What's the deal with interconnection queues?

In this episode, clean grid expert Chaz Teplin demystifies
interconnection queues.


(PDF
transcript)


(Active
transcript)


Text transcript:


David Roberts


By now, you’ve probably heard that tons of new renewable energy
projects are “stuck in the interconnection queues,” unable to
connect to the grid and produce electricity until grid operators
get around to approving them, which can take up to five years in
some areas.


And you might have heard that FERC recently implemented some
reforms of the interconnection queue process in hopes of speeding
it up.


It all seems like a pretty big deal. But as I think about it, it
occurs to me that I don’t really know what an interconnection
queue is or why they work the way they do. So I’m going to talk
to an expert — Chaz Teplin, who works on carbon-free grids with
RMI — to get the lowdown.


We’re going to talk through the basics of interconnection queues,
why they’re so slow, what RTOs and FERC are doing to reform them,
and what remains to be done (namely some friggin’ regional
transmission planning).


With no further ado, Chaz Teplin. Welcome to Volts. Thank you so
much for coming.


Chaz Teplin


Thanks for having me.


David Roberts


You know, as I said in my intro, it seems like the clean energy
community at this point has heard the term interconnection queue
enough times that they all know it enough to say it, right. We
know on some level that interconnection queues are slowing things
down and they're backed up and that's why we're not building
renewable energy as fast as we should be. But I suspect that
quite a few of my listeners are roughly where I am, which is
that's basically where my knowledge runs dry. I can say the
words, so I'm excited to talk to you about what the heck they
are, why they exist, etc., how to solve them, etc.


So maybe let's just start with why is it that all of a sudden
everybody's talking about interconnection queues? Why has this
come to the top of the pile recently?


Chaz Teplin


Yeah, everybody's talking about interconnection queues and
there's been a recent order from FERC amid the hullabaloo. Right.
So I think it's a good news, bad news story. The good news is
that there's currently two terawatts of generators asking to
connect to the US grid. And almost all of that two terawatts is
clean energy, wind, solar and storage. So for those of us that
have been in the business for a while, this is unbelievably great
news. That means there's so many projects out there of clean
energy mostly there's some gas, but clean energy mostly that
believe it's economic to connect to the grid and they're willing
to pay a fee in order to ask to connect.


David Roberts


And how much is that relative to what's currently on the grid?


Chaz Teplin


Yeah, it's not exactly an apples to apples comparison, but two
terawatts asking to connect 1.25 terawatts approximately on the
US grid today.


David Roberts


Right. So there's more waiting to get on than exists currently on
the grid. Now, we know, I'm sure you're going to say, we're going
to say probably 50 times during this pod, just because
something's in the queue doesn't mean it will necessarily get
built. So it's not like all of that two terawatts is real or
inevitable, but still, the fact that more is waiting to get on
the grid than currently exists on the grid is quite striking.


Chaz Teplin


That's right. And every year more is asking to connect, right?
So, yeah, absolutely, it's not going to all get built. But I
think it's a fairly clear demand signal that generators and
developers are giving. They want to connect to the grid. They
believe they can make money doing so, so it's great news.


David Roberts


And yet they are stuck there.


Chaz Teplin


So that's the good news. The bad news is twofold. First, say I'm
a wind or solar generator developer wanting to connect to the
grid. It's going to take me years after I ask, before I even find
out if I'm allowed to connect. Three, sometimes even five or more
years. It depends on the grid and some of the details, but it
takes years. And that adds cost and obviously time to your
project that you don't want. And that's unfortunate. And second,
it's bad because a lot of times what the grid operator comes back
with is a really large bill that could easily make it so that
your project is uncompetitive, no longer makes sense.


And so you see high dropout rates. So yeah, the queue is huge.
That's good. It shows that there's demand, but it's bad because
projects take too long to get through the queue and even find out
what the cost is going to be to connect. And often those costs
are high.


David Roberts


This might even be too obvious to say, but I think it's worth
emphasizing at the outset that it's just a little crazy. Anyone
who's an investor or who's tried to manage a project or build a
project, just imagine if you had to say to your investors, not
only like, this is a worthy project now, but this will be worthy
in three years, or it will be worthy in five years. How do you
know? It's just an insane addition of uncertainty and risk to
every single solitary project.


Chaz Teplin


Right. And you don't know how much it's going to cost. It's like
this cost of my project is a dollar a watt, plus or minus $0.50.
That's not really reasonable because you don't know what the
connection cost is going to be.


David Roberts


I know it's just an insane business environment. Like we're not
sure of what your costs are, not sure how long it's going to
take, and then you're trying to talk investors into sort of
sticking with you through this.


Chaz Teplin


One thing I want to add on that is it causes problems for
developers, for investors, but it also causes problems for the
grid. And the problems sort of are in this reinforcing loop.
Because developers don't know where to ask to connect or how long
it's going to be. They tend to put in a lot of speculative
projects. Because they are hoping that one of them is a good
deal.


David Roberts


Right. Playing the table, right?


