As California works to bring large amounts of clean energy to the grid over the next decade and beyond — resources that are critical to the state’s climate as well as powe reliability goals — experts are increasingly pointing to the need to revamp its interconnection processes.
In early March, the California Independent System Operator kicked off an initiative to make “significant and transformative improvements” around the coordination of resource planning, transmission planning and managing the interconnection queue. The interconnection queue is currently inundated with applications, and CAISO is considering a variety of proposals to deal with it, such as only accepting interconnection requests in areas where there is existing or planned transmission capacity. While experts acknowledge that CAISO is trying to find solutions to reduce the number of interconnection requests they need to process, some developers have raised concerns about certain proposals, as well as how the grid operator could go about implementing them.
The state’s forecasted electricity resource requirements have been growing significantly in recent years. Two years ago, CAISO’s transmission plans included forecasts, based on coordination with state regulatory agencies, of around 1,000 MW of new installed electric capacity a year over the next decade, according to Neil Millar, the system operator’s vice president of transmission planning and infrastructure development.
In 2022, that number climbed to about 2,700 MW a year. This year’s plans are working off of estimates of around 4,000 MW a year, and the draft decisions that would set the stage for next year’s plans are looking at around 7,000 MW a year, he added.
“This has been, over the course of a few years, a rapid increase in the rate of expected development year after year… we think what that is driving is a tremendous amount of competition in the resource development community — and that’s also driving this spike in a large number of those people competing for those opportunities in our interconnection process,” Millar explained.
The issue, experts say, is that the state’s current interconnection framework was not set up for the volume of resources that it is currently trying to bring online. CAISO’s Cluster 14 interconnection application window, which opened in April 2021, received an unprecedented 373 applications — compared to an average per year of 113 over the last decade — leading the system operator to essentially extend its study process by a year. Now, based on informal surveying, CAISO is expecting at least 300 applications to be filed for the Cluster 15 window, which opens this April, said Millar.
“We see [a need] to have better linkages and tighter coordination between resource planning, transmission planning, actual procurement activities and the interconnection process,” he said.
Interconnection is definitely going to be a very significant challenge for resources that California is looking to bring online for grid reliability over the next few years, as well as going forward, agreed Seth Hilton, a partner at Stoel Rives.
“As we transition to more clean power, the volume of procurement that needs to be done is going to mean there’s a huge amount of resources that have to interconnect,” he added.
Different pathways to interconnection
Projects that want to interconnect to the transmission grid in California go through a CAISO-run procedure, which generally involves filing a request, going through interconnection studies, and eventually signing an interconnection agreement. Distribution-level interconnection, meanwhile, goes through a similar process. Generally, projects go through other development stages — like permitting and engineering — in parallel.
On the CAISO side, a large part of the challenge is just the significant jump in interconnection requests, according to Millar, which caused it to extend its timeline for dealing with Cluster 14 applications. Of the 373 applications that were filed for CAISO’s Cluster 14 window, a few dropped out and in December, CAISO presented preliminary results for 353 applications. Of those, 212 are looking to move into the next phase of the process, Millar said.
“That is also a far higher number than we have ever seen before. Usually, we have smaller numbers apply and of the people that apply, a smaller percentage of them move into the detailed Phase 2 study process. So that, plus the expected volumes in Cluster 15, represent another huge increase from our historic benchmarks for workload,” he said.
“I know that every system operator is facing challenges keeping and retaining the technical staff they need for those jobs and of course, every generator would love to have the best people as well – so those individuals are in high demand."
Founder and President, Grid Strategies
Two of the bottlenecks that CAISO faces when it comes to interconnection are physical capacity constraints, as well as human resource processing capability, said Rob Gramlich, founder and president of Grid Strategies.
“I know that every system operator is facing challenges keeping and retaining the technical staff they need for those jobs and of course, every generator would love to have the best people as well — so those individuals are in high demand,” he said.
In addition, the number of independent parties that are participating in the interconnection process — while a sign of healthy competition — can make coordinating on transmission upgrades more difficult, an analysis that Grid Strategies conducted for the system operator noted.
The volumes of applications CAISO is seeing don’t just have implications for workload, but also create “challenges in producing reasonable interconnection results, when you’re dealing with this level of overheated competition right across the whole state,” said Millar.
Interconnection processes and grid reliability
Now that California is looking to bring a large amount of new clean energy resources online, interconnection processes will continue to be an important part of those efforts.
“Everything is on a tight schedule and the real nightmare would be if we shut down our gas plants before all this other stuff arrived, and we were left with a gap,” said Eric Gimon, senior fellow with Energy Innovation.
One major reason for the spike in applications for Cluster 14 was recent procurement orders from the California Public Utilities Commission. “Widely reported concerns about evening power needs and then the rolling blackouts in August 2020 also very likely added to market interest in adding capacity,” according to the Grid Strategies analysis.
