Grid Connection Barriers To New-Build Power Plants In the United States
New Berkeley Lab article documents how deployment of new electric generation is being constrained by current interconnection processes
The backlog of proposed power plants that have submitted grid connection requests (i.e., the interconnection queues) is larger than ever. As reported in our flagship Queued Up report, grid connection requests active at the end of 2023 were more than double the total installed capacity of the US power plant fleet (2,600 GW vs. 1,280 GW). Solar, battery storage, and wind energy account for 95% of all active capacity in the queues.
The unprecedented volume of requests in queues points to significant shifts in the generation mix of the US power system but is also evidence of a significant structural and regulatory bottleneck for plants seeking grid connection. The amount of time spent in queues has increased by 70% over the last decade, and withdrawal rates remain high at 80%. Interconnection costs have risen and are highest for wind, solar, and battery storage projects.
To better understand the dynamics of interconnection, and what solutions may be available, we compiled and analyzed two unique datasets for the first time, in “Grid connection barriers to renewable energy deployment in the United States,” in the journal Joule.
Figure: The amount of capacity in queues has boomed, along with an increasingly long wait to get connected, a higher rate of withdrawn projects, and higher connection costs.
Uncovering the Data
Surprisingly, the challenges to and bottlenecks resulting from interconnection are not well understood, either in the US or globally – a research gap that is partially attributable to a relative lack of available interconnection data.
To investigate, Berkeley Lab created and analyzed two never-before-compiled interconnection datasets with more than 38,000 project-level observations.
Our first dataset covers interconnection queues from all 7 organized electricity markets in the US plus 44 additional utilities outside of those regions, which collectively represent over 95% of total installed capacity. In total, the data set consists of 11,597 projects, or 2.6 Terawatts (2,600 gigawatts) of generation and storage that are actively seeking grid interconnection, plus 17,873 projects that entered the queues but were withdrawn, and 4,155 projects that moved through the queues and reached commercial operations.
The second dataset is a compilation of interconnection costs from six of the seven organized electricity markets in the US. This never-before compiled dataset was collected from interconnection study PDF files, requiring over 2,000 labor hours to compile the entire sample of more than 5,000 projects. Public policy makers are actively working with stakeholders to improve procedural rules for interconnection but commonly cite the lack of data and transparency as a gap to evidence-based decision-making.
Drivers of Delay and Higher Costs
These data shed light on how the costs to interconnect vary over time and by generator type, geographic location, and interconnection service type requested (e.g. capacity resource or energy resource).
We find that costs are rising, that renewable energy projects see significantly higher costs to connect to the grid than fossil fuel projects, and that costs vary widely – a quarter of projects had interconnection costs less than $25 per kW while a quarter had costs of more than 10 times as much. This unpredictability increases the uncertainty and financial risk of renewable development.
Some specific findings:
- Project status: Interconnection costs are much greater for projects that are withdrawn ($373 per kW) than for those that completed the interconnection study process ($73 per kW).
- Trends: Interconnection costs have risen over time, especially for projects that were withdrawn. Average costs for completed projects have risen only slightly in recent years, from $76 per kW before 2014 to $81 in the past five years. But projects withdrawn in recent years ($428/kW) had costs 23% greater than the preceding 5 years ($348/kW) and more than double those before 2014 ($197/kW).
- Generation technology: Interconnection costs for wind and solar in particular have risen dramatically, whether completed or not. While completed wind and solar projects saw interconnection costs making up 6-8% of total project costs, withdrawn projects faced costs of 30-37% of total. Natural gas generation projects have had consistently lower costs.
Figure: Completed and withdrawn projects have seen very different interconnection costs, with significant variation by generation technology.
- Type of service connection: Interconnection service can either be firm (capacity) or as-available (energy), though most interconnection requests seek firm (capacity) service. One would expect that as-available service would cost less, would be approved more quickly, and would be less likely to trigger grid upgrades, but our evidence suggests that is often not the case.
A key factor driving higher interconnection costs is the cost of network upgrades, which are often fully or partially billed to project developers in the areas we studied to overcome transmission constraints. The wide range of interconnection costs across the country and in different situations illustrates the uncertainty and lack of uniformity of the process.
Potential Solutions
We draw on these findings to suggest some changes that could make the interconnection process less costly and more predictable.
- Data: The grid interconnection process would benefit from greater transparency afforded by better data. It is difficult even to assess what works and doesn’t work in the process, let alone successfully navigate the process, without better data. Data are a critical need during this time of active reform.
- Cost Assignment: Network upgrade costs could be assigned to consumers rather than to project developers, as is done in Texas, Australia, and Germany. Or developers could pay an upfront, average interconnection fee to cover expected network upgrade costs, similar to what is done in the UK and proposed in the Southwest Power Pool (SPP). Such changes face tradeoffs between providing beneficial upfront cost certainty for project developers but also lowering incentives for informed project siting on the current transmission system.
- Operational fixes: Further research should be done on service agreements that mitigate interconnection costs, such as new re-dispatch strategies and market-based solutions to congestion. Such approaches could be modeled after the “connect and manage” strategy implemented by grid operators in Texas, Australia, and the United Kingdom, where project developers bear more risk of congestion and curtailment.
- Technology fixes: On-site batteries can reduce the size of an interconnection, which might reduce upgrade costs while spreading out electricity deliveries to more hours. “Grid enhancing” technologies, such as dynamic line ratings, can improve performance on the existing grid. Better hosting capacity maps can give guidance on optimal locations to interconnect, though these maps would need to be frequently updated.
These potential solutions along with 30 more are elaborated upon in the U.S. Department of Energy’s (DOE) Transmission Interconnection Roadmap which was developed to serve as a guide for implementing near- to long-term solutions to interconnect new energy sources to the transmission grid and to clear the existing backlog of projects seeking to be built.
Summary
These findings suggest the need for continued interconnection reforms, tighter links between long-term transmission planning and project-level interconnection processes, and more interconnection outcome transparency.
Regulators are keenly aware of the situation, as the Federal Energy Regulatory Commission (FERC) issued Order 2023 to improve generator interconnection processes and Order 1920 to improve transmission planning processes. But implementation can vary among grid operators and continued analysis is needed to track progress.
Without effective implementation, it’s clear that the interconnection process will remain a barrier to connecting new energy resources, which could put grid reliability at risk and result in higher consumer energy costs.
“Grid Connection Barriers To Renewable Energy Deployment In the United States” was written by Will Gorman, Julie Mulvaney Kemp, Joseph Rand, Joachim Seel, Ryan Wiser, Nick Manderlink, and Fredrich Kahrl of Berkeley Lab, and Kevin Porter and Will Cotton of Exeter Associates.
This work was funded by the U.S. Department of Energy’s Solar Energy Technologies Office, Wind Energy Technologies Office, and Strategic Analysis, in part via the Interconnection Innovation eXchange (i2X) program, under Contract No. DE-AC02-05CH11231 (Award Number 38425).