PJM and stakeholders have worked intensively in 2021 and 2022 on a plan to improve the interconnection process for new projects. Now that there is a formal proposal for a new process – and a plan to transition to it – heading toward final approval, PJM Inside Lines sat down with Ken Seiler, Vice President – Planning, to talk about the proposed improvements and how they are designed to establish a better, faster, more efficient system that will help states meet their policy goals.
Inside Lines: Let’s start at the beginning. Can you give us the backstory on how this reform came about, and why now?
Seiler: The interconnection process we have now had served us well over the past two decades, including absorbing a whole generation of new natural gas generators while maintaining reliable delivery of electricity, which is our most essential function. But in recent years, we’ve seen a lot of change with the influx of renewable generators, which tend to be much smaller, more numerous and more dispersed.
That means we are getting a lot more requests that we have to study. There is a detailed study process for every single project to make sure that the grid that a generation project is plugging into can remain strong and reliable.
But the nature of the new projects coming in meant that the volume of requests in PJM has basically tripled in four years. We are studying more projects, by far, than any other grid operator in the country; in 2020, PJM performed more studies than all other regional transmission organizations combined.
PJM has already studied more than 150,000 MW of solar, wind, storage and hybrid projects that have either withdrawn or are now in operation – that’s almost as much energy as PJM’s all-time peak load of about 165,000 MW.
Right now, we have nearly 2,500 projects we’re reviewing, totaling 225,000 MW of capacity, and 95% of that is renewables. To put that into perspective, consider that the current capacity of the entire PJM grid is under 200,000 MW, and that’s in addition to the 150,000 MW we previously studied. Each of those 2,500 projects must be carefully studied to evaluate their impact on the existing grid, and whether and how the system needs to be upgraded to accommodate them.
The deluge of requests has been partly driven by some developers submitting multiple projects, with the financing to build only one or two. That means PJM and its member companies were required to devote time and resources to evaluate projects that would never be built. Developers with real projects, meanwhile, were waiting around while PJM studied speculative projects.
Inside Lines: So what are you doing about it?
Seiler: PJM and our stakeholders, representing a cross section of the industry – from developers of renewable generators, to utilities, to industrial customers, to state consumer advocates – had expressed a desire for us to analyze the interconnection process. Based on that feedback and our own observations from managing a queue – the rapidly increasing volume of requests, the size of each project shrinking, and a drastic change in the fuel mix of planned projects – we decided that it was time to take a fresh look at the process.
We knew it was critical to improve our process to handle this unprecedented influx of generation interconnection requests in order to help states achieve their decarbonization goals and enable the grid of the future. In 2020 we engaged stakeholders in workshops that led to the creation of the Interconnection Process Reform Task Force in 2021.
I should add that we had a record number of companies – members and nonmembers alike – participating in our task force. The process wasn’t easy, and those who participated will be the first to tell you that the final proposal for both a new process and a transition to get there involved compromise from all sides. In the end, there was virtually unanimous consensus for the new process. It passed our Planning Committee – again representing a cross section of stakeholders – by a vote of 274-1. The transition plan received 91% support from the Planning Committee.
Inside Lines: Tell us about the proposed process and transition – what it is and what it isn’t.
Seiler: In the transition plan, we are prioritizing more than 1,200 projects, most of them renewable energy, representing 100,000 MW of nameplate capacity. That’s over half the capacity we currently have in our system, and we are focused on moving those through the system and streamlining the system so that when we get to the newer projects, those will move through faster as well.
The overall plan will eventually speed up the integration of renewables, but projects that entered our queue in 2021 will have a two-year waiting period while we clear the huge backlog of projects that were already in the queue before them.
Like I said, the vast majority of projects in the queue are renewables, and we’re working to move the ones that are most ready into operation faster. The improved process will better equip states to meet their renewable goals because it will be faster and involve projects that are more likely to actually get built.
Now, I get it – if your project is one of the ones that is being put on hold, you’re not going to be satisfied with our study timeline. But I can say that, in the end, many of the new projects will get through the queue faster under the transition plan than they would have otherwise. We have had many renewable developers support this transition, because they believe that any short-term pain will be rewarded with a better process going forward.
That’s because the new process will move the model from a first-in, first-out basis to first ready, first served, with readiness demonstrated by financial and site control milestones. So a project that is ready to move forward doesn’t get stuck behind a project that isn’t.
The plan also simplifies the cost construct to limit it to projects studied in the same cycle and has scheduled restudies for project changes that will minimize disruptions.
Finally, it allows certain projects to complete the study process early – projects that don’t contribute to the need for network upgrades and/or don’t need facilities studies will be able to proceed directly to a final agreement.
Inside Lines: What are the next steps to getting these proposals approved, filed with the Federal Energy Regulatory Commission and implemented?
Seiler: The new process and the transition plan will be presented for the first time to the Markets & Reliability Committee on March 23. That committee will be asked to vote on both plans at its next meeting, April 27. That same day, the plans will proceed to the Members Committee for endorsement.
Provided the proposals are approved, PJM would expect to file proposed changes with FERC in May.
Based on the current work plan, the effective date of the transition would be the fourth quarter of this year or the first quarter of 2023. We will continue to fast-track the most ready projects and clear other projects with the goal of having the backlog cleared and new projects being reviewed under FERC-approved rules by the second half of 2024.
