Interconnection and Grid Planning — Episode 179 of Local Energy Rules

And so I started thinking about what, like solar was happening, what would be the interesting way to engage in that? And I was particularly interested in distributed generation at the time, partly because we were looking at a lot of these large scale solar facilities and the habitat impacts and so on of that. And so I was excited about exploring rooftop solar. So I changed law firms and started representing the Interstate Renewable Energy Council or IREC. And like in my first couple months I got asked to work on an interconnection case and I remember the first couple of days being like, there’s no way I can do this. I don’t know anything about this. I guess, you know, it’s highly technical and I didn’t, I mean it was so, I was so green at the time. And then fast forward 13 years later or something, that’s almost all I do <laugh>, which you wouldn’t have thought at the time, but it does, it suits me. And the reason I enjoy this work is one is that I do kind of always liked really specializing in the sense that I enjoy going very deep on a topic and really understanding and unpacking, and again, having an opportunity to really design solutions.

Things that like are trying to like make things better and interconnection is an area that’s ripe for that opportunity and that also every single project essentially has to go through this process getting interconnection and so little attention is paid to the process and how to make it better. It’s getting a lot more attention now, but for many years it was like the third rail. No, because it’s complicated and technical people didn’t really wanna focus on it as much or I think we’re intimidated by it. And so it’s become like an area that I just enjoy because there’s a lot of work that needs to be done and I do still think that there’s a lot of opportunity for innovation and collaboration. So it can be very fun to dig in once you get over the initial hurdle of having to understand what basic electrical engineering is, which I did, you know, don’t have an engineering degree to be clear <laugh>.

And I should say that my work focuses on the distribution system and distribution scale interconnection. We can touch a little bit on some of the transmission or bulk system issues which are very parallel, but where I’m focused on is the distribution system rules.

But in either system as you start to get more and more renewables on the grid, you start to see more grid constraints. So that’s one of the big reasons and that breaks down in lots of things and we can talk about all the different ways that those are real problems or are not real problems. And then also you just have a human limitation on how do you process all of those applications that I think those two things kind of are converging at this time to make this area of particular focus or it’s starting to get some focus, at least I still think it’s not given anywhere near the level of attention it needs considering how critical it is to every project.

In terms of the practicalities for, you can sort of think of the three different parties that are involved in interconnection. You have the actual project applicant, either, you know, a customer with a system on their rooftop or their installer, a solar or storage developer and then you have the utility and the public utilities commission or the regulator. And for each of those parties there’s sort of a different aspect of why getting these rules right matter. The basic thing for interconnection is the purpose of those rules are to ensure the safety and reliability of the grid and ensure when projects connect that they don’t impinge upon the safety and reliability of the grid and that centrally should be the focus of those rules, although they sort of get at a lot more than that these days.

So from the utility perspective, they’re looking at it from how to ensure system safety, reliability and how to also make sure they’re recovering costs associated with managing the grid and the influx of renewable energy. For customers, because it’s a critical step of the process, the amount of time it takes to go through the process is really critical. It’s the classic time equals money and especially when you’re talking about customer-side systems is a real customer relationship issue at hand if the process takes a long time. Same thing with large scale development. If they have a power purchase agreement that has a timeline in which they must be online, that means that the interconnection process has to move fast enough to enable them to meet that target. So there’s a time element and then there are a couple different cost elements for customers separate from the time itself and those can be both the basic application fees, study fees, so on, but also in more critically any distribution upgrades that might be required. Those can very often and very often do make or break a project whether or not the process is the upgrades that are determined are fair and reasonable and how the cost for those upgrades are allocated is probably one of the most central policy issues in interconnection today. And then for the regulator, they’re sort of there to help hopefully facilitate this process.