Chaz Teplin


That's right, they're playing the table and unfortunately that
doing that might be good for them but it puts a huge load on the
grid operator to try and process all this and makes it bad for
everybody because then it makes the process take even longer.


David Roberts


Right.


Chaz Teplin


It's an example of the rule of incenting bad behavior and then
the bad behavior cycling.


David Roberts


Right. So let's back up then and talk about what an
interconnection queue is exactly, and why they exist. Like why do
utilities need every project to stand in a single file line and
be approved one by one? Why?


Chaz Teplin


So, there are some very good reasons and then some arguable
reasons for having an interconnection queue. The clear and very
good reason, and we're all glad that they exist, is because the
grid operator does need to ensure that a new generator on the
system won't cause some cascading set of failures that could
bring down a significant fraction of the grid. That's not likely,
but it's possible. The way that that would work is you would
study the grid under some set of scenarios and then the key thing
is then you also ask so what if something else on the grid fails
that would cause transmission or cause power to flow along the
transmission lines in different ways.


And if you, for example, overloaded a line or a substation, that
would be bad. And so you might need to upgrade that substation to
make sure that when this new generator comes online you don't
cause a problem.


David Roberts


So you're just ensuring for each individual project that that
individual project will not be sort of the straw that broke some
camel's back.


Chaz Teplin


That's right. And it's important to understand though that's like
one piece and every grid operator studies that to make sure that
there's not going to be a problem. But there's a second piece
which is making sure that the power from that generator is
usually going to be deliverable to load, meaning you don't have
to turn it off to keep things in safe conditions. And that's a
little bit different. And that's related to how grid operators
plan for resource adequacy, making sure that there's always
enough generation to meet load. And different grid operators do
that in different ways.


But a lot of the different opinions about how we should do this
come down to how much we should ensure that different projects
are deliverable to the system. And it's related to how grid
operators again think about making sure that there's always
enough generation online at a given time.


David Roberts


Right, so that seems like a reasonable reason to have a queue. Is
that the main one?


Chaz Teplin


The one that's universal right is the making sure there isn't
cascading failures issue. The one that is more controversial is
the connection to resource adequacy because different grids do
that in different ways. And then the other related issue is that
in a lot of grids today, this is the primary way we invest in the
transmission system is we ask the next generator to pay for
upgrades to the transmission system.


David Roberts


Yes, this is the part I always stumble over the craziest thing to
me so I want to just spend a second on it. The analogy I always
hear is like a line of cars waiting to get on the freeway. The
freeway can only fit so many cars. So when the freeway reaches
capacity we ask the next car in line to build a new lane of the
freeway, basically. So the next generator in line when capacity
is reached is on the hook for paying for new transmission which
is as crazy as it sounds, yes?


Chaz Teplin


Yeah, it's pretty much like that. So it's a competition to be the
car after the person had to pay because then you sort of get to
nominally free ride.


David Roberts


Exactly. Or the car before or just like not be that car. You
don't want to be like that one car who it's like a lottery
almost.


Chaz Teplin


Yeah. And it's important to recognize though that it's crazy in
the current system to look at it that way. But when these roles
were put in place it wasn't quite as crazy as it seemed. In a
world where that we're in today, where we're seeing lots of new
generation that is sort of geographically constrained. You want
to put low cost wind farms where it's windy, you want to put
solar farms where it's sunny and the cost to build is low. Those
are sort of geographically constrained. In previous eras where
load was flat and we were mostly building gas plants, you can
kind of build a gas plant wherever it's convenient for the grid.


Chaz Teplin


And so to continue with the analogy, you can get to your
destination through lots of different highways so you're
encouraged to use an empty one. But that's no longer the world
we're in now. And because, and this is the key thing, because we
haven't been doing significant investments in transmission, we're
in this place where all of the key highways are clogged or close
to being clogged and lots of cars are waiting in line to get on
that highway.


David Roberts


So is it the case that if you are the project that just draws the
short straw and happens to be in line or at the head of the line
when new transmission is needed, two questions: One, how much
additional cost is that to you, does it double your cost? How
much is it for a developer to pay for new transmission? Is that
sort of dispositive amount of additional money? And number two,
if you are the unlucky person in that spot or the unlucky project
in that spot. And you hear back from the RTO that, yes, you can
connect if you build a new transmission line, can you then just
say, well, never mind, right, and then drop out, and then the
next project behind you is the unlucky project and then why
wouldn't that project also just drop out?


So who accepts these additional costs? It seems like you don't
have to like everybody would be trying to avoid it.


Chaz Teplin


That's right, everybody's trying to avoid it. Absolutely. You
aren't required to build your project when you enter the queue.
You might lose your deposit. So the cost can be very large. The
queues that make it all the way through, often they are ones with
manageable costs and so they do get built or they run into the
next set of challenges, things like supply chains currently or
permitting. But those projects that do make it through the queue
often are the ones that chose a good place on the grid, if you
will. Like I mentioned earlier, it's sort of a cascading problem
if a project drops out, that also impacts all of the projects
around you. So now somebody else becomes the second car, the
second car becomes the first car. And so then the RTO needs to go
and restudy and say, oh, we thought that generator A was going to
be online, but they dropped out, so now we have to restudy the
whole thing.