In the longer term, the current interconnection queue approach could undermine resource adequacy objectives, the paper notes.
“For example, if one capacity resource type can be placed anywhere, and another capacity resource type is location-constrained and deliverable only over a congested transmission path, the optimal system would have the location-flexible resource in the less transmission-constrained location and the location-constrained resource using the transmission path,” the paper stated.
At the moment, however, “generation can propose to locate anywhere, whether an optimal location or not.”
For developers, long interconnection processes can present a financial hit, according to Jin Noh, interim executive director at the California Energy Storage Alliance — especially when it comes to holding site control, or actually having the land under contract, for a project.
“And so, especially if you’re a project that is trying to locate or develop on very expensive land, like in urban areas, holding a lease for a long period of time just poses opportunity costs and real costs to the project,” Noh said.
Looking ahead, and potential solutions
California isn’t the only state in the country facing challenges with interconnection queues. A January study from the Lawrence Berkeley National Laboratory found that the average interconnection costs for projects in the PJM Interconnection’s queue increased eightfold in 2020-2022 compared to the previous two years. PJM will not review new interconnection requests until 2026, as it works through its backlog.
One important factor that CAISO is working on is integrating resource adequacy into transmission planning, said Gramlich.
“These historically are two separate processes, but they really can’t be separate anymore, because when you get to a certain level of renewable energy penetration, then you end up needing resources from different places, and that operate at different times in order to achieve resource adequacy. And the only way you can integrate those resources is through transmission,” he said.
Every region of the country is probably going to have to eventually figure out that dynamic, “but California may be the only one that really has to do that now, because the state has really reached the point of renewable energy penetration where that starts to matter a lot,” he said.
Last October, the CAISO Board of Governors approved a plan to streamline the operator’s interconnection processes and help it better manage the queue. That decision sought to ensure that projects that are the most viable and ready have the highest priority in the queue, and balanced the cost responsibility for network upgrades between developers and consumers, among other things.
“If CAISO limits the number of spots in the queue to match the exact volume of resource capacity needed, it will need to devise a method to ensure that enough projects get built to meet the CPUC’s reliability and climate goals, accounting for project attrition rates.”
Consultant to the Large-Scale Solar Association
In early March, the grid operator also launched its 2023 interconnection process enhancements initiative, which it has split into two tracks. The first track — which the grid operator will present to its board of governors in May — looks at immediate tweaks to the schedule for Cluster 15 applications. While CAISO plans to accept Cluster 15 interconnection requests in April as originally scheduled, it is proposing to postpone parts of the review process until after it has concluded review of the Cluster 14 projects, likely not until 2024.
The second track of the initiative will look at “transformative changes” to the broader interconnection process, and CAISO has outlined a few proposals that could help. For instance, the system operator could only accept or process interconnection requests in areas where there is available transmission capacity, whether existing or planned. In addition, CAISO could consider whether to require that projects either have a power purchase agreement, or be shortlisted for one, in order to move into the phase two study process.
“This will help limit the required upgrades to what are truly needed and provide more precise construction timelines,” according to CAISO.
The broad problem that CAISO is trying to address with these proposed measures is to reduce the number of interconnection requests they need to process, but the challenge with this approach is that it is “picking winners and losers at the outset … which is not something the CAISO has historically done,” said Hilton.
For instance, the idea of requiring projects to have a PPA to move forward in the interconnection process has drawn criticism from some in the development community. In a whitepaper published in September, developer Golden State Clean Energy questioned the idea that a power purchase agreement is the “hallmark of commercial success.”
“[I]t is absolutely not the case that commercial readiness is determined by [just] having a PPA, because there are plenty of examples where PPAs have been signed and projects have never been built,” said Daniel Kim, principal and vice president of governmental and regulatory affairs with the developer.
“If CAISO limits the number of spots in the queue to match the exact volume of resource capacity needed, it will need to devise a method to ensure that enough projects get built to meet the CPUC’s reliability and climate goals, accounting for project attrition rates,” Hillary Hebert, a consultant to the Large-Scale Solar Association, said in an emailed statement.
And in terms of accepting projects that align with planned transmission capacity, “the location for the bulk of that planned capacity isn't yet known. We have a lot of work ahead of us,” Hebert added.
Another potential solution is seeing how much of the interconnection process work can be done by the interconnection customers themselves, Noh said. This could involve using their consultants and in-house staff to go through a portion of the process, and then have the ISO or utility review and sign off on that work.
“They have their own electrical engineers, they are trying to build projects that are safe and reliable — is there a hand-off point and sharing of duties that could allow the ISO, the utilities to be able to share the load?”