the PPA Market

PJM interconnection queue reform moves ahead with FERC’s approval

The Federal Energy Regulatory Commission (FERC) approved PJM’s interconnection reform filing at the end of November. This decision will cause significant delays in project development in the mid-Atlantic region in the near term, hopefully in exchange for faster development timelines long-term. FERC concluded that the proposed “first ready, first served” clustered study approach and transition mechanism to the new scheme are just and reasonable. FERC concurred with PJM, finding that the upcoming reform should reduce current study backlog more quickly than under current rules and will be more efficient going forward.

The reform is widely supported by PJM stakeholders, as PJM’s interconnection queue has nearly tripled over the past four years alone, with the majority of new service requests being wind, solar, storage, or a combination thereof. FERC’s approval is contingent upon two compliance filings, as well as report submissions detailing progress made during the transition period.

There are two timeframes for moving projects forward in PJM: a ‘fast track,’ and a slower track. Assets projected to have minor upgrade costs and low grid impact will be ‘fast-tracked’ and studied while the larger reform process is under way. The majority of new interconnection requests will not be reviewed by the grid operator until 2026, pushing out approvals to at least 2027. In some cases, new interconnection requests can be processed prior to 2026 if they do not require further studies and have no network upgrade cost allocation. Some renewable developers active in the region have communicated that there will be development delays given the transition timeline, while others have refrained from marketing their PJM portfolio until there is further clarity.

For renewable buyers who have near-term greenhouse gas reduction targets or sustainability goals, a thorough evaluation of interconnection status will be critical to quantify the associated development risk. As is the case with most deregulated wholesale markets, mature PJM development assets have been in demand for some time and are hard to come by. The transition phase is expected to be implemented in early 2023, with further detail on timing still to come.