The Value in Patience: The Interconnection Queue Process

       There is no shortage of good quotes concerning the twin notions of patience and perseverance and if you are a land developer trying to navigate an electric utility’s interconnection queue process, you will have plenty of time to familiarize yourself with many of them. A renewable energy developer is free to site and build a solar farm, wind farm, or battery storage facility as soon as they negotiate and acquire the land and access rights and have been granted whatever federal and state permits might be required for such an operation. However, until they have applied to and successfully navigated the relevant utility grid operator’s interconnection process and been granted a Generator Interconnection Agreement, they will not be able to connect their project to that grid thereby denying them a means or market with which to sell the electric power they will generate. While there are many difficult and time-consuming aspects to developing renewable energy projects (siting, permitting and zoning issues, equipment lead times, etc.), the developer has the least control and line of sight as to the interconnection review process. As with many such issues in life, that which you cannot control will usually cause you the most problems.

       This blog post is meant to look at the size and scope of the problems currently existing in the nation’s interconnection queues, the likely near-term future of those queues as developers across the United States continue to site and enter projects as quickly as possible, and what possible approaches or solutions can be found to alleviate what is becoming an intractable problem. This blog is, as always, not meant to judge whether this much generating capacity should be added to the nation’s power supply or whether there are potentially better ways to secure the power and electricity needed by our still growing economy. Instead, for those involved with the planning, development, and siting of these projects this is a necessary discussion to understand the inherent problems and competitive landscape faced and to consider several approaches that could possibly reduce the delays, cost overruns, and likely high failure rate associated with them. Not since at least the decades after World War II has so much federal money been allocated toward domestic infrastructure. It would seem that for the foreseeable future those federal dollars, and the public and private money that inevitably follows, will continue to radically redefine the land acquisition community.

       The interconnection queue is actually a misnomer as it is not actually a single processing line that all developers send their projects through. Rather it is a multi-step process independently run by each electric utility to which a developer must submit their intended project. Once a renewable developer has established some level of site control in their project area, they can submit an application and place a deposit with the utility and start the review process. Once accepted into the interconnection queue the utility will begin a review process and conduct several studies necessary to determine the impact and suitability of the intended project within the utility’s existing grid portfolio. A Feasibility Study will determine on an initial and basic level whether plugging the project into the grid would cause electrical problems and assess whether transmission upgrades are needed to avoid future issues. A System Impact Study is a subsequent and more in-depth review of how the proposed project and the electricity it will generate will affect the existing grid and its current demand needs as well as a review of how it will fit into the projected changes in demand and supply constantly being modelled. A Facilities Study will estimate the costs of equipment, engineering, and construction for any new facilities needed to connect the project to the existing grid. These will include any new transmission wires, towers, substations, or other electrical infrastructure that might be required. If the project is of sufficient scale that it might affect the adjacent or nearby transmission systems, then an Affected System Study might be required to determine its likely impact beyond its immediate region of impact.

       During the interconnection review process there will be communication between the utility and the developer as the former seeks the ability to approve the project and the developer reacts to requests. As proposed projects from other developers further up the queue progress toward approval the developer will have to work with the utility to adapt their project to the evolving needs of the grid. This is a long process full of uncertainty for the developer.

       Where in the United States the intended project is to be located and what type of project is being proposed will play a large part in how long the interconnection review process will take. A battery storage site, smaller in scope and impact, will at current take approximately twenty- four months to work its way through the review process, while a much larger and more impactful utility-scale wind farm will average forty-five months. But these are national averages, and a developer should be mindful of local conditions which might affect the speed of review. South Carolina and Idaho currently have the shortest average queue waits between fifteen and twenty months. By contrast, Minnesota, Florida, and Wisconsin have the longest average queue waits at fifty months or longer.

       Finally, a developer wishing to enter a new project into an interconnection review queue must contend with the recent success of their own industry. Over the last decade, the number of projects being added to the nation’s interconnection queues has risen exponentially. In 2014, there were approximately 400 gigawatts (“GW”) of proposed new capacity waiting in or added to the nation’s queues, but by 2023 that number had risen to just over 2,500 GW. As we all headed into New Years in 2020 that amounted to approximately 2,000 projects of all type, sizes, and locations waiting in the queues. By April of 2024, that number had risen to 11,300 projects. At present, there does not seem to be any reduction in the number of projects being put together by developers and so that number seems set to continue to rise.

       So, what can be done to at least partially alleviate this growing issue? At present, the availability of a virtually endless supply of easily accessible funding would seem to allow developers to continue to do what they have been doing for the past several years. That is, planning as many new projects as land can be acquired for and then applying to enter these projects into the nation’s interconnection queues. Not surprisingly, this will only make the present situation worse as the utilities far from finding efficiencies and best paths forward are having an increasingly difficult time navigating their queues with some going so far as to place temporary moratoriums on further submissions. The question remains, therefore, what can be done beyond the current unworkable status quo to expedite a developer’s ability to bring projects online?

Extending the Reach of Eminent Domain Takings
       Some have called for the extension of the right to take private land for the public good under Eminent Domain principles and the Fifth Amendment’s Takings Clause (For a more in-depth discussion on the general topic of eminent domain takings please see a past blog post – “He Fought the Law…and Won”). No less a figure than Jamie Dimon, the longtime head of Chase Bank, devoted a significant portion of this 2024 Annual Message to Shareholders to his concern that new electric generating power was not being brought through the queues and online fast enough. He referenced factors such as politicians opposed to renewable power, local and national “N.I.M.B.Y.” property owners, and even competing sectors and endeavors employing contrarian experts so as to delay the permitting process for wind, solar, and battery storage projects in the hope that their developers and backers would eventually either gave up, ran out investment availability, or time out the land agreements holding their place in the queue. While the taking of private land for use on behalf of the public need has worked very well elsewhere (primarily in allowing the development of this nation’s pipeline and electric transmission infrastructure) this will likely not be of benefit to the renewable siting process anytime soon. A key element of such Takings is a demonstration showing a need for a particular tract of land meant to serve a public good that cannot be easily or readily acquired by normal means. Every one of the projects currently languishing in the nation’s interconnection queues could not have gained entry to those queues had they not first demonstrated some degree of site access and control. How does one logically argue that a federal condemnation process is necessary when 11,300 projects before yours managed to secure the needed acreage through more normal courses of landowner negotiation and acquisition? I have yet to encounter a situation where a developer fails to find a willing landowner if and when they make a sufficiently reasonable offer.

