PJM Data Show Substantial Increases in Interconnection Costs

January 19, 2023

For projects with completed studies and plants now in service, costs have doubled. For active projects still in the queue, estimated costs have grown eightfold since 2019.

We are pleased to announce the release of a brief analyzing interconnection costs in the PJM territory, which finds that substantial interconnection cost increases have occurred in parallel with the tremendous growth of PJM’s interconnection queue in recent years. As PJM reforms its interconnection process, the analysis can provide a useful baseline against which future progress could be measured.

At year-end 2021, PJM had 259 gigawatts (GW) of generation and storage capacity actively seeking grid interconnection. Capacity in PJM’s queue is dominated by solar (116 GW) and, to a lesser extent, standalone battery storage (42 GW), solar-battery hybrids (32 GW), and wind (39 GW). PJM’s dataset also contains data for projects no longer seeking interconnection, both those that are in service (79 GW) and those whose applications have been withdrawn (432 GW). PJM’s queue has ballooned in recent years, with 2021’s active queue increasing by 240% compared to year-end 2019. The capacity associated with interconnection requests is nearly twice as large as PJM’s peak load in recent years (~155 GW). This explosive growth of interconnection requests along with lengthy study timelines and high project withdrawal rates motivated PJM to reform its interconnection process in 2022. The ISO adopted a “first-ready, first-served” cluster study approach and increased study deposits that are at risk when projects withdraw.

With data from over 1,100 projects, the brief’s sample covers 86% of all new unique generators in PJM between 2000 and 2022. While the cost sample analyzed by the Berkeley Lab is sufficiently robust for detailed analysis, much data is difficult for the public to obtain. The paucity of easily accessible interconnection cost data poses an information barrier for prospective developers, regulators and policy makers, resulting in a less efficient interconnection process. The PJM study and all underlying project-level interconnection cost data can be found at emp.lbl.gov/interconnection_costs.

The brief analyzes interconnection cost data for three types of projects: those that have completed all required studies, including plants now in service (“complete”); those actively working through the study process (“active”); and those that have withdrawn from the queue (“withdrawn”).

The Lab’s analysis finds that PJM interconnection costs have grown across the board. For complete projects, average costs have doubled relative to costs from 2000-2019 (mean: $42 to $84/kW, median: $18 to $30kW) (Figure 1). Mean costs for active projects have grown even more, from $29/kW to $240/kW (2017-2019 vs. 2020-2022, median: $8 to $85/kW). Withdrawn projects face the highest costs (mean: $599/kW, median: $156/kW) - likely a key factor in those withdrawals. Project costs vary widely and a small number of high cost projects caused average costs to rise above median costs.

Figure 1. Interconnection Costs over Time by Request Status (bars show simple means, gray lines represent standard error)

The main driver behind these increases has been broader network upgrade costs, the Lab finds. Average costs for upgrades beyond the interconnecting substation have risen sharply since 2019, to $71/kW for complete projects, $227/kW for active projects, and $563/kW for withdrawn projects. A very small subset of generators face lower network upgrade costs by choosing interconnection services as an energy instead of a capacity resource. However, project owners of energy resources forfeit preferential treatment during high load hours, cannot participate in PJM’s capacity market, and may face increased curtailment.

Average interconnection costs across all request statuses have been significantly lower for natural gas ($24/kW) than for storage ($335/kW), solar ($253/kW), or wind ($136/kW for onshore, $385/kW for offshore) (Figure 2). Among recently completed projects, interconnection costs have fallen for natural gas ($18/kW) while increasing significantly for both solar ($99/kW) and onshore wind ($60/kW) relative to historical costs (2000-2016). Costs for active and withdrawn storage and solar hybrid projects are surprisingly high ($337/kW), but complete projects are much cheaper (storage: $4/kW, solar hybrid: $20/kW).

Figure 2. Interconnection Costs by Fuel Type (left) and Over Time for Complete Projects (right) (bars: means, gray lines: standard error)

This study was funded, in part, under the U.S. Department of Energy’s Interconnection Innovation e-Xchange (i2X), and builds on Berkeley Lab’s previous work tracking interconnection requests and timelines. The PJM brief is the second in a series analyzing interconnection costs in wholesale electricity markets, with an October 2022 study containing similar findings about MISO. The Berkeley Lab will publish analyses of NYISO, ISO-NE, and SPP in the coming months.

The PJM study and underlying project-level interconnection cost data can be found here. For questions, please contact Joachim Seel ([email protected]) at Lawrence Berkeley National Laboratory.

We appreciate the funding support of the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy in making this work possible, specifically the Solar Energy Technologies Office, Wind Energy Technologies Office, and Office of Strategic Analysis.