We’re trying to get regulators to appreciate a little bit more how critical their role is in interconnection. The reason I say that is interconnection rules are kind of an odd sort of regulatory body in the sense that they’re adopted by, typically adopted by state public utilities commissions, but the party that actually facilitates the regulations is the utilities. So it’s not like you’re applying to EPA for your permit, you’re applying to the utility for your permit to interconnect or your interconnection agreement, but the actual rules are set by the commission. And most public utilities commissions with a few great exceptions, historically really relied on a lot of deference for the utilities, especially on the technical issues. But as commissions are starting to sort of bear a huge amount of responsibility for achieving our climate goals, they need to kind of focus in on how to achieve those goals in terms of electrification of transportation and buildings plus all of their renewable energy procurement targets and recognize that interconnection is the big, could be the big impediment to doing that. So I think that’s kind of the role and why it’s important from a regulatory standpoint is it, it can be the thing that prevents us from meeting all of those other goals or makes meeting those goals much more expensive.

And ideally, and this goes back to what I was saying a moment ago about as we get to higher and higher penetration of these resources, ultimately grid upgrades are going to need to happen. And the way to make that efficient and not a huge hurdle, have the interconnection process be a hurdle, is to start doing those proactively through a sophisticated planning process. And so that, I think when I think of separate from the rates and the incentives and other things that will help move these resources forward is really starting to recognize any policy where the commission’s paying attention to the actual grid is really important and, and historically there was very little of that now states are starting to engage a little more directly with distribution system planning, but I think that that’s where a lot of these things flow out of.

So one element of that is, like you mentioned, hosting capacity analyses, which is something I’ve worked a ton on and the Interstate Renewable Energy Council has a lot of great resources for how to adopt a good and useful posting capacity analysis. And then within the interconnection process moving towards changing how we allocate costs for upgrades so that we can better make sort of a more efficient and more effective process for determining how to create the kind of capacity we need for those systems.

But as we have like exponentially more people trying to connect to the grid and as the system transforms from one in which it’s more like a one-way system and like bringing power from others from the utility and from other producers to customers and to one where it’s like more transactive I guess at what point does it end up feeling more like roads, you know, like we pay for roads through taxes, you know, there’s some user fees and gas taxes, but it’s like property taxes and such generally cover the cost of roads and we expand roads when there’s congestion and whatnot. So I guess kind of curious like how do you think about how we should pay and does that, how do you think about it changing as the nature of who’s producing energy or connecting valuable services or whatever with energy storage is changing on the grid system?

Separately, load upgrades that are required for new load. There’s some costs that are directly paid by a customer, they need a line to their, the new house they’re building or property or something. But most of the upgrades that are required to basically provide load service, which is the central function of the utility, those costs are typically spread across the rate base. More like the highway example in the sense that no one individual has to pay for the majority of the distribution system operations and upgrades. I distinguish those because we start to think about, what we’re talking about when we talk about this world of distributed energy resources is there’s less the bright, there’s less of a bright line between what’s a generator and what’s a load source or you know, importing or exporting and also even where they are very distinct, their ability to interact with each other is a potential efficiency where we may not need as many grid upgrades and these sort of bright line rules as they’re currently restricted are preventing us from being achieving that sort of economic efficiency.

So to get to your actual question, who should pay, I think that that a little bit of everybody should pay is probably the right answer to that question as we look at the reason I was promoting the idea of doing more advanced planning and looking at proactive upgrades is that it enables us to do an analysis that looks at what the benefits of the upgrade would be and who would benefit from it and to apportion those benefits across the different quote beneficiaries potentially. And that can be eventually the utility is gonna have to upgrade the transformer anyways because it’s at end of life. Does it make sense for that one unlucky interconnection customer to bear that cost even if the load customers would’ve benefit? We can capture all of those kind of nuances if we do it in a more deliberate manner. And that doesn’t sort of just look at accommodating distributed generation only through singular interconnection upgrades.

So I think that there’s like the main reasons to move away from this traditional cost causer pays are one, it’s not really accurate in terms of like who’s causing the cost. And so that creates a lot of inequities and also it’s just not enabling us to be efficient and designing the grid the best way for these types of resources. And then in states where you have like specific carbon reduction or clean energy targets, the distributed energy resource developer or customer is contributing an important element to achieving the state’s goals and the costs maybe need to be considered in that context as well in terms of whether they should pay for the whole upgrade.

So an additional thing that plays into this is that we all, we talk about grid upgrades as one separate thing and then we have rates and procurement in a totally separate bucket and we’re starting to adopt things like time of use rates which encourage customers to use power during low periods versus peak periods. And those price signals can also sort of translate to and effect the cost or the need for distribution upgrades. But they’re very siloed right now. So I think we need to sort of also think more progressively about how to integrate or make sure that the prices also reflect the grid constraints or encouraging the behavior we want to deal with the grid constraints. So there’s a lot of different buckets there.

