Interconnecting to the grid is one of the key hurdles for renewable energy project development. The process can be lengthy, expensive and irksome. Some projects take three or more years to get interconnected, with a price tag of millions of dollars, and it is because of these difficulties that there has been a renewed focus around the country on reforming the interconnection process.
California just enacted a new set of streamlining tools for interconnection that may well become a model for the rest of the country. As is often the case on energy policy, as goes California, so goes the country.
This article will look at what reforms were enacted and how we got here. I represented the Clean Coalition in the regulatory process that led to these reforms over the last six years, working alongside the Clean Coalition’s director of policy Sahm White, so I’ve had a first-hand and direct role in this process throughout these years as we submitted round after round of comments, attended settlement talks and numerous workshops, and did our best to persuade decision-makers in various ex parte meetings
I’m going to describe what was done in the recent reforms and offer some lessons learned in terms of how to be effective in promoting regulatory reform. This article can be considered a modest case study, then, in effective regulatory reform.
Reforming California’s interconnection procedures
The California Public Utilities Commission opened a proceeding in 2011 (R.11-09-011) to consider reforms to the state-jurisdictional interconnection procedure known as Rule 21. Rule 21 codifies the rules that each utility and customer seeking to interconnect must follow for interconnecting new projects to the utility-owned and -operated distribution grid.
The proceeding quickly resulted in a settlement of some key issues between the parties (the big utilities and various intervenors representing consumers, project developers, and environmental interests), and the Phase 1 settlement was approved by the CPUC in 2012.
A key issue, “cost certainty,” was left out of the settlement, however, and scoped for resolution in a second phase of the proceeding. Cost certainty refers to the need to know with more certainty what it will cost a project developer (solar, biomass, wind, etc.) to interconnect to the grid. Until the new reforms were enacted, a project developer could be on the hook at any point after interconnection upgrades were completed for unspecified and potentially very large additional interconnection costs. By enacting new measures to provide additional cost certainty for project developers, these developers could save on financing and insurance costs, and the savings would be passed on to ratepayers.
The second phase was supposed to be expedited -- but little did we know back in 2012 that it would take four more years to resolve these issues. One lesson learned: regulatory reform usually takes a lot longer than you expect or hope that it should. In this case, there were a couple of major staff changes that slowed things down considerably.
The recent CPUC decision (D.16-06-052) included an enhanced preapplication report (PAR) request process, which allows developers to request additional information, for an additional fee, over and above what was previously available. Mostly useful for large net-metered solar systems, the enhanced PAR should provide project developers a great way to identify likely costs and potential issues with their project without spending $15,000 or so on a fast-track application and having to wait six months for the results. The costs for a PAR now vary from $300 to $800 depending on the options selected.
The same decision also enacted a new unit cost guide that will describe the normal component costs for the most common interconnection configurations for solar or other renewable energy projects. While not binding on the utility, the new unit cost guide should provide very useful information about possible costs for common project configurations. It will also be updated each year. The Clean Coalition proposed this new unit cost guide way back in 2011, and it is gratifying to see it finally come to fruition.
Perhaps the most important reform to come out of the recent decision, however, was the new “cost envelope” option for interconnection studies. The envelope refers to the option to receive a binding cost estimate rather than a rough and potentially changing estimate of interconnection costs for a specific project. The cost envelope provides a plus or minus 25 percent binding cost estimate. That is, the developer will be on the hook only for a maximum of 125 percent of the interconnection cost estimate, and the actual costs may come in up to 25 percent lower than the estimate.
Previously, interconnection cost estimates were a “non-binding order-of-magnitude cost estimate,” so this plus or minus 25 percent cost envelope option is a very significant improvement. This new cost envelope is the end result of the last five years of efforts to create more cost certainty for developers seeking to interconnect to the grid.
How the CPUC came to support the cost-envelope approach
A key force for the final decision was energy division staff, including Jamie Ormond (who moved up the food chain to become Commissioner Catherine Sandoval’s legal and water advisor halfway through the proceeding’s second phase), Gabe Petlin, and Marc Monbouquette. But perhaps the biggest credit goes to Commissioner Sandoval herself for sponsoring the alternate proposed decision and spearheading efforts with the other commissioners to gain their unanimous support for the alternate decision. (Sandoval doesn’t take ex parte meetings at all, so we didn’t meet with her or her staff in that manner).
