FERC Order No. 2023: How to Adapt to a Changing Environment
In July 2023, the Federal Energy Regulatory Commission (FERC) formally issued Order No. 2023 (RM22-14-000) to address and reform "interconnection procedures and agreements to ensure that interconnection customers are to interconnect to the transmission system in a reliable, efficient, transparent, and timely manner," and ensure that services facilitated by the Commission are "just, reasonable, and not unduly discriminatory or preferential."
Why make this reform?
This order proceeds Order No. 2003--which adopted revised pro forma Large Generator Interconnection Procedures (LGIP) and pro forma Large Generator Interconnection Agreements (LGIA) for generating facilities greater than 20 megawatts (MW)--and Order No. 2006--which, respectively, adopted revised pro forma Small Generator Interconnection Procedures (SGIP) and pro forma Small Generator Interconnection Agreements (SGIA) for generating facilities smaller than 20 MW. However, the decades since the adoption of these orders aimed at streamlining the interconnection process have wrought unprecedented growth and diversification in technology sources of power generation, including wind, solar, and battery power. The influx of transmission interconnection requests catered to nonsynchronous renewable energy sources, plus the ever-growing demand for traditional synchronous forms of generation, have created immense interconnection queue backlogs, which exacerbate uncertainty regarding both the cost and timing of implementation.
Under these conditions, FERC issued a Notice of Public Reform (NOPR) in June 2022, initiating a collaborative process of public comment and response. This process, following the Commission's deliberation, led to the reforms adopted under Order No. 2023. The final rule aims to reduce interconnection queue backlogs by implementing a "first-ready, first served" cluster study process, increasing the speed of interconnection queue processing, and incorporating technological advancements into the interconnection process.
Transition from to a "First Ready, First Served" Cluster Study Process
Before the adoption of Order No. 2023, transmission providers processed interconnection requests in the order in which they were received. This serialized "first come, first served" approach expressly incentivized prospective customers to propose interconnection requests for speculative, incomplete, or unviable projects. Unsurprisingly, these fledgling requests were later withdrawn in many instances, further congesting the queue backlog and indirectly imposing additional costs on lower-queued projects. Thus, to reverse this approach, Order No. 2023 adopts a "first ready, first served" process whereby clusters of ready projects are studied in batches.
Order No. 2023 stipulates several reforms intended to improve communication and transparency between prospective customers and transmission providers to ensure that interconnection requests are granted only to viable projects. The rule aims to accomplish this with the following initiatives:
Enhanced access to public interconnection information for prospective customers, including providing a "heatmap" or display of visual available transmission capacity indicating suitable points of interconnection.
Implementation of a "cluster" study process, including more definitive study timelines, more detailed explanations for restudies, and a more fair and equitable allocation of costs for cluster studies and network upgrades between prospective interconnection customers.
Enforcement of financial readiness and site control requirements, including increased study deposit amounts, demonstration of site control and commercial viability, and stricter withdrawal penalties to curtail the influx of projects unlikely to be developed in favor of those that decongest queue backlogs.
Reforms to Increase the Speed of Interconnection Queue Processing
As part of the NOPR and period of public comment that preceded the issuance of Order No. 2023, the Commission acknowledged that interconnection queues were prone to congestion due in large part to the fact that previous rules did not require transmission providers to meet actual deadlines for interconnection studies but to merely demonstrate that "reasonable efforts" were made to complete interconnection studies on time. The vague definition of "reasonable efforts" and the lack of consequences for transmission owners who exceeded interconnection study deadlines led to excessively long Commission reviews and thus further exacerbated interconnection queue backlogs.
Furthermore, under previous rules, prospective interconnection customers whose projects posed potential impacts on "affected systems" or neighboring transmission owners were not held responsible for notifying affected system owners or conducting the necessary studies to assess the overall impacts on the systems in question. Without any incentive to notify and conduct studies before an interconnection customer queue request, the impact on affected systems often went unnoticed until the later periods of interconnection queue processing, frequently leading to the cancellation of the affecting requests.
Order No. 2023 proposes the following key reforms to remove these potential obstacles to timely and efficient interconnection processing:
Replacement of the "reasonable efforts" standard with financial penalties for transmission owners who failed to meet study deadlines.
Requires interconnection customers to provide initial notice to affected systems, allowing the affected system the opportunity to plan and conduct a cluster study that assesses adjacent impacts. Additionally, the rule revised affected system agreements to establish consistency and transparency between transmission providers regarding the distribution of costs for any subsequent network upgrades.
Reforms to Incorporate Technological Advancements into the Interconnection Process
In the last several decades, the amount and type of technologies utilized for electric generation, transmission, and distribution have significantly increased. To account for the upswell of technological advancement, Order No. 2023 aims to remove previous encumbrances by easing the barrier of entry for transmission providers to implement innovations. The rule seeks to accomplish this with the following reforms:
Allows transmission providers to co-locate projects to single-generating facilities tied to one point of interconnection. This not only lends more flexibility to transmission providers by increasing the scope of available points of interconnection but also allows providers to diversify the sources of power stored at a given generator, such as wind, solar, or battery storage.
Requires transmission providers to evaluate alternative transmission technologies that could be deployed more efficiently at lower costs, including advanced conducts, advanced power flower control, static synchronous or VAR compensators, and synchronous condensers.
Establishes modeling and performance requirements for non-synchronous generating facilities and allows for the continuation of crucial "synchronous" generation resources - such as energy for hydropower, nuclear, coal, and natural gas - which remain critical due to their ability to stay connected in the event of a grid disturbance.
How can Utility Organizations Navigate this Change?
At its crux, FERC Order No. 2023 aims to enhance the Commission's enforcement measures, more so the previous lack thereof, to streamline interconnection queue processing and provide transparency and unbroken communication between transmission providers, affected system owners, and the Commission itself. With growing demands on the national grid and the drive to bring non-synchronous renewable energy sources online, it is more critical now than ever to address the root causes of that once-stagnated interconnection queue process.
Bent Ear Solutions has demonstrated experience with clients in the utility sector, including RTOs and transmission providers, implementing innovations and solutions to satisfy compliance with Order No. 2023. Notably, this has included the development of public-facing applications for our clients that allow prospective transmission customers to screen for potential POIs and assess grid capacity based on megawatt (MW) injections or withdrawals for a given substation. This demonstrates only one way of many ways BES is prepared to leverage enhancement technology to assist utility organizations with providing public information and overall greater transparency into the interconnection queue process.
Sources:
2. Federal Energy Regulatory Commission - Explainer of the Interconnection Final Rule