David Roberts


And those studies are what take years.


Chaz Teplin


The studies themselves are pretty complicated because first you
have to look at every possible failure on the grid that could
happen and then you have to look at, well, okay, if that fails
and something else fails, what happens? That's part of the
interconnection queue study and they are processor and human
intensive. And so, yes, they actually take a long time to do the
studies. They're expensive in terms of having the staff and even
the computational capabilities to run. And so they take a long
time.


David Roberts


So we can get a situation here that's trying to paint a picture
where all these projects are in line. A project comes to the head
of the line, the RTO takes years to study, comes back and tells
the project, our study concluded that we don't currently have
capacity to accommodate you, so you're going to have to build a
new transmission line if you want to connect to the grid. And
that project says, oh, that's going to double my costs. No thank
you, I'm dropping out. And then the years long study process
starts over again. That's like two years a pop, three years pop
with nothing happening and nothing getting interconnected. That
just seems like an insanely slow way to do things.


Chaz Teplin


Yes. And so there's been lots of ideas about how to fix some of
these process-oriented challenges and some RTOs are already doing
that. And FERC has made some progress this week. We'll get to
there I'm sure. But yes, that is a fairly close approximation of
the existing process.


David Roberts


Is any transmission getting built this way? It just seems like
the most inefficient possible way to build transmission, too. Are
there projects that get stuck with this obligation to build new
transmission who do it? And are we seeing transmission getting
built through this?


Chaz Teplin


Yeah, I mean, most projects will have some interconnection cost,
right? And so they do make some improvements to the transmission
system. So some developers are able to make it work and they'll
swallow the cost and that benefits everybody else on the system.


David Roberts


Right.


Chaz Teplin


They pay for it. So, yes, we are building a small amount of
transmission in that way. Not very much.


David Roberts


All right. And also, it seems worth pointing out that in terms of
transmission planning, building each increment of transmission
based on what the next project in line requires also seems like
the most myopic possible way to be building transmission. Like,
you're not planning for the future, you're just literally
reacting —


Chaz Teplin


Yeah, that's right.


David Roberts


on a project by project basis.


Chaz Teplin


Yeah. And like I said, it's not crazy in a world where you don't
imagine the grid needs to change very much, but it'll never get
us to where we need to go with the energy transition underway.
And this has big implications. In terms of economics, as ACORE
has pointed out, in terms of states meeting their clean energy
goals, as NRDC study recently showed, and then even in terms of
reliability, which PJM in the Mid Atlantic has shown, they're
worried about retiring fossil plants and these problems and the
lack of ability to get projects online, being out of sync and
then having reliability issues. Not having enough resource
adequacy to meet demand.


David Roberts


Right. So this process is not going to be fast enough for any of
the things we want to do to hit our carbon goals, state carbon
goals, utility, carbon goals, utility, reliability. All these
things require some speed and agility, which this is standing in
the way of. So why is it like this? How did it get this way?


Chaz Teplin


Yes, I mean, the current system was set up in the 2000s where
natural gas was the primary generation being added and could be
flexibly cited. And so in order to try and set up the system in
the way that made sense, FERC suggested that we have this
participant funding paradigm where new generators pay for the
transmission needs that they require. That's how we got here, and
there's a lot of status quo bias towards keeping that system, and
there's not a lot of appetite among many for changing it
dramatically.


David Roberts


This I don't understand, though, because I'm not a grid expert,
but even just explaining it to me in this way, it's very obvious
to me that it's not working. It's obvious from the results that
it's not working. It's obvious from any description of the
process that it's clearly not working. It's not working for
anybody, for anybody's goals. Why isn't there more appetite for
large scale change? Is it just the conservatism of the industry?


Chaz Teplin


Yeah, you're putting me in a tough spot here, David, but I think
there is a lot of hesitancy to change. Cost allocation is often a
problem with — if we're not going to ask new generators to pay
for the transmission, who are we going to ask to pay for it?


David Roberts


Right.


Chaz Teplin


And then there's disagreements between again, to go back to PJM
the grid I perhaps know the best, between states that have clean
energy goals that are excited to do this kind of transmission
planning and states without that feel like they're being burdened
with other states goals. I don't think that's a good argument
necessarily for not building transmission because just the
economics and reliability benefits from the transmission alone
are more than adequate to make a great case.


David Roberts


To make a great case for ratepayer benefit, for citizen benefit.
But the utilities in those states with no targets, their narrow
financial interests may not always line up with — they make a lot
of money through the grid being congested is one of the dark
secrets there.


Chaz Teplin


Yes, of course. There are financial actors that have a spot on
the grid where power prices are higher than they would be
otherwise. And if you happen to own the generator there, you're
making more money. And if you did the transmission and you had to
compete with that's just unavoidably true. We would hope that the
stakeholder processes and the RTOs and whatnot would take the
broader picture about what's best for the full system, for the
economics and everything. But it's hard to make those changes and
it's always hard to make a change from the status quo, especially
if it was — there were long battles in the 2000s about getting to
this era, so folks are always hesitant to make that effort, to
really look at what could be done differently.


