California has led the nation on a key environmental issue once again.
In this case, the Federal Energy Regulation Commission (FERC) adopted key aspects of California’s new interconnection rules for small wholesale energy projects like solar and small hydro. The fast track process is a dramatically cheaper and faster interconnection process for qualifying small projects, so this change represents a major improvement with nationwide impacts.
FERC adopted a number of changes in the Small Generator Interconnection Procedures (SGIP), three of which I’ll focus on here: 1) Utilities must provide a $300 pre-application report to requesting parties, which includes important information for judging the cost and feasibility of interconnection of the site at issue; 2) Increasing the minimum project size for fast-track eligibility from 2 megawatts up to 5 megawatts; 3) Changing the 50 percent minimum load rule to 100 percent, which effectively doubles the size of projects that are eligible for the fast track.
All of these changes were first adopted by California in its interconnection reform process for the state-jurisdictional Rule 21 procedure in 2011 and 2012. I was heavily involved, as co-lead, in this reform process in California on behalf of my client, the Clean Coalition. We wrote much of the language that was adopted in the requirements for the pre-application report and also influenced many other features of these reforms in what became a lengthy settlement process.
The Clean Coalition was also active in the FERC reform process, and we were very happy to see FERC adopt California’s new rules almost unchanged. Kudos also goes to the Interstate Renewable Energy Council (IREC) and the Solar Energy Industries Association (SEIA) in these efforts.
So what do these changes mean? Let’s go through each of the three major changes one by one.
Pre-application report
The new $300 report allows developers to obtain the following information if it is “readily available” to the relevant utility:
- Total capacity and available capacity of the facilities that serve the point of interconnection
- Existing and queued generation at the facilities likely serving the point of interconnection
- Voltage of the facilities that serve the point of interconnection
- Circuit distance between the proposed point of interconnection and the substation likely to serve the point of Interconnection
- Number and rating of protective devices, as well as number and type of voltage-regulating devices between the proposed point of interconnection and the substation
- Number of phases available at the proposed point of interconnection
- Limiting conductor ratings from the proposed point of interconnection to the substation
- Peak and minimum load data
- Existing or known constraints associated with the point of interconnection
These combined data give the developer a pretty good idea of the feasibility and cost of interconnecting under fast track or other procedures because the costs of interconnecting under fast track are generally fixed. For example, in California, the interconnection request fee, which includes the initial review, is $800. Supplemental review is $2,500. These fees are far lower than the $50,000 plus $1,000 per megawatt study fee under the default cluster study process, for example.
The benefit of the new pre-application report option is to provide a very low cost tool for developers to figure out if a site is suitable for their project. Previously, developers would have to submit an interconnection request and go through the process to find out. Reports from developers in California indicate that, so far, the new pre-application report option is working quite well.
Increase fast-track eligibility from 2 megawatts to 5 megawatts
FERC increased fast-track eligibility to 5 megawatts, based on the proximity to substations and line size, as described in the table below. This is also a major improvement, particularly when we consider the change discussed in the next section. The eligibility threshold changes adopted by FERC are in fact better than those adopted by California (which allows up to only 3 megawatts), so the reform process is an ongoing dance of reforms between the state and federal levels. It is likely that California will adopt the table below before too long.
Change minimum load screen from 50 percent to 100 percent
Under the former interconnection procedure, “Screen 2” was the bane of fast track applicants’ efforts to interconnect.
Screen 2 required that a project not exceed 15 percent of the peak load on the line section at issue. A line section is the next size down from the circuit level, which itself is the next structure down from the substation level. The 15 percent rule was adopted as an approximation of 50 percent of the minimum load on the line section. “Load” refers to how much power is being drawn by customers.
The idea behind this rule was that in order to avoid backflow above the line section at issue, utilities should play it safe and limit the interconnection size of projects that feed power back onto the grid to half of the minimum load.
In practice, this meant a line section that saw only 1 megawatt of minimum load at, say, 2 a.m. could interconnect 500 kilowatts under Screen 2. California regulators, utilities and stakeholders agreed that this rule could be relaxed a bit. The California Public Utilities Commission (CPUC), which regulates utilities and state-jurisdictional interconnection procedures under Rule 21, agreed to adopt a 100 percent minimum load rule instead of the 50 percent rule as part of the new supplemental review procedure.
In effect, this change allows projects at least twice as large as before to interconnect under fast track. Combined with the change to the 2-megawatt size threshold limitation, developers can now interconnect projects up to 5 megawatts in far more situations than previously possible. It wasn’t enough to simply allow up to 5 megawatts under the size threshold if a project would then be rejected for failing to meet the minimum load screen. Good for FERC for recognizing this.
The new reforms in action
I have had the pleasure of being the first to successfully navigate California’s new Rule 21 fast track process. My client, the Blue Sky Sustainable Ranch, located in the Cuyama Valley in northern Santa Barbara County, obtained interconnection permission from PG&E for 1 megawatt and 1.5 megawatts under the new Rule 21 fast track in late 2013.
Without the reforms that the CPUC implemented in early 2012, we would not have been able to gain this permission, because we would have exceeded the 15 percent maximum load rule even with much smaller projects.
The renewables revolution is ramping up in California and around the country. Regulators like the California Public Utilities Commission and FERC will need to be vigilant in order to keep ahead of the curve on issues like interconnection.
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Tam Hunt is owner of Community Renewable Solutions, a consultancy and law firm specializing in community-scale renewables. Community Renewable Solutions can help developers navigate this complicated field and provide other development advice relating to interconnection, net metering, procurement and land use.