California’s ambitious decarbonization goals and the large quantities of new carbon-free resources required to meet them have caused the California Independent System Operator (CAISO) to receive unprecedented numbers of interconnection requests from interested resource developers. The CAISO’s 2023 Interconnection Process Enhancements (IPE) initiative is part of a larger set of foundational framework improvements being coordinated among the California Public Utilities Commission (CPUC), the California Energy Commission (CEC), and the CAISO to help meet California’s energy policy objectives in a timely and efficient manner. The overall strategic direction of these efforts is set forth in a joint Memorandum of Understanding (MOU) signed by the three parties in December 2022.
This IPE initiative builds upon the new requirements established in Federal Energy Regulatory Commission (FERC) Order No. 2023, issued in July of 2023, which sets new standards for interconnection processes around the country. The CAISO intends to complement FERC Order No. 2023 requirements with additional reforms to the interconnection queuing process that aim to leverage the improved coordinated planning resulting from the MOU and help further break down barriers to efficient and timely resource development.
The CAISO’s intent is for the revised interconnection procedures to give greater priority to interconnection requests aligned with Transmission Plan Deliverability (TPD) zones where at least 50 MW of transmission capacity exists or has been approved for development, as well as to cap the number of projects permitted to proceed into the study process at 150% of the available and planned transmission capacity in these zones, and to adopt modified scoring criteria for eligibility and prioritization in the interconnection study process.
Zones where there is less than 50 MW of transmission capacity will be “Merchant Zones.” Project applicants in Merchant Zones will be responsible for funding their own deliverability network upgrades, and will be required to make an additional Commercial Readiness Deposit towards the costs of Area Delivery Network Upgrades (ADNUs).
CAISO believes this will help shape the interconnection queue as the resource development community responds with proposed projects in areas enabled by existing or approved transmission. Additionally, the revised procedures intend to drive resource development with the operational characteristics and in geographic locations consistent with resource planning conducted by the CEC, CPUC, and other local regulatory authorities and the CAISO’s transmission planning.
The CAISO initially set out the 2023 IPE stakeholder process to follow two tracks. Track 1 adjusted the schedules of Clusters 14 and Cluster 15, and addressed the need to postpone the opening of Cluster 16, such that broader reforms could be developed before Cluster 16 opened. Track 2 addresses the development of the broader transformational changes that would apply to Cluster 15 and beyond. As the Track 2 working group and stakeholder process progressed, the CAISO identified in December 2023 the need for a third track to address changes to the Transmission Plan Deliverability (TPD) allocation methodology (Track 3A), as well as additional streamlining initiatives (3B).
In March, 2024, the CAISO released the Track 2 Final Proposal, which advances concepts for significant and transformative improvements to the CAISO’s role in resource planning coordination, transmission planning, interconnection queuing and management, and power procurement. In May, the CAISO issued an addendum to the Track 2 Final Proposal and issued a revised version. The addendum primarily responded to stakeholder comments and provided clarity around the zonal approach, how available transmission capacity will be assessed, and the scoring process including load-serving entities’ (LSEs) new role assigning points to proposed projects in the queue. On June 12, 2024 the CAISO Board of Governors approved the 2023 IPE Track 2 Final Proposal, as clarified in the Final Revised Addendum to the IPE Track 2 Final Proposal.
Following a lengthy and contentious stakeholder process, on August 1, 2024 CAISO filed its proposed tariff language to reform its queue intake process to adapt to the recent dramatically increased levels of interconnection requests for Cluster 15 and beyond, with FERC (Docket ER24-2671). FERC issued an order accepting CAISO’s proposed Tariff revisions (188 FERC ¶ 61,225), effective October 1, 2024. According to CAISO, this will enable the organization to move forward immediately with a fair, open, and transparent process, allowing the most advanced generation projects to move more quickly through the interconnection queue. FERC also approved the CAISO’s new screening process central to this reform that is designed to provide interconnection customers, LSEs, and the CAISO with greater certainty when studies of interconnection applications are complete. The new protocols will ensure that interconnection requests for projects coming into the CAISO during an annual application window will be scored based on commercial interest, project viability, and system need. These projects would be ranked in accordance with their ability to advance the study process, where they would be more fully evaluated.
To address outstanding interconnection issues that were not part of the current round of reforms, another track of enhancements is underway and will focus on deliverability allocations.
Clusters 15 and beyond will be subject to the Track 2 Tariff Amendments and FERC Order No. 2023 reforms. CAISO will allow Cluster 15 interconnection customers to modify their pending interconnection requests to comply with the new reforms by December 1, 2024, including adjusting the point of interconnection (POI) within the projects zone. However, there are still significant challenges that will affect Cluster 15 projects.
First, the zonal approach itself presents significant challenges to Cluster 15 projects. Few if any zones will be designated as TPD zones due to the amount of deliverability that has been allocated to Cluster 14. The CAISO understands that Cluster 14 TPD allocations are likely to reduce the number of Cluster 15 projects that will proceed under the TPD pathway noting that “the proposal is designed to right-size the number of projects advancing to the study process with the amount of available and planned transmission capacity while ensuring sufficient projects in the queue.” (Tariff Amendment to Implement Track 2 of Interconnection Process Enhancements 2023 Initiative, pp. 25-26.) This means that the majority of Cluster 15 projects will likely be in Merchant Zones and will be responsible for funding their own deliverability network upgrades. Although CAISO plans to allow Cluster 15 interconnection customers to modify their pending interconnection requests to comply with the new reforms by December 1, 2024, Cluster 15 projects may only adjust their POI within their designated zone, which will likely be a Merchant Zone.
Second, a particular interconnection point may be identified behind more than one constraint, as some of the constraints are either nested within or overlap other constraints. A project in a TPD zone but behind sub-zonal constraints with insufficient deliverability would not be accepted for study even if they score very high under the scoring rubric and the ADNUs needed to provide deliverability are relatively economic. However, the CAISO stated that it “has been clear about this treatment and has committed to providing information to interconnection customers so they can avoid points of interconnection that have no available transmission capability prior to the Cluster 15 modification window.” (Tariff Amendment to Implement Track 2 of Interconnection Process Enhancements 2023 Initiative, p. 27.)
In conclusion, the CAISO interconnection queue now contains more than three times the capacity expected to achieve California public policy objectives for the next two decades and far exceeds the ability of available and planned transmission to deliver power from all of these projects to customers. The IPE policy initiative and the Track 2 Tariff Amendments seek to right-size the queue and streamline the interconnection process. However, these reforms will likely result in significant barriers for Cluster 15, and potentially Cluster 16, project applicants.
If you have questions or would like to discuss the interconnection process, please contact Avery Lajeunesse or Brian Biering.