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So you can see some reasons why we don’t really just want anybody to put anything anywhere cuz some of those places just don’t make sense and may be too expensive or there isn’t a need for the power there for example. And because we bifurcate it now there’s that incentive that you might just put projects in places that weren’t economically efficient for the whole but it we, we probably can deal with that in a more nuanced way, right?

So we can get to reasons why one, like I was saying, once we start thinking about electrification and stuff and the costs that are going to go into having to build out a grid, for that it really becomes important to start thinking about this as a public good. I do also think there’s some good equity issues that need to be dealt with in this context. So without getting into the whole net metering arguments, there is some issues associated with individual customers being able to put panels on their rooftop and achieve cost savings from it and then those that can’t participate in it if they were having to pay for those upgrades without getting a direct benefit. But again, there’s ways that we can ensure that all those customers do benefit. I think it is something we need to move towards with this which is spreading those costs largely for an efficiency reason so that we make sure we’re using the grid the best way possible but we need to kind of consider the nuances of who’s actually getting those benefits before we just say every, you can build anything anywhere cuz that could be an expensive way of doing it.

Now I wanna get to my question which is actually more related to where we were around this idea of okay so maybe we don’t want to just pay for everybody’s upgrades to put stuff, like throw stuff onto the grid. It might not be the most, there’s probably more efficient ways to go about that. How do we also wrestle with this tension in the management of the grid system in that energy, the energy grid for so many of us is managed by a private utility whose financial interest is designed in the state laws to be build your rate base by owning more things, build more power lines, upgrade substations, build power plants in the cases where those investor-owned utilities also own power plants. So it’s responsible, as you said a lot, there’s a lot of deference for public regulators in letting these utilities run that interconnection process and yet there’s, in today’s market they’re almost responsible for connecting their competitors. So I guess I’m kind of curious like do you see situations in which utilities can potentially abuse that role of being in charge of connecting projects to the grid and how do we deal with that?

But even if we tell utilities well why don’t we rate base those upgrades, that doesn’t always bring them on board to creating a more efficient interconnection process. And I think that’s partly cuz they may also have other tensions with wanting to own the generation and a lot of electric engineers that work for utilities aren’t raised in a culture of innovation or trying to make things better. They really see themselves as like protecting the grid, which is super important and I don’t wanna under at all say that that’s not what they should be doing, but there’s ways of doing that that also are sort of embracing the other goals that we have, particularly dealing with climate change. But the other, you know, clean air benefits and other things, the engineering departments aren’t very often given that as an incentive for them to create a process that makes more sense.

So I do think that the role of the utility here cannot be understated and I do believe that regulators in particular aren’t appreciating how critical this gatekeeping function is. They’ll go and spend a ton of time on developing really cool procurement programs for community solar and so on and they may reject the utilities proposals in that context and set a rate that they feel comfortable with. But then you see that the utility, if they don’t like that those programs, they have an opportunity to slow those projects down through the interconnection process if the regulator isn’t also overseeing that process really carefully. So I do think in my work before commissions in interconnection proceedings, what I would like commissions to do is take that regulatory role way more seriously in the interconnection context, recognizing that these are where we’re talking about monopoly utilities, that customers have no other option. It’s not like, man this utility’s interconnection process is super slow. I’m gonna go shop around, I’m gonna go to Amazon instead to Walmart or whatever your options are. You have only one pathway and we need to recognize that utilities aren’t entirely incented to facilitate that connection.

How do we deal with that? I think the very first and most important step is just bringing so much more transparency into the interconnection process. Most states require absolutely no reporting on how long the interconnection process is taking. They don’t require the utilities to publish their technical standards, they don’t have any visibility into what’s being charged for interconnection costs. I think that expression that you know, whatever, sunshine makes things good or whatever is-

And then we’re reviving something that I did for a number of years called Freeing the Grid, which is a partnership with Vote Solar and IREC does the grading on interconnection. So we basically go through a really long list of criteria about, you know, different aspects of the interconnection process and grade how states’s rules are doing on that and the, the point of this is to help states understand which areas to pay attention to. I will say that we’ve, as we’ve been doing this project, interconnection rules are so detailed and nuanced these days that it’s a little tricky to like without having like 700 grading criteria to really get at all the important nuances there. But it’s a way to signal what’s important and what states really should reopen their proceedings and start taking a look.