Ormond was the author of the staff report that recommended that the CPUC adopt, at least in part, the cost-envelope approach after some intervenors (the Interstate Renewable Energy Council and the Clean Coalition) had recommended this approach, which emulated in some ways the Massachusetts interconnection model.
The utilities had proposed a different “fixed-price option,” which would apply to a small subset of projects seeking interconnection and in many cases would apply only to the projects that needed the increased cost certainty the least. In other words, only the most straightforward and predictable projects would qualify.
The cost-envelope approach would, to the contrary, apply to a larger swath of projects and, while not as certain as the utilities’ fixed-price option in terms of knowing the exact costs, provide sufficient cost certainty to make it a much-improved option to the status quo. There were also additional unjustified costs and lengthy timelines associated with the utilities’ approach that my client and others didn’t like.
When the proposed decision finally arrived in early 2016, we and many other intervenors were pleased with certain parts of the decision, which adopted the consensus recommendations worked out jointly by the parties on issues like the enhanced PAR process, the unit cost guide, and behind-the-meter energy storage interconnection, but seemed to ignore the record and the staff’s own recommendations by adopting the utilities’ fixed-price option instead of the cost-envelope approach that was supported by almost all of the other parties. We and the Interstate Renewable Energy Council (IREC) were also quite concerned that the proposed decision punted on how interconnection cost overruns would be dealt with: should utility shareholders or ratepayers be on the hook for overruns?
We kicked into high gear when the proposed decision came out, as did other intervenors, and we scheduled various calls and meetings with commissioners and other decision-makers. We also learned that Energy Division staff supported modifications to the proposed decision and continued to support the cost-envelope approach. So we had support both internally and externally for an alternate decision or a substantially modified proposed decision.
In our advocacy, we focused on the fact that over the four years of deliberations, no party other than the utilities had supported the fixed-price option, so it was strange that the proposed decision would adopt that position. At the same time, the proposed decision overlooked much of the record, including the CPUC’s own staff report that was the official beginning of the record on the cost-certainty issue.
In response to the outcry over the proposed decision, Commissioner Sandoval convened an “all-party meeting” to consider criticisms and alternative approaches. All five commissioners attended this meeting. IREC and the Clean Coalition attended and provided strong feedback about the proposed decision, but also offered constructive alternative solutions. We were very happy to hear Commissioner Sandoval’s opinions on key issues, and it was apparent that she was our most important internal ally in enacting strong interconnection reform.
While we did not know the outcome ahead of time, we were pleasantly surprised when Sandoval later released an alternate proposed decision that adopted the cost-envelope approach and even went further in some ways than we and IREC had recommended.
We expressed strong support in our written comments and additional ex parte meetings for the alternate decision. We were also very pleased that the utilities came around to support the alternative, in part due to ongoing discussions between the utilities, the Clean Coalition, IREC and others, about the key issues. Kudos to the utilities for being able to support a different approach and to maintain an open dialogue with intervenors on policy issues.
We were again pleasantly surprised when the commission unanimously approved (5-0) the alternate decision at its June 23 meeting. The decision, sponsored by Sandoval and her staff in the portions that weren’t taken from the previous proposed decision, contains some very far-sighted statements about the need for interconnection reform in order for California to achieve its promise on renewable energy and climate mitigation.
Sandoval wrote in her concurrence to the decision (a document expressing only her views and not those of the other commissioners): “Just as interconnection created competition, choice, and innovation in the telecommunications sector, and was key to the evolution and accessibility of the Internet, so too will this new California interconnection model be pivotal to our state’s ability to turn the electric grid into the backbone of our clean energy future.” Hear, hear.
With this decision California, continues its pioneering leadership on energy reform and climate mitigation. The next steps in continuing this leadership will be to introduce elements of automation in order to further streamline, reduce costs, and speed up the interconnection process, using IT tools that the utilities are already developing.