David Roberts


Yeah. So let me ask what might be a naive question, but what
would happen if an RTO, a regional transmission organization
that's responsible for the sort of wholesale electric market in a
region, just threw open the door and let projects connect? First
come, first serve as they show up? Without this extended single
file line process, would things come crashing down? Is that even
a possibility?


Chaz Teplin


Well, I mean, that is basically or has been at least the ERCOT
model, which is in Texas. Right. So to be clear though, they
still do interconnection queue studies. They just don't worry
about deliverability to the same extent. They still make sure
that new projects won't cause dynamic instabilities in the grid
that could cause cascading failures. Everybody does that. What
happens though is you put on the developer the risk that they
just will have to be curtailed much more often.


David Roberts


Right, because of grid congestion.


Chaz Teplin


Yeah, that's right. It's also tightly related to the different
ways that in this case, ERCOT handles resource adequacy. In
ERCOT, there is no effort to make sure that there's always enough
power to meet demand. They trust that high energy prices will
incent developers to build projects.


David Roberts


Right. For the nerds, this is an energy-only wholesale market.
They do not have a capacity market alongside it.


Chaz Teplin


That's right. And so, because in PJM, in order to qualify for the
capacity market, PJM, quite reasonably wants to make sure that
you can actually deliver power to load, otherwise you're not
really helping much with resource adequacy. Though there's some
details there. In ERCOT, there's no such concern. They just trust
that developers will look for places on the grid where they think
there might be high energy prices, because there's barely enough
generation to meet load, and that that will incent development
and so they don't have to be as careful with that kind of
analysis. And so it speeds up the system.


They put more of the risk on developers that their projects will
get curtailed and so they're able to make their interconnection
queue process go more quickly.


David Roberts


And it works?


Chaz Teplin


Well —


David Roberts


ERCOT's had some troubles lately.


Chaz Teplin


Their queues are much shorter and they are able to process
applications much more quickly. Every grid has been having its
challenges in ERCOT especially. I'm not sure I would blame the
recent outages there on this problem. The other thing that in the
past, ERCOT has done well and is the solution everywhere, as
we've hinted all along, is the CREZ transmission planning effort
made it much easier to connect a whole bunch of wind energy.


David Roberts


What's the CREZ?


Chaz Teplin


Yeah, this was an effort that the state and ERCOT took to
recognize renewable energy zones and plan significant
transmission investments that made it possible to connect all of
the amazing wind in the Texas panhandle.


David Roberts


Right. Proactively planning and building the transmission for
when they show up, rather than waiting for them to show up.


Chaz Teplin


Exactly.


David Roberts


And then building the transmission in reaction. So that sort of
takes that bit of risk off the developer's back.


Chaz Teplin


Right, that's right. Or you do in places where there's been
proactive transmission planning, there's a surge in projects in
those regions with the new transmission and the interconnection
costs are much lower.


David Roberts


Right. And what does CREZ stand for? I can't let this go.


Chaz Teplin


Now you're going to get me. It's something for renewable energy
zones.


David Roberts


Yeah.


Chaz Teplin


And we would love and many folks are calling for the same thing,
that we need to do a lot more of this kind of proactive
transmission planning for reliability, for economics, for
reducing costs to customers and to help relieve the stress on the
interconnection process.


David Roberts


Yeah. I think this is a theme here, not only in this podcast, but
on all of Volts and indeed all of the clean energy world. It is
mind-bogglingly crazy that we're not doing large scale regional
transmission planning when that is clearly necessary to shorten
these queues, to improve reliability, to reduce costs, to meet
our energy emissions targets. Just name it. If you look in these
models, Princeton has done these models of IRA's effect, the
Inflation Reduction Act's effect and how big the effect is
depends almost entirely on how much transmission gets built. Like
the modeling that shows big reductions from this depend on a ton
of transmission getting built. And right now we just aren't doing
it. It's crazy. I know I'm just repeating myself at this point,
but it's so crazy, I feel like I need to just say it over and
over again.


Chaz Teplin


And we can make the argument for that based on economics,
benefits to ratepayers and reliability. As you've said, in other
cases, the emissions reductions are just a bonus. I think it's
also important to notice where progress is being made. For
example, in PJM again, my favorite grid there is now the start of
some regional planning. So there's going to be a huge opportunity
there to look at what that looks like.


David Roberts


Maybe let's take a minute to focus in on PJM because PJM is sort
of like the poster child for this difficulty, right? They have
the biggest queue, the slowest queue. Like, this is the problem
that's most acute there. So maybe tell us a little bit about PJM,
like where it is and what it is and why it has this problem so
badly.


Chaz Teplin


Yeah. So PJM is in the Mid Atlantic 13 or 14 states, District of
Columbia, it's the nation's largest grid operator with 150
gigawatt peak. They have 3000 queued projects, even though they
stopped taking actually projects into the queue for some time
because they just couldn't process it.


