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Farmland Solar Policy Design Toolkit

Interconnection

Topics

Understanding Grid Interconnection Policies

Utility interconnection refers to the process of connecting a new solar array to the existing electric grid.

Grid interconnection rules are essential for ensuring electric reliability, but can be costly and complicated. 

Depending on whether a new solar array connects to the transmission grid or the distribution grid, federal, regional, state, and utility-specific rules and fees may apply to the interconnection process. The interconnection of solar arrays remains a significant regulatory issue because of the technical and procedural requirements needed to safely, reliably and efficiently interconnect a new solar array.

Federal Authority over Interconnection

At the federal level, the Federal Energy Regulatory Commission (FERC) has broad authority over all wholesale sales of electricity and over interconnection of new energy generators to the transmission grid. FERC has issued several orders governing interconnection procedures for new electricity generators under its jurisdiction. FERC Order 2003 established a procedure to standardize the interconnection process for large electric generators, greater than 20 MW. The standardized interconnection procedures and agreements for large generators include studies conducted by the transmission provider, which FERC uses to evaluate the request to interconnect, and standardized requirements covering frequency, voltage, and other power standards.

FERC has also addressed interconnection procedures for small generators under 20 MW, initially in Order 2006, which also included a streamlined process for generating facilities with capacity less than 2 MW. In 2013, FERC responded to a rapid increase in small-scale, distributed solar deployment with Order 792, allowing certain inverter-based interconnections up to 5 MW to qualify for a streamlined “fast-track.” Eligibility to apply “for the fast-track interconnection process is based on the generator type and size, and the line voltage and type at the point of interconnection.”

While the interconnection rules developed by FERC legally only apply to projects under FERC jurisdiction, several states have used the FERC rules as a model in designing rules governing interconnection to the distribution grid.

The North American Electric Reliability Corporation (NERC) is designated by FERC as the nation’s Electric Reliability Organization (ERO), meaning that NERC establishes nationwide grid maintenance and testing standards for transmission, generation, load shedding, and other technical requirements.  Ultimately, NERC ensures the reliability of the North American “bulk electric system.”

 While FERC and NERC set national interconnection and reliability standards, the United States has not developed a single, unified set of interconnection requirements for connection to the distribution grid.

It is important to distinguish between state and federal jurisdiction for solar array interconnections. If a solar array interconnects to the distribution grid with an electric utility exclusively making retail sales, it does not fall under FERC jurisdiction and is subject to state interconnection rules.

State Authority over Interconnection

States have the authority to create and implement interconnection policies for generation facilities that fall under state jurisdiction, including solar arrays connecting to the distribution grid.

Public utility commissions are often tasked with establishing rules for interconnection of new solar arrays to the distribution grid, but specific requirements are often left up to the individual interconnecting utility.

Some states allow smaller projects to qualify for an expedited interconnection process, while requiring larger projects to go through more comprehensive review, which often includes paying for an interconnection study. Some state interconnection rules only apply to net metered systems, and many state standards apply only to investor-owned utilities—not to municipal utilities or electric cooperatives. Where rules have not been established by law, the interconnecting utility is in charge of the interconnection process.

Interconnection Agreements

Any generator that proposes to connect to a local electric utility’s distribution system must comply with the utility’s tariff for interconnections and enter into an interconnection agreement.

Utilities may require the same interconnection procedures for small systems and large independent power production facilities, and charge for system studies, upgrades, and miscellaneous interconnection fees that greatly reduce the financial feasibility of smaller-scale solar arrays.

In the process of developing standard interconnection procedures, states may choose to adopt a standard interconnection agreement as well, in order to assure equal legal treatment of solar and other distributed renewable energy installations across different utility service territories in the same state.

Hosting Capacity

A utility must ensure that interconnecting a new solar array to a distribution system does not negatively impact electric power quality or reliability for customers, like voltage deviations or violations of electrical safety limits. Hosting capacity refers to the aggregate solar capacity (and other distributed energy resource capacity) that can be interconnected to a distribution system without requiring system-infrastructure upgrades. When upgrades are required, the costs may be added onto the cost of the proposed solar development. 

Additional References
  1. FERC Order No. 2003, Standardization of Generator Interconnection Agreements and Procedures, 68 Fed. Reg. 49,846 (Aug. 19, 2003) (codified at 18 C.F.R. pt. 35). Since issuing Order 2003, FERC has revised the large generator interconnection procedures several times. The history of revisions and current rules can be found at https://www.ferc.gov/industries/electric/indus-act/gi/stnd-gen/LGIP-procedures.pdf
  2. FERC recently reformed procedures in Order 845. FERC Order No. 845, 163 FERC ¶ 61,043, Reform of Generator Interconnection Procedures and Agreements (April 19, 2018) (codified at 18 C.F.R. pt. 37).
  3. FERC Order No. 2006, Standardization of Small Generator Interconnection Agreements and Procedures, 68 Fed. Reg. 49,846 (May 12, 2005) (codified at 18 C.F.R. pt. 35).
  4. FERC Order No. 792, Small Generator Interconnection Agreements and Procedures (Nov. 22, 2013) (codified at 18 C.F.R. pt. 35). The small generator procedures were revised in several subsequent orders. This history of revisions and current rules can be found at https://www.ferc.gov/industries/electric/indus-act/gi/small-gen/sm-gen-procedures.pdf.
  5. Ilya Chernyakhovskiy, et al., U.S. Laws and Regulations for Renewable Energy Grid Interconnection, National Renewable Energy Laboratory, 2016, at 14 (https://www.nrel.gov/docs/fy16osti/66724.pdf)
  6. If a solar array is a wholesale power generation facility intended to be interconnected electrically to the transmission or distribution system operated by a local electric utility on behalf of the power region, the facility must enter into an interconnection agreement that has been approved by the Federal Energy Regulatory Commission (FERC) as part of a tariff filing of the utility or as part of the overall tariff documents approved by a regional transmission organization (RTO) or an independent system operator. These projects are outside the scope of this report.
  7. Fred Beck & Eric Martinot, Renewable Energy Policies and Barriers, Academic Press/Elsevier (2004), Science (http://biblioteca.cejamericas.org/bitstream/handle/2015/3308/Renewable_Energy_Policies_and_Barriers.pdf?sequence=1&isAllowed=y).
  8. McAllister, Richard, David Manning, Lori Bird, Michael Coddington, and Christina Volpi. 2019. New Approaches to Distributed PV Interconnection: Implementation Considerations for Addressing Emerging Issues. Golden, CO: National Renewable Energy Laboratory (https://www.nrel.gov/docs/fy19osti/72038.pdf).

How do Interconnection Policies affect Farmland?

While many concerns about grid interconnection are not limited to farmland solar arrays, policymakers hoping to establish smart farmland solar policy should seek to streamline and improve interconnection rules. Current rules create project approval delays and increase project costs, particularly for rural solar development.

Project Delays

One of the issues with connecting new solar arrays to the grid is the delay between submission of an interconnection application to a utility and receipt of the utility’s permission to operate. It can take a long time to complete required electrical interconnection studies and analyses on system impacts for proposed solar arrays. Using data from more than 30,000 solar arrays installed between 2012 and 2014, the National Renewable Energy Laboratory found that the median interconnection approval time for residential arrays (up to 10 kilowatts) was 52 days, and small commercial arrays (between 10 and 50 kilowatts) took 63 days to obtain approval. Policymakers should strive to ensure that needed renewable energy resources and those that support farm viability are not unreasonably delayed in obtaining interconnection approval.

Increased Costs and Fees

In addition to time delays, solar arrays sited on farmland, like other solar arrays, may face substantial fees and compliance costs for interconnection. Charges include application fees, engineering fees, and inspection fees for reviewing, for example, the stress a new solar array will add to a neighborhood transformer.

“Individual home or commercial systems connected to utility grids can face burdensome, inconsistent, or unclear utility interconnection requirements. Lack of uniform requirements can add to transaction costs. Safety and power-quality risk from non-utility generation is a legitimate concern of utilities, but a utility may tend to set interconnection requirements that go beyond what is necessary or practical for small producers, in the absence of any incentive to set more reasonable but still technically sound requirements. In turn, the transaction costs of hiring legal and technical experts to understand and comply with interconnection requirements may be significant. Policies that create sound and uniform interconnection standards can reduce interconnection hurdles and costs.”

— - Beck and Martinot, Renewable Energy Policies and Barriers, Academic Press/Elsevier, 2004

Utilities may require the same interconnection procedures for small systems and large independent power production facilities, and may be able to charge for system studies, upgrades, and miscellaneous interconnection fees that greatly reduce the financial feasibility of smaller-scale solar arrays.

Standardized interconnection agreements can expedite this process, removing a barrier to smaller-scale solar development that is more consistent with farmland protection.

States may also choose to adopt a standard interconnection agreement, particularly for smaller-scale arrays that are less likely to burden the distribution grid.

Rural Interconnection Barriers

Agricultural businesses are likely to be located in more rural areas that may be served by radial distribution network with no connection to any other transmission or distribution lines.

This is common for rural lines with isolated electric loads, like farms, and may limit the hosting capacity of the grid or the capacity size of proposed projects.

Additionally, farmers and ranchers are often served by Rural Electric Cooperatives that are usually not subject to standardized state interconnection policies. This means lawmakers must specifically address improvements in interconnection procedures for rural generators and electric cooperatives when considering changes to farmland solar interconnection policies.

