A Review of United States Energy-only Generator Interconnection Service Policy and Considerations for Reform

Abstract

Grid interconnection has emerged as a significant obstacle to the development of new electricity resources. There is growing interest in energy-only interconnection, which is an interconnection service option meant to allow the interconnection of new generators without ensuring their energy deliverability during all hours through the transmission system to customers. This approach potentially avoids upfront congestion-related transmission upgrades but could increase curtailment risk. Interest in energy-only interconnection is shaped by incomplete understanding of how interconnection policy functions in different jurisdictions, a knowledge gap that makes it difficult to determine how energy-only interconnection might be better used or re-designed. In this paper, we provide a regulatory review of energy-only interconnection in U.S. interconnection policy and practice, identifying jurisdictions in which rules are close to -or farther from- the theoretical concept of energy-only interconnection service. We find that there are wide jurisdictional differences in interconnection study rules and processes. This heterogeneity is driven by differences in resource adequacy designs, real-time transmission operations, and state-level procurement practices. U.S. regulators have preferred local jurisdictional flexibility over federal prescription of interconnection study rules, which also contributes to differences among regions. Such findings raise fundamental questions about whether competition policies in electricity markets should extend beyond spot energy markets and into more prescriptive guidelines around market entry, which are currently impacted by interconnection rules. Controlling thresholds for congestion-related network upgrades can be a barrier to entry, and this paper sheds light on tensions that energy-only interconnection raises in its goal to expedite interconnection of grid resources.