It’s long been known that the existing power grid was designed for one-way operation.

That, and that its modernization with distributed energy resources would incur costs somewhere for somebody (setting aside the benefits of integrating them into the system).

A new report from DOE’s Lawrence Berkeley National Laboratory regarding PJM territory interconnection costs includes plenty of insights into this. Here’s a few selections:

  • From 2000 to 2016, only 27% of projects requesting interconnection achieved commercial operation by year-end 2021. 
  • Wind and solar developers saw much higher average connection charges from 2019-2022 than over the last two decades. 
  • Natural gas plants were less costly to interconnect than renewables.
  • Not surprisingly, costs decline as project size increases, with the most marked step-decline seen with largest-scale projects. 
  • Interconnection costs in the eastern PJM states were markedly higher than in western states. 

Project applications are forced into an economic efficiency funnel that some don’t emerge from:

  • “Costs for active and withdrawn storage and solar hybrid projects are surprisingly high ($337/kW), but complete projects are much cheaper (storage: $4/kW, solar hybrid $20/kW).” 
  • Among withdrawn solar projects, interconnection counted for 36% of total project costs, and 19% for withdrawn onshore wind applications. 

So with only about one quarter of projects seeking IX coming to fruition, how do we interpret this? 

Developers will give projects a go, but the accompanying costs of upgrading the power grid are often assigned to that specific project creating the upgrade cost. 

If the IX costs make a project uneconomic, they’re generally abandoned. 

My guess is that the main reasons for cost outliers are not due to companies’ padding their margins with rent-seeking behavior. 

Huge costs are likely due to a combination of 1) adverse property conditions on which a project was sought, like unique sites with crazy geo-tech features; and 2) remoteness from transmission/distribution spans with adequate existing hosting capacity. 

These are substantive commercial generation projects connecting directly to the transmission system. 

At more local levels, smaller renewables projects hosted on customer properties will be instead dealing with utilities. As before, interconnection costs are often assigned to customers based on causation. 

Take as an example a street with half the houses covered in solar PV. It’ll be that last house getting solar that triggers a need for a new transformer to be placed on the feeder circuit. And it’ll be only that project whose utility IX costs are tripled as a result. If the customer bears them, they’re all but guaranteed to drop the uneconomic project. 

A general takeaway with no surprises here…

A power grid built from scratch would likely accommodate clean energy additions more affordably than the power grid most of us have – where the needed engineering improvements must be shoe-horned into it, piecemeal over time.