100 GW over the next 10 years, "outpacing the next closest state by a two-to-one margin," Solar Energy Industries Association (SEIA) and WoodMac said in a recent report.

Many larger developers "run models that mimic the grid studies performed in interconnection studies, to give them a better sense of where the best sites might be," Rand noted.

On average, non-ISO West grid operators complete the application process more quickly than ISOs/RTOs, according to the Berkeley Lab study. The median duration from grid connection request to approval in the non-ISO West was 30 months in 2021, 20 months in 2022 and 22 months in 2023, based on  the limited number of non-ISO West utilities that provided data.

Federal push

The Biden administration has enacted measures to lessen the pain of grid connections which should bear fruit in the coming years.

FERC Order 2023 issued in July 2023 calls on grid operators to assess clusters of projects rather than individual applications to form grid connection plans and prioritise projects that have more financial and siting requirements in place. Costs are allocated between cluster study participants.

Developers must also prove site control and include commercial readiness deposits in the application process. This means developers must “clear any possible barriers to entry before entering a queue—not during or after with the expectation that it will resolve itself during a prolonged study process," Daniel Hagan, Project Development and Finance partner at law firm White & Case, said.

Developers can now be penalized for withdrawing from queues, “which should serve as a deterrent from entering projects as an exploratory exercise," Serena Rwejuna, another Project Development and Finance partner at law firm White & Case, said.

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The non-ISO West is made up of 33 balancing authorities across 15 states that are not strictly regulated by the FERC, but the direction of travel is clear as operators seek to process large numbers of clean power applications.

BPA plans to start using the cluster study process in January 2025, a spokesperson for the utility told Reuters Events.

"BPA is a non-jurisdictional utility but has pledged to align our transmission tariff to pro forma practices as much as possible," the spokesperson said. Assessments of clusters of projects should lead to fewer network upgrades and reduced costs, BPA said in a January 2024 report.

FERC Order 2023 also allows hybrid solar-storage projects to be assessed as one single interconnection point and therefore one request in the queue. Developers can also add storage to an existing solar facility to use surplus interconnection capacity, without having to make a new connection request, noted Caplan.

Hybrid solar plus battery projects account for around 80% of total solar capacity in non-ISO West queues, according to the Berkeley Lab study.

Bulk capacity

Another emerging trend is the forward planning of bulk transmission capacity by grid operators.

Last month, FERC issued Order 1920 that requires proactive transmission planning instead of expanding grids in response to individual interconnection requests. The ruling reforms the cost allocation requirements for new electric transmission lines and requires transmission owners to conduct 20-year plans assessing electricity needs that must be updated every five years.

Transmission developers must submit plans for how to split costs between states and companies and assess specific criteria to determine whether transmission proposals will meet long-term needs in a cost effective way.

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California grid operator CAISO has already instigated forward bulk transmission planning to provide greater clarity to clean power developers and reduce future connection delays.

In its latest annual plan, CAISO proposes investing $6.1 billion in 26 grid improvements to connect new renewable energy projects by 2035. The draft plan will support 38 GW of new solar capacity, in areas such as the Westlands area in the Central Valley and areas in the south near the city of Tehachapi, Kramer in San Bernardino County and Riverside County, as well as in southern Nevada and western Arizona.

Implementation of the FERC's rules across other grid networks should “ease bottlenecks as more transmission capacity becomes available," Rand said.

Reporting by Neil Ford

Editing by Robin Sayles