David Roberts


So you can't even go to PJM now and set up a new renewable energy
project, basically, like you can't even get in the queue at all.


Chaz Teplin


Yeah, I mean, they've just restarted their process. I want to
acknowledge the staff at PJM and the stakeholders at PJM have a
really hard job to manage this large collection of politically
diverse states. And they see their job as keeping the lights on
and doing so economically, and they're balancing lots of
competing things. So their job is hard for sure, but the queue
process, they have not done any real regional transmission
planning for some time. So they've looked at where transmission
projects are needed to relieve, like, immediate congestion on
their system and they do a good job of building those kinds of
projects, but they haven't done any of these regional
transmission projects for some time.


David Roberts


Is their queue notably slower than other queues? Like, do their
studies take longer or are they just in a particularly large and
busy place?


Chaz Teplin


No, objectively, their queues have been taking longer to process,
typically five years.


David Roberts


Esh...


Chaz Teplin


Yeah. Compared to nationally, about three years. Again, the good
news is that there's lots of projects in their queues.


David Roberts


I sort of wonder why, though. I start to wonder why, if you're
the 2970th project in the queue, why bother? Like if it's taking
five years per project, you're not going to come up for approval
until like the year 4000 or whatever.


Chaz Teplin


It's a good question. I think these project developers though,
right, they have to take a long view. They know that in five
years, if they still want to have work, they got to put projects
in now. And so there's a lot of speculation about where good
projects will be and where they'll be able to get generations
cited. And so it's worth taking the risk and we'll get to the
FERC piece, but there's relatively little cost to adding your
project to the queue and it potentially could be a really
valuable position to do so. Really profitable to build a project
there.


So people do still have a lot of appetite to put projects on the
queue, even with a long time horizon.


David Roberts


And do they have unique reliability problems in PJM that are
either exacerbating or being exacerbated by this interconnection
process?


Chaz Teplin


One thing that makes it easier in PJM, I'd argue, is there's very
little variable generation on their grid right now. They have
very little wind and solar, less than 5% of generation in PJM is
from wind and solar, whereas it's much higher in many other parts
of the country. It is true. PJM has done recent studies of their
own where they are very concerned about in the out years, about
resource adequacy, they're looking at upcoming electrification,
they're looking at coal retirements and they're concerned that
they can't get new generation online fast enough. The official
take on it and others take on it places the blame at different
places on the system and the solution at different places.


What we'd like to see is transmission planning and reforms to the
queue that makes it easier to get new generation online. We think
that's the opportunity with the best economics and the most
reliability and of course also the bonus emissions reductions.


David Roberts


And so isn't it the case that outside of ERCOT, no RTO seems to
be really like killing it on this? But didn't MISO recently do
some things to have some reforms that sort of sped things up
somewhat? Aren't they? I thought they made news recently with
some reforms.


Chaz Teplin


There is progress around the country, not to the extent that we'd
like to see. MISO's process is probably seen as one of the better
ones. They've had a long stakeholder process and they've
identified the first of four tranches of new transmission that
they have approved at the RTO level. Right. So MISO is approved.
There's also good things going on in California. California has
identified that they need a lot more transmission to bring more
generation in from out of state. And I mentioned PJM starting up
a new process and of course, FERC is looking at requiring with a
new rule that regional transmission planning be more holistic.


David Roberts


Is it one of the things MISO is doing? And this I feel like is
one of the reforms, sort of the near term easy reforms I see
tossed around a lot, which is at least approving projects in
batches instead of one at a time.


Chaz Teplin


Yeah. And this is perhaps the biggest deal in the FERC order as
well. So most of the RTOs now are moving towards more of a batch
process. So it's not like the example, the metaphor you used
earlier with the cars in line, where the last car that gets
tasked with the whole lane, instead they look at looks like
there's twelve cars coming online in this freeway entry. We're
going to look at what it's going to cost to add all of them at
once.


David Roberts


And if it requires a new transmission, then the cost of the new
transmission gets spread out over those twelve projects.


Chaz Teplin


That's right. They also ask more of the developers in each of
these so-called clusters. They want to do more to increase the
financial and the siting, make sure that they actually have the
land available to them, that they're serious projects. And so
this first ready, first served approach where you look at
clusters of projects and require the developers to show that
they're likely to actually build the project, is hoping to fix a
lot of the issues that we talked about. Not all of them, there's
still going to be a lot more to do. But this is something that
now FERC is requiring that MISO and PJM and their new process is
requiring, I believe SBP does it as well in California.


David Roberts


This batching?


Chaz Teplin


Yeah, that's right.


David Roberts


It seems like if nothing else, that would impose a little sort of
discipline on the queue. Like you wouldn't get in the queue so
casually, like you wouldn't get in the queue unless you're really
ready to go.


Chaz Teplin


Right.


Chaz Teplin


And these clusters sort of progress together and it handles
dropouts much more efficiently so that there's less
re-re-re-re-studies, still some, but — the process should move a
lot faster and more efficiently. With these best practice cluster
studies.