And I’m glad that we’re redoing Freeing the Grid because the one thing’s so clear is that interconnection is not something that you can just do and then leave on the shelf for 10 years. I mean that and that is what some states have done. It’s something you kind of gotta revisit all the time now as things get more complicated and we wanna make sure that states understand what innovations are coming out and what they should be doing as these evolutions evolve.

And then I’ll mention one last one, IREC just is right at the end of a three year project that was funded by the Department of Energy, we call it the BATRIES project, it was focused on how to improve the interconnection process specifically for energy storage and we partnered with a number of different solar and utilities and Electric Power Research Institute to develop a report called the BATRIES Toolkit that has specific guidelines to interconnection rules on what you need to do to integrate energy storage. And then we’ve done a ton of webinars and trainings on those and those are available on IREC’s website.

But we, what California did in this again started out of their distributed resource plan proceeding, which I think started in 2015, now is the state adopted really the first comprehensive hosting capacity analysis called the integration capacity analysis of sort the ICA in California and other states have adopted hosting capacity analysis since, but California’s really stands out still because it provides a 576 hour look which means a 24 hour minimum and maximum load profile for each of the 12 months of the year that show what the hosting capacity is. But it’s not just what the hosting capacity generically is, it all shows, shows you it. What’s the thermal limit, what’s the, for each hour you get a specific for each of the different technical criteria, thermal value protection et cetera. And that information is published on a publicly available website and you can download all of those detailed data. So where am I going with this? So that foundation of having a publicly accessible, transparent and quite detailed hosting capacity analysis means that a customer can go to a particular site on the grid where they wanna build a project and they can download and essentially create a, what we call a hosting capacity or an ICA profile which shows for each month a 24 hour profile of what hours you can produce at different amounts without violating those different criteria.

So following from that, the next step that we’re working on is enabling customers to propose projects that match that profile and we call that profile the limited generation profile. The idea is that projects would essentially be agreeing to curtail their project during certain hours and be able to produce more in other hours and it varies both by hours of the day and months of the year or the profile does. One of the debates we’re having in California is how nuanced, how if you’re just gonna be allowed to do a monthly profile or if you can also do a 24 hour profile, but the reason this is like such an incredibly important idea and it goes back to a number of the things I’ve talked about so far, which is let’s try to do this a lot more efficiently and what we’ve been by treating every project as though it just generates 24 hours a day at its peak capacity is both not how projects actually operate but also it just assumes that you have to upgrade the grid for hours when people aren’t operating and also for hours when the energy isn’t needed.

Now that we have rate structures, so time of use structures or different procurement programs and especially in California where you have a really significant quote duck curve and really significant seasonal differences, it’s gonna allow us to let projects propose basically to provide energy during the times when it’s needed, which also typically corresponds to when there are not grid constraints and to curtail when the power is not needed aka when there are grid constraints. That’s the concept we are deep in the weeds on whether and how the commission’s going to allow that process and all of the specifics about what happens if conditions change on the grid later and who should bear certain types of costs associated with this.

So it’s a really important proceeding and really innovative. The other thing that’s different about this than the what we call what’s being referred to as flexible interconnection is that the projects are basically proposing a fixed schedule that’s based, that matches the profile for the hosting capacity and they’ll use certified power control systems likely or other accepted devices to control when the power goes on to the grid. It doesn’t require a communication system necessarily or signals from the utility. The next or a slightly different way of doing that is to create a more communications based system where the utility actually sends curtailment signals but that’s not what California’s pursuing at this time and that that can be really valuable. That’s also super complicated and requires the communications network essentially that doesn’t exist in most places. So that’s how it’s sort of slightly different from what people refer to as flexible interconnection but it’s building off of the hosting capacity analysis.

