Summary
On March 29, 2024, the California Independent System Operator (CAISO) released the Track 2 final proposal for its Interconnection Process Enhancements (IPE) initiative. The proposed changes in the IPE proposal aim to address the “unprecedented and unsustainable interconnection request volumes” in the CAISO. CAISO proposes to adopt a zonal approach that prioritizes project interconnection in areas with existing or planned transmission capacity, to cap the number of projects permitted to proceed into the study process at 150% of the available and planned transmission capacity in specific zones, and adopt scoring criteria for eligibility and prioritization in the interconnection study process.
Background
The IPE initiative commenced in March 2023, and aims to reduce the number of projects backlogged in the interconnection queue and coordinate resource procurement, interconnection, resource planning, and transmission planning. The IPE initiative is divided into three tracks. Track 1 addressed modifications to the Clusters 14 and 15 study schedules. The Track 1 tariff changes extended the interconnection study deadlines for Cluster 14 and paused Cluster 15 pending completion of Cluster 14 studies.[1] Track 2 focuses on modifications to the interconnection and queue management processes. Track 3 will address deliverability allocation procedures. The revised interconnection procedures in Track 2 will prioritize interconnection requests in priority zones where transmission capacity exists or has been approved for development. The proposal also focuses on resource development by attempting to align the interconnection of resources with certain operational characteristics in geographic locations based on resource plans approved by the California Energy Commission (CEC), California Public Utilities Commission (CPUC), and other local regulatory authorities.
Zonal Approach
One of the central tenets of CAISO’s proposal is the zonal approach, which prioritizes projects that seek to utilize available capacity and are in zones where there are planned transmission capacity additions approved in the CAISO transmission planning process. Within the zones identified in the CAISO transmission plan, CAISO will identify interconnection area constraint zones and map constraints with transmission plan deliverability allocations. Interconnection customers may utilize this information to identify available interconnection capability at various points of interconnection. CAISO proposes to cap each study group to 150% of the available and planned transmission capacity in each identified zone. CAISO will continue to provide a merchant option for projects that seek to interconnect where no transmission exists or has been approved whereby the interconnection customer elects to self-fund the necessary transmission upgrades.
Scoring Criteria
CAISO has developed heightened requirements to complete an interconnection request that necessitates a greater level of project readiness to advance to the interconnection study process. In addition to the new readiness requirements required in FERC Order No. 2023,[2] CAISO proposes specific criteria to score and prioritize interconnection requests. The main criteria are commercial interest, project viability, and system need. Commercial interest evaluations will incorporate preliminary, non-binding feedback on specific projects from load-serving entities (LSEs). Commercial entities and other non-LSEs will also have an opportunity to express interest in specific projects. CAISO has also proposed a clearing auction mechanism for any necessary “tiebreakers” under the scoring system and to meet the proposed 150% cap on each interconnection study group. Interconnection customers will be required to submit a self-assessment scoresheet with their interconnection request as well as documentation supporting their score.
Time in Queue Requirement
CAISO will also require all projects in the queue to demonstrate commercial viability to remain in queue beyond seven years, regardless of deliverability status. CAISO will require all projects in the queue to meet the commercial viability criteria established by a “time in queue requirement.” To demonstrate continued commercial viability in the queue an interconnection customer may provide proof of one or more executed power purchase agreements, a third interconnection financial security or generator interconnection agreement deposit, demonstrate site control for 100% of the property necessary to construct the facility, demonstrate good standing pursuant to an executed generator interconnection agreement, or provide a detailed report that includes progression of generator interconnection agreement milestones, engineering and design of the facility, the status of major equipment, and other construction activities. The time in queue requirement will apply to all projects currently in the queue through Cluster 14. All projects in Cluster 15 or later will be required to meet commercial viability criteria when they are in the queue five years from the interconnection facilities study. Pