Interconnection Woes Stymie DER and Microgrid Deployment: These Innovative Policies Could Help

The International Energy Agency estimates that more than 3,000 GW of projects are stalled in interconnection queues globally, slowing microgrid and distributed energy resource (DER) deployment and the clean energy transition.

A number of obstacles have led to this standstill, including long and complicated interconnection queues, unexpected grid upgrades, permitting challenges, transmission bottlenecks, and equipment and supply chain delays.

Investors seeking low-risk projects because of interconnection delays

As a result of such challenges, investors are limiting DER investments to “low-risk” projects, such as those that have already obtained an interconnection agreement, said Michael Phelan, CEO of GridBeyond, a technology platform for managing DERs.

“In some ways this is part of a vicious circle in which ‘speculative connection requests’ for projects that are far from ready to come online are clogging up the first-come, first-served queue and putting net zero at risk,” said Phelan.

Maryland and Massachusetts try to lead the way out of the quagmire

However, a few states – including Maryland and Massachusetts – are beginning to implement innovative programs to address the interconnection roadblocks, said Samantha Weaver, director of interconnection and grid integration at the Coalition for Community Solar Access (CCSA).

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“Broadly across the U.S., most solar and community solar developers want predictability about timelines and cost,” Weaver said. “We like to say the experience of applying and interconnecting should look like buying a plane ticket, but it looks like going to the Department of Motor Vehicles (DMV).”

She said that to get projects out of the complicated, time-consuming and costly “DMV” process, states should ensure:

• Utilities adhere to interconnection timelines established by statute.
• Developers’ costs to interconnect fall within a reasonable range.
• Utilities provide data about what’s happening on the ground, including frequently updating hosting capacity maps – which is uncommon now.

Maryland’s proactive planning efforts

Maryland is a leader among states working to solve interconnection challenges, Weaver said. 

“While there’s no silver bullet, the closest thing we have is proactive planning of the distribution system,” she said. “That’s what Maryland has been looking at for the past several years.”

The Maryland Public Service Commission in January adopted proposals intended to speed up interconnection and is expected to implement them in the coming months and years, said Weaver.

Planning system upgrades for congested areas 

The Maryland measures include a hosting capacity upgrade plan that allows utilities to proactively propose upgrades to areas they expect will be congested in the future. Under the plan, utilities forecast where DERs will be sited and upgrade the grid accordingly. While this may seem straightforward, utilities tend to be reactive – rather than proactive – to interconnection requests, so this will require them to shift gears, Weaver said.

“As DER markets mature, Maryland is trying to accommodate higher concentrations of DERs. They want to plan and get ahead of the expected exponential growth of DERs,” Weaver said. 

How to allocate infrastructure upgrade costs?

As part of the process of addressing long interconnection queues, one challenge is identifying how to allocate the costs of utility upgrades completed to interconnect microgrids and DERs. 

A white paper from the CCSA calls for states to address this issue by adopting cost-sharing policies that distribute system upgrade costs across a “more appropriate range of beneficiaries.” Power system upgrades create benefits for customers, not just the developers seeking to interconnect, the white paper said.

Traditionally, the interconnecting customer who triggers the upgrade has to pay for the entire upgrade of a substation. This upgrade may allow for an additional 10 MW of DERs, but the first interconnecting customer may only want to use 2 MW, said Weaver.

New customers share upgrade costs under Maryland’s plan

Under Maryland’s framework, utilities would proportionally allocate costs to new customers. Interconnecting customers who come after the first customer would pay their fair share of the full upgrade costs, said Weaver. Under the measure, called the Maryland Cost Allocation Model, Maryland utilities would be allowed to recover rates through the cost of upgrades.

Like Maryland, Massachusetts is leading efforts to improve interconnection.

East coast-based utility National Grid in late 2018 filed a rate case with the Department of Public Utilities (DPU) that included a proposal to recover interconnection costs, according to the white paper from CCSA. As part of its proposal, National Grid called for a variety of metrics and scorecards to track the success of the measure.

Tracking utility performance

The DPU established scorecards tracking utility performance in greenhouse gas emission reductions, customer engagement, DER customer experience and involuntary electric service terminations.

As part of the DER customer experience metrics, the plan called for measuring the number of days it takes National Grid to respond to DER customer inquiries and the percentage of interconnection applications that are eventually authorized to interconnect, said the white paper.

National Grid reported that the average number of days it took to respond to DER customer inquiries increased from a baseline of seven days in 2018-2019 to 20 days in 2020, according to the white paper. As for applications that were authorized to interconnect, the report showed that interconnection authorization declined from 73% in 2018-2019 to 63% in 2020.

“While National Grid’s performance in these areas does not impact their revenue in a positive or negative way, these scorecard metrics are examples of potentially effective tools that a regulator can use to assess the performance of a utility over time,” said the white paper.

California bills aim to speed interconnection

Meanwhile, in California, two bills – AB 50 and SB 410 – signed by Gov. Gavin Newsom in October 2023, are expected to provide some interconnection relief. AB 50 requires utilities to report to the California Public Utilities Commission (CPUC) and identify the criteria for providing timely interconnection services. AB 50 institutes reporting requirements for investor-owned utilities about how and why delays are occurring. 

Under AB 50, the CPUC will analyze the reasons for delays and develop a set of resolutions for how utilities should address the delays.

SB 410 requires the CPUC to decrease the time for utility connection and upgraded service. It also calls for shorter target interconnection times and sets a timeline for utilities to connect different types of resources.

Utility incentives needed to speed interconnection work

In addition, utilities need incentives and mandates to pursue distribution system planning that focuses on decarbonizing and completing interconnection work efficiently, said the white paper.

“States can prioritize all these items by making regulatory reforms that align utility incentives with these goals. In particular, regulatory bodies can adopt performance-based regulation frameworks that specifically measure objectives and either incentivize or penalize utilities based on their progress in meeting specific metrics,” said the white paper.

Regulators could designate utilities as the “facilitators of DER integration” with mandates and cost recovery authorization.

One example would be “establishing specific metrics related to DER integration and tying them to performance incentives that permit a utility to earn a higher return or receive performance payments funded through distribution rates,” said the white paper. 

Interconnection action plan in the U.K. 

The U.K. is experiencing similar interconnection frustrations, said Phelan of GridBeyond. In the U.K., the Connections Action Plan, released by the Department for Energy Security and others in November 2023, included these proposals:

• Raise entry requirements to increase the quality of projects applying for transmission connections and deter speculative connection applications.
• Remove stalled projects to release capacity for more viable projects. This would require utilities to establish milestones in transmission connection contracts that a connection customer must meet – or risk termination of their connection contract. In this case, customers would lose their place in the queue.
• Better utilize existing network capacity to reduce connection timelines. This would change how the impact of connections is assessed by the U.K.’s electric system operator and network companies, enhancing flexibility.
• Better allocate available network capacity by moving away from the first-come, first-served approach. Instead, the goal would be to connect projects that are more prepared to progress and therefore able to quickly make use of capacity.

Altering utilities’ focus

In the U.S., speeding up the interconnection process is seen as key to the clean energy transition. Regulators and utilities need to change their focus to make this happen, said the CCSA white paper.

“When utilities do not have incentives or mandates to conduct distribution system planning with an eye towards decarbonizing, implementing grid modernization upgrades or accomplishing interconnection work efficiently, they prioritize other activities,” the white paper said. While those other activities may contribute to their bottom line, utilities need to add resources that shorten interconnection queues and hasten the clean energy transition, according to the white paper.

In other words, there’s a lot of work to be done.

“For me in particular, this is a challenge on top of mind because of our organizational vision to provide 10 million more people with solar by 2030,” said Weaver. “Interconnection will play a major role in closing that gap.”