A lot of people in the development space, clean energy world, they kind of know like interconnection might be important but they can’t name anything in particular about it. So we’ve been been talking about doing like a challenge where everybody who cares about clean energy development should have to name three things about the interconnection process that are important or that need to be improved and we’re talking about what resources we should develop to help build that understanding. And then I think also people need to understand that it is really complicated and really nuanced and we wanna build processes that make it a little less like that. But I think sometimes the risk is that people do oversimplify this and what we need to encourage commissions and parties to do is take the time to really pay attention to the details and dig into those which is admittedly hard to do and not everybody should have to do that. But we do need people to understand some basics about why interconnection matters and what are the key hurdles.

But I think it also is what’s happening is that people are paying only at attention to that issue and I think it’s really important to recognize there are a lot of reasons to pay a lot of attention to distributed grid issues generally and interconnection in particular. One is, you know, I think it’s dangerous to put all your eggs in one basket with this in this context that building all of that transmission as we know and this is why everybody’s focusing on focusing on it is going to be hard and it’s probably gonna take a long time and if we’re gonna meet our clean energy goals and because of the importance of electrification and how that all is gonna be happening down at the distribution system level, we need to really make sure we’re capitalizing on the opportunity for that generation to be served locally and it’s way more, it’s way faster and way more efficient to do distribution system upgrades than it is to do massive transmission build out.

And so I think putting attention into both of those issues, the policy development can compliment each other a lot of times what works at the transmission system may also work at distribution and so on. I also think just that idea that one of the real political motivations around supporting clean energy is when people get to interact with it and have a good relationship with it. So we want to continue to allow customers to see direct cost savings on their bill from a net meter system or to participate in a community solar program and those are distributed scale programs and they, they’re important for building like popular support for solar and helping people really understand it in a more local and direct way.

And then finally there’s a number of studies that have been done that that look at how do we get to our one hundred percent clean energy future and in those studies, distributed generation is a critical piece of it. It’s not like we can do this just all on the bulk system. We absolutely need to do distributed scale generation and especially energy storage and the interactions with that. So let’s really focus on getting that transmission built out but let’s not do that instead of focusing on distributed generation.

Where I’m going with this question is if you could wave a magic wand and just say, hey interconnection is now gonna be handled by an independent entity that’s separate from the utility and has separate interests, is that what you would wave the magic wand to do in order to like address interconnection or would you actually rather just like give every commission the like backbone and motivation to really dive into it? Like where would you wave your magic wand in terms of interconnection if you wanted to really get to the core underlying issues that make it complicated and make it challenging to address and solve?

But in the meantime we have so many near term issues that we have to deal with and it’s hard to like dual track those <laugh>, you know, at the same time. And that I think is one of the big problems in this space is that with interconnection people are always facing like so many, I can’t get this project done tomorrow, my whole business is gonna go away, that we’re not able to look out ahead. And that is one of the things that IREC tries to do is to, is to really look at those longer range ideas. I think separate from having a totally independent entity that would facilitate the interconnection process and essentially operate the grid or have all the necessary information from that, I think more exploration does need to be done into really what the utilities incentives are. I’m not a huge advocate of basic idea of performance-based incentives, not because I’m worried that interconnection is quite nuanced and hard to create the right incentives that can’t be manipulated, but the idea behind it is something they strongly support. So I do think that if regulators are naive about the underlying incentives or ignoring them that we’re never gonna get this on the right track.

And I think one little example I want to use about this is recently in a couple states in Minnesota, your home state, and this just came up in a workshop on Wednesday in California, utilities don’t think about interconnection customers as their customers. They literally often say those aren’t our customers. And in some cases they literally are the very same customer as their rate payers. They’re if you know, if John puts solar on his roof, he is the same customer who’s going to be using that billing like you are one and the same person. Even if you’re talking about large scale development though, the idea that they don’t treat developers building projects as customers really says a lot about what we’re trying, what we have to overcome here because they’re the ones who have to provide the permission. If they’re saying they’re not our priority, we are not responsible for making a good experience for them, then I think regulators need to recognize that and say, well maybe somebody else should be doing that then if the utility’s not going to actually treat them and have a responsibility for creating a good experience and doesn’t wanna do that, then somebody else should be responsible for that.