Do we have empirical evidence that these reforms are going to
speed things up? Or is it just hope at this point? Has it been
implemented anywhere long enough for us to judge its success?


I wish I had great data on that. I don't. I know that MISO for
sure has been doing this now for a little while, and I'd welcome
a listener to comment somewhere on whether there's data there.
But I think everyone agrees that this is best practice and we're
seeing better results with the process moving along more
efficiently.


David Roberts


Right, so let's talk about FERC then. So FERC, the Federal Energy
Regulatory Commission, obviously this problem has been bouncing
around for a while and people have been angsty about this and we
desperately need reforms of this. The chance to do it
legislatively came and went. So sort of all on FERC's back now.
So what exactly did FERC take upon itself to do and what did it
do?


Chaz Teplin


Yeah. So FERC Order 2023, named obviously after the year was
issued last week. It's a 1500 page light read.


David Roberts


Yikes!


Chaz Teplin


Yeah. So I admit I have not read all of it but can summarize what
a lot of folks have been talking about. So perhaps most
importantly, it moves to this first ready, first served approach
and this cluster study approach which includes some more
requirements from developers to show their projects are serious.


David Roberts


So this has force of law now like RTOs have to do that?


Chaz Teplin


That's correct. The way it works is that all the RTOs will have
to say, okay, we see your order, we're required to do it in
certain ways. This is how we're going to change our process and
then FERC approves that. And a lot of the RTOs already have a
FERC approved process. Likely a lot of them will have to over the
course of the next few months, revise their already approved
processes to comply with the new order or ask for an exception.
There's going to be a lot of action there to try and make sure
that the RTOs are as aggressive as possible in how they comply
with this new order.


David Roberts


Yeah, I'm sort of wondering if we can just kind of a timeout
here, but I'm just curious what the sort of disposition of the
RTOs is toward this. Are they looking at this as like, oh, here
come the Feds imposing onerous restrictions on us or are they on
board, do they want to do this? Are there any RTOs that are sort
of like pushing back or recalcitrant on this type of reform?


Chaz Teplin


I mean, compliance is always a burden, right? But I think FERC's
stakeholder process and comment process is extremely extensive
and the RTOs get a large voice in that process. So the order
itself is quite long. But the comments they got on the draft
order, the notice of proposed rulemaking was even longer and so
shout out to all the FERC staff that had to read all those orders
and try and make sense of it and final rule. So the RTOs of
course are going to like some things and dislike others and have
to work hard to comply.


And I think that FERC did a good job of balancing the needs. Of
course we probably would have asked them to go further in some
ways, but a lot of what they've done is really good.


David Roberts


So what else is it? There's the clustering, first ready, first
served.


Chaz Teplin


Yeah, they now need and there are studies of like how can we
solve the issues that we did identify. They now have to include
what FERC called alternative transmission technologies. Right. So
things like new ways of moving power on the grid and other tricks
that we can play to get more out of the current system.
Unfortunately — also they're called GETs, grid enhancing
technologies — so a lot of these technologies are really cost
effective, most studies show, but they're not always adopted. And
so now we probably would have liked this ruling to be a little
bit stronger. We think that the opportunities for these
technologies is really great and the payback times are often
measured in months, not years.


And so we'd like to be adopted more aggressively. They're now
required to at least consider and evaluate the option there.


David Roberts


That's it though, they have to consider and think about grid
enhancing technologies?


Chaz Teplin


Yeah. We haven't, I haven't especially, gone through the detailed
language in the order to know exactly how that's going to look,
but I think a lot will come down to how the RTOs actually comply.


David Roberts


Longtime listeners will remember I did a piece on grid enhancing
technologies a couple of years ago and a pod on it, and it's just
sort of like advanced digital stuff, as you say, to get more
performance, more throughput out of existing lines. And it always
struck me that if we have these technologies available and we
know they're available and we know they work, then RTOs are like
utilities refusal to use them violates the sort of core utility
mandate for just and reasonable rates. Like, you could lower
rates by using these. So it seems like it ought to be more
enforceable.


It seems like something that you could sue utilities over, not
just like a helpful suggestion.


Chaz Teplin


Yeah. A lot of people have made the just and reasonable argument
that these are cost-effective technologies and it's just crazy
not to use them to the greatest extent that we can. There's
always the balance that comes back on. Are they really proven?
And we have to be very conservative because we don't want to risk
the grid. I think the evidence is there that that's not a great
argument. And so we have projects to really try and push getting
more of these GETs technologies onto the grid to reduce
interconnection costs and just use our existing grid more
efficiently while we build out the transmission.


David Roberts


Yeah, and when we say more efficiently, like getting 30, 40, 50%
more out of it. These are not small numbers that these
technologies enable.


Chaz Teplin


Yeah, often. And they're fairly low cost and can be deployed a
lot more quickly than building a new transmission line.


David Roberts


Yes!


Chaz Teplin


They make a lot of intuitive sense and most of the studies
support that. There's always some devils in the details and so
we're even doing some quantitative work there to try and show how
much it could reduce costs and increase deliverability.


David Roberts


Yeah, I need to revisit that. I need to revisit that subject on
the pod. Okay, so FERC saying batch processing, you have to at
least think about and consider grid enhancing technologies.


Chaz Teplin


Well, there is now some deadlines and penalties if the processing
takes too long. So there is some stated rules about we expect you
to process interconnection applications in a certain amount of
time. I don't think this is like start to finish when you get in
to when you get the final results of the study. It's more like
how these cluster studies should progress as they go through. So
we think that's good. The penalties, I don't believe, are
extremely large by utility numbers, but it's still meaningful
that they're there and I think it should be a way to encourage
transmission owners and RTOs to move quickly.


As an aside, I think this isn't in the FERC order, but just from
a pure staffing perspective, it's really a challenge for the RTOs
as well.


David Roberts


Capacity. Capacity. Capacity our favorite subject here.


Chaz Teplin


That's right. Yeah. So you did a workforce pod and I don't think
it was too much focused on this kind of issue, but yeah, the need
for transmission engineers is far exceeding the supply. So all
you engineering students out there, please go into transmission.


David Roberts


All right. So that seems like those three things together seem
like reasonable, incremental reforms —


Chaz Teplin


That's right.


David Roberts


from FERC. So nothing bad. Is there more that FERC could have
done? Like, I'm sort of curious about the kind of limits of its
authority here. What would you like to see it do that it didn't
do?


Chaz Teplin


Yeah, I mean, I think the regional transmission planning and
ideally even interregional transmission planning, I'd be remiss
if I didn't say, like, please, we need to do everything we can to
make that kind of transmission planning the default and the
requirement. So that's number one, it's not a fast fix because it
takes a while to build transmission —


David Roberts


Yeah, I'm just curious whether FERC can do that because this was
the whole debate over they tried to get it in the legislation and
then that deal fell apart and it fell out of the legislation. And
then people are like, well, we'll just go to FERC. And so I'm
curious, I think a lot of people are curious whether FERC can do
that to the extent legislation could have.


Chaz Teplin


Yeah, I mean, they're not going to be able to do obviously
legislation is more flexible. Right. But FERC does have a notice
of proposed rulemaking on regional transmission that has been a
huge focus and hopefully will come out over the course of the
next year and hopefully require this transmission planning. It's
definitely within their jurisdiction to my understanding, though.
Though I'm not a lawyer to make that caveat.


David Roberts


Yeah. I mean, it would just make so much more sense to go plan
your transmission grid and then for the RTO to go out and say,
hey, we're going to build transmission here. It can accommodate X
amount of new energy bid for this spot on the grid. Right. So
instead of backing into the future, you're sort of proactively
filling out your grid according to your vision.


Chaz Teplin


That's right. And that requires broad alignment, though, about
everybody in the market trying to say, yeah, what is the future
that we envision? It's not going to just be a — so it's a long
and complicated stakeholder process that we're all excited to
partake in.


David Roberts


It'd be super nice, wasn't it, if we had federal, if we didn't
have this patchwork of states with radically different visions
about what they want to do and radically different targets. It'd
be nice if we were sort of like everybody's on the same page and
striving for the same goal. It is politically a super sticky
wicket to do interregional transmission planning with states that
are so heterogeneous.


Chaz Teplin


The clean part of it is challenging politically but the
reliability and the cost perspective isn't so bad. So the
Hickenlooper bill that would have required more interregional
transmission built does have bipartisan support, and we're
hopeful that that will come back and there'll be a chance for a
requirement there on the legislative side. But in the near term,
and as for what we can do to fix these problems the FERC oder,
perhaps order 2024 is really top of mind for everybody in this
space.


David Roberts


So FERC can do more and do you think wants to?


Chaz Teplin


I'm not going to guess what the current set of four commissioners
are going to do.


David Roberts


Right? We're still lacking one, aren't we?


Chaz Teplin


We're still lacking one. Yeah. So we currently, I believe, have
four. Commissioner Danly's term I believe, is up or coming up but
is able to stay on for, I believe, till the end of the year. So
yeah, we may be down to three shortly. It would be great to have,
as they say, a fully staffed and operational FERC.


David Roberts


Yes, I'm sure Joe Manchin will find some way to screw that up and
delay that appointment. I want to ask one final question, but
first, I want to ask a second to final question because I forgot
to ask about this earlier. This is something I've always been
sort of curious about. Generation projects in the queue are one
thing, but lots of projects these days will be combined
generation and storage, and some projects now will be standalone
storage. Are those also in the same queue and if so, are they
studied the same way? Because it just seems like the performance
of a storage project on the grid is going to be fundamentally
different and its effect on the grid.


It's going to be fundamentally different than the performance and
effect of a generator. Do they all go mushed in the queues
together? Are they all evaluated in the same way?