Permitting Reforms
       The interconnection queue is, after all, a permitting process and so federal efforts to revise and perhaps shorten it would likely have a beneficially effect on the projects currently waiting in the queues. Congress has not been shy about wanting to take on the task of process reform in permitting but has been at loggerheads for the last several sessions as to how best to accomplish this. Democrats have voiced support for faster permitting at the federal level for renewable energy projects and Republicans have been just as forceful in wanting to reform the permitting process for oil & gas projects. It is likely that any permitting reform at the federal level will require easing the path forward for both renewable and fossil fuel projects. I love this idea, but no one elected me to anything and those who have been elected seem stymied for the foreseeable future. Rather than find a path forward to permit both the utility scale wind farm and the interstate pipeline, both sides seem stuck on denying the other a feasible path into existence. The only losers here are the businesses, industries and communities that need cheaper, more readily available electricity and a constant and economic supply of oil and natural gas to serve both as an energy source and a feedstock.

Purists worry that any revisions to the nation’s permitting system would necessarily weaken the nation’s protective environmental regulations, but these arguments tend not to hold much sway as these same existing regulations and intensive processes are hampering the goal of these same individuals to convert the national economy to one not powered by fossil fuels. Representative Bruce Westerman (R-Ark.), chairman of the House Natural Resources Committee, has responded to these groups by arguing, “People might put on a facade about wanting to stand up and protect the foundational environmental laws, but everybody knows that things aren’t happening… we’re not building the decarbonizing infrastructure that they want, and we’re causing energy prices to go higher because of the attack on fossil fuels, so there is a pathway to get to a better place.”

No one wishes for a return to the time when some of our nation’s rivers lit on fire, and no one wants to create pockets wherein elevated rates of cancer affect entire communities, but it is not necessary to entirely gut the existing environmental protection framework in order to revise and reform the federal permitting process. The goal of allowing more projects to reach the final stages of development, construction, and, eventually, generation is a reasonable goal that should be able to find the necessary support.

Commit to the Effort and Pony Up
       Traditionally, one way out of a problem is to buy your way out. At present, the application fees and deposit amounts demanded when a developer seeks to enter a new project into the interconnection queue are not as onerous or dissuading as they could be. The utility rightly understands that many more projects will fail out of the queue than will survive it, and they want to be able to select and support the very best options available to them. Part of the reason for so many potential projects being accepted into the various queues is because the utilities themselves understand that this is a low success venture that relies on a high number of applicants to guarantee sufficient successful projects on the back end. Instead, the financial requirements of these applications could be meaningfully increased so that developers had to choose which of their many projects to focus on and reduce or cut down their others. By forcing developers to only focus on and support their most important and integral projects the overall number of projects in the nation’s interconnection queues would inevitably fall. And from a utility’s point of view, when confronted with the at present Sisyphean task of reviewing and considering all the projects in their queue it would be far easier to have to review a relatively few Ferraris instead of a large number of Fords (I say that with love… I am a huge Mustang fan).

       The current system does nothing to deter developers from placing as much into the queues as possible. By mandating a higher fee and deposit at the outset the utilities could moderate developer behavior likely without meaningfully reducing their options when selecting new projects to approve.

Be Prepared
       That old Boy Scout motto has gotten a lot of mileage, and for good reason. Usually, being prepared prior to entering any given situation is the best method to come out of it successfully. At several points throughout the review process the utility and the developer will communicate and try and find the best path forward for the project. The results of several studies will be shared with the developer, and they will have to accept, react to, or counter their findings. Additional infrastructure such as new substations or transmission lines might be required to approve a project. Can a developer adapt to the need for more land if needed along with its attendant cost? Do their schedules permit additional or extended negotiations with landowners as they seek new acreage for the project? Do their vendors have the sufficient level of expertise needed to maneuver a project into readiness when a utility offers a path forward to approval? Is the developer capable of taking immediate advantage of any opportunities afforded it during the interconnection review process? These, and a hundred other concerns will have to be modelled and prepared for if a developer wishes to meaningfully increase their project’s chances of successfully navigating the interconnection queue process.

Before a project is ever entered into a queue a developer should be preparing to avoid both the known and the unknown perils of that process and be ready to take advantage of any bit of good fortune that may arise. The interconnection queue process is a multi-year journey that only the smartest, most nimble, and most well thought out entities will survive. By understanding what is to come, by preparing both your own internal resources and external vendors to be ready when they are needed, and by properly staging both funding and resources appropriately, a developer will give themselves the best opportunity to gain approval for their project.

       Improving this process will pay massive dividends for all involved. Developers will have a higher success rate when entering projects into a queue and can thereby more easily secure funding at any level needed. Investors can target their funds to where they will have the greatest likelihood of returns. Those employed by both the developers and the utilities will confront less burnout and turnover. Vendors can avoid unnecessary costs and properly marshal their resources where most profitable. And, while this will likely be the subject of a future blog post, American landowners can reduce their frustration with the current acquisition process and the inevitable levels of fatigue it is generating.