What's the deal with interconnection queues?

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

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 clea