Additional References
  1. K. Ardani & C. Davidson & R. Margolis & E. Nobler, NREL, A State-Level Comparison of Processes and Timelines for Distributed Photovoltaic Interconnection in the United States, Jan. 2015 (https://www.nrel.gov/docs/fy15osti/63556.pdf).
  2. Fred Beck & Eric Martinot, Renewable Energy Policies and Barriers, Academic Press/Elsevier (2004), Science http://biblioteca.cejamericas.org/bitstream/handle/2015/3308/Renewable_Energy_Policies_and_Barriers.pdf?sequence=1&isAllowed=y
  3.  Ecofys US, Energy Trust of Oregon, Interconnection Guidebook for Developers of Small Scale Renewable Energy Generation Systems, at 42 (2016). Available at: https://www.energytrust.org/wp-content/uploads/2016/10/100908_Interconnection_Guidebook.pdf
  4. Irene Xiarchos and Brian Vick, Solar Energy Use in U.S. Agriculture – Overview and Policy Issues, United States Department of Agriculture, 2011, at 59.

Smart Farmland Solar Policy Options

→ Specify time limits for interconnection application review.

Effective interconnection rules should specify both the procedural steps that must be taken and also the amount of time allowed for each phase of the process. Timing can be critical to project development success, and delays are likely to arise if procedures do not include specific, reasonable time limits for each step.

For example, Virginia’s net metering law provides, “The electric distribution company shall have 30 days from the date of notification for residential facilities, and 60 days from the date of notification for nonresidential facilities, to determine whether the interconnection requirements have been met.” VA Code Ann. § 56-594(C) (2019).

→ Expedite applications for smaller-scale solar arrays.

States should create simple, transparent interconnection applications for “small generators” (equal to or less than 2 MW), as noted in the FERC Order 2006. If possible, the interconnection application should be combined with a simplified interconnection agreement.

For example, Oregon has established four tiers of interconnection requirements applicable to solar arrays:

  • Tier 1 application process is generally used for arrays 25 kilowatts or less in capacity.
  • Tier 2 application process is generally used for arrays 2 megawatts or less in capacity.
  • Tier 3 application process is generally used for arrays 10 megawatts or less in capacity.
  • Tier 4 application process is for projects 10 megawatts or less in capacity, but which do not meet other requirements of the lower tiers.
  • The public utility must provide separate application form for Tier 1 review and for review under Tiers 2,3 & 4. Further, application fees are capped at $100 for Tier 1 review, $500 for Tier 2 review, and $1000 for review under Tiers 3 and 4.

OAR 860-082-(0045-0060) (2017)​

 

→ Limit fees and reduce interconnection costs for smaller-scale solar arrays.

States should limit application and processing fees for interconnection of smaller-scale projects. This includes limiting overly burdensome administrative requirements, such as obtaining signatures from local code officials, unless necessary.

For example, California’s Rule 21 Tariff, governing interconnection, mandates that customer-generators with solar arrays up to 1 megawatt must pay a pre-approved one-time interconnection fee based on each Investor Owned Utility’s historic interconnection costs. This fee is between $75-$145. Customer-generators with systems greater than 1 megawatt must pay an $800 interconnection fee and must pay for any necessary transmission or distribution system upgrades.

→ Consider Use of a Cost Envelope.

A cost envelope limits a developer’s cost responsibility for upgrades (or modifications) to a certain threshold above a utility’s estimate. Typically, costs are estimated before a developer signs an interconnection agreement, and these estimates generally are made based on a preliminary assessment of the project without a site visit.

For example, in Massachusetts, once a utility has conducted an impact study that includes a cost estimate, a developer can sign an Early Interconnection Service Agreement to limit its liability to 25% above the impact study cost estimate. After the utility produces another cost estimate based on a detailed study, developers only are liable for actual upgrade costs up to 10% more than the detailed study estimate.

MDPU 2009, 14; MDPU 2015, 115; MDPU 2009, 76.

→ Develop Model Interconnection Standards for Rural Electric Cooperatives.

Policymakers should consider developing rules or models for interconnection with rural electric cooperatives to facilitate farmland solar arrays.

For example, the Montana Electric Cooperatives’ Association (MECA) developed and adopted a model Interconnection of Small Customer Generation Facilities policy in 2001, which has been adopted in whole or part by most of the 26 electric cooperatives in Montana, although individual cooperatives may choose to modify the policy.

Additional References
  1. McAllister, Richard, David Manning, Lori Bird, Michael Coddington, and Christina Volpi. 2019. New Approaches to Distributed PV Interconnection: Implementation Considerations for Addressing Emerging Issues. Golden, CO: National Renewable Energy Laboratory. (NREL/TP-6A20-72038. https://www.nrel.gov/docs/fy19osti/72038.pdf).