Interconnection Reform Is Working, but Will New Generation Actually Get Built?

Paul McGlynn, Vice President – Planning

By Paul McGlynn, Vice President – Planning

For a good part of the last two years, PJM has been engaged in deep discussions with our stakeholders, regulators, and state and federal officials about the challenge of maintaining the reliable electric service we all have come to depend on, while proceeding through a revolutionary energy transition to a greater share of renewable-based electricity generation.

Simply put, how do we maintain a reliable and affordable power system through this transition? One acute challenge is interconnecting enough new reliable generation resources to replace the fossil-fuel generators that are retiring en masse due to economics or state and federal policy requirements.

We have raised concerns about the rate at which generators are being forced to retire before sufficient replacement generation is in place and operating. That is a real concern, and those ongoing discussions nationally have produced policies in many areas that prioritize reliability. PJM has also embarked with its stakeholders on market reforms that will incentivize the amount of generation with the required attributes to support reliability.

And PJM and its stakeholders have also been working diligently to help smooth the process for bringing new generators online. PJM’s old technical study process to integrate new resources – a necessary step to maintain the critical balance required of any electric system – was created to handle interconnection requests from a small number of large generators. The new process is designed to handle a larger volume of requests from much smaller generation resources, mostly solar, wind and batteries.

PJM and its stakeholders started reforming the study process in 2020 after seeing the number of interconnection requests nearly triple between 2018 and 2022, overwhelming the existing process and creating a backlog. FERC in November 2022 approved the proposed reforms, which were driven and overwhelmingly endorsed by PJM members.

In July 2023, PJM began transitioning to the new, reformed process, moving away from a “first-in, first-out” model to a “first-ready, first-served” structure. At the start, 734 projects were eligible to be evaluated. Of those, 118 either dropped out or did not post sufficient readiness requirements by the due date, clearing the queue of projects that were less certain to be developed but still requiring the same time and resources from PJM. These were the kind of speculative projects that were contributing to the backlog.

The first transition cycle of the reformed interconnection process kicked off in January 2024, with the onset of System Impact Studies on 308 projects representing 46,000 MW of new, mostly renewable generation. These projects are expected to clear PJM’s study process and have signed interconnection agreements by mid-2025. The reformed interconnection process anticipates that those projects with executed agreements will begin construction shortly after. In addition, another 308 projects totaling 26,000 MW qualified for an Expedited Process, or “fast lane,” with Final Agreements to be issued throughout 2024.

In total, PJM expects to process about 72,000 MW in projects by mid-2025 and 230,000 MW over the next three years; over 90% of those projects are renewable or storage. That’s more nameplate capacity than currently exists in PJM’s entire system, so the transition is happening in that respect.

But there is a concerning trend that stands in the way. According to Lawrence Berkeley National Laboratories, more than 300,000 MW of projects have been approved nationally but have not proceeded to construction – nearly 25% of current generating capacity in the country.

Right now, PJM has cleared nearly 40,000 MW of generation projects through our interconnection process that are not moving to construction. Nothing from PJM is holding these projects back, yet they sit idle in PJM and elsewhere due to continued challenges with supply chain, financing and local siting issues.

These factors are outside of the control of PJM and other grid operators, but they are a top priority for the industry overall.

PJM is sensitive to the plight of developers of projects who face long waits because they came in after the several thousand new service requests that PJM has received in recent years.

But in reality, the solution is working. PJM will process enough renewable and other generation in the next few years to effect profound change. The improvements PJM and its members are implementing, however, require concerted government and industry effort to make sure those generation projects actually start generating electricity.