Chaz Teplin


They are all in the same queue. They aren't always necessarily
evaluated in the same way. And there were some reforms also in
the recent FERC order about the assumptions we make about
inverter-based resources which include storage, about how they're
going to operate and the ability for developers to say what
technologies they're using to make sure that they go well. And I
believe there's some ability to change how you can add storage,
like make your solar project a hybrid project. If that's not in
the FERC order a lot of the RTOs are looking at or do allow you
to make some of those changes.


You don't have to go to the back of the line if you just add
storage, which in theory should just make your resource more
valuable and easy to control.


David Roberts


Right. I mean, this is what I'm saying. Intuitively it seems to
me like a storage project is going to be good for the grid,
almost categorically like, good for grid reliability, good for
grid performance. There's no overloading the grid from storage.
So it seems to me like storage ought to be either allowed to skip
the queue or at the very least go to the head of the queue or if
you attach storage to your project it seems like you ought to get
some advantage in the queue.


Chaz Teplin


Yeah, and I think another thing that RTOs can do that's really
valuable is look at using retiring generation, citing things
there and storage like natural gas, as I mentioned earlier, can
be placed pretty much anywhere. So that's an obvious place.
Hopefully, you can also connect wind or solar nearby to a
retiring coal plant connection. Right. And as we repower that
valuable grid connection and so storage can go there and there
are fast track processes and fast track queues, if you will, for
considering things like that. And a lot of the RTOs are looking
at those processes and we really see that as a really valuable
way to leverage the existing grid.


There's a lot of fairness and cost implications and if you're a
developer in the queue, you don't like to see anyone jumping the
queue. So there's a lot of ways, questions about what the best
way to handle that is, but yeah, that relates to storage for
sure.


David Roberts


Just tell them like if you want to jump in the queue, add
storage. It just seems to me like yes to storage as much as
possible, as fast as possible.


Chaz Teplin


Yeah. Certainly for short term duration resource adequacy
challenges, there's no question that storage is an obvious
solution.


David Roberts


For sure. Okay, so by way of wrapping up then, let's just briefly
talk about what's next. So FERC has issued this order as you say,
these are good things, they're going to be improvements, they're
going to speed things up a little bit. Do we think that this FERC
order alone is enough to speed things up enough to catch us up
where we need to be? And if not, what are the other tools in the
toolbox here? What else can be done? What should sort of
advocates be thinking about next?


Chaz Teplin


Well, there's no substitution for transmission. Okay, I know,
keep being a broken record there but it's true. So leveraging
gets as much as possible, leveraging the existing retiring
connections as much as possible. And then the last one's a little
fuzzier, but I think the RTOs have some flexibility on how they
treat deliverability of resources and think about their resource
adequacy. And sometimes I worry that we're overly strict about
making sure a project is really deliverable. And so Commissioner
Clements noted that there's something called energy only
resources that typically have different, less strict rules for
deliverability. So there's probably ways of getting projects on
the grid more quickly by looking at some of the specific rules
about how careful we have to be on deliverability.


Those are going to be some complex conversations and possibly
build on some long-used processes that RTOs have been using, but
I think there's some flexibility there and we're excited,
certainly to work with everyone to see if we can figure out ways
to get more generation onto the existing grid quicker while we
plan transmission.


David Roberts


These all — except for maybe fully grasping and throwing
ourselves into regional and interregional transmission, which is
still not really on the table in any meaningful way — this all
seems kind of incremental. Like, just intuitively to me it
doesn't sound equal to the scale of the problem. So I'm wondering
if you feel the same way. And I sort of wonder, given the need
for grid reliability, as you say, the legitimate need to sort of
study these things and make sure they're not going to screw up
the grid, is it even possible to approve things to get on the
grid fast enough to hit the targets we want to hit?


Like, is there a process that moves fast enough even on the
horizon here?


Chaz Teplin


Well, I'm an optimist, and if you look at how many gigawatts of
power are likely that the RTOs themselves say are going to clear,
then it's a large number, so we can actually move fairly quickly,
but it's not as large as we want. And how many of those projects
are going to get bogged down in really large network connection,
costs are going to be hard, but perhaps there's ways to fund
those. So yes, I'm an optimist that we can use our existing grid
a lot better than we are today and get a lot more storage, wind,
solar on the system. But yeah, it's going to be a challenge.


There's no easy answer on expanding the grid to replace a lot of
retiring fossil generation and grow it to substitute for the
existing oil and gas industry. Right. That's a large ask to do
very quickly.


David Roberts


It's not something it's never been done.


Chaz Teplin


No, never been done, but that's why we're here to do it for the
first time.


David Roberts


All right, well, thanks so much for decoding all this for us and
picking apart these strands. And it sounds like as bad as this
problem is currently, there are things happening, there is hope.


Chaz Teplin


There is hope. The FERC order is a big deal and there's lots of
dedicated stakeholders and advocates working really hard to try
and fix these issues. So that's what always gives me hope.


David Roberts


Awesome. All right, Chaz Teplin of RMI, thanks so much for coming
on.


Chaz Teplin


Thanks so much. Always great to be here.


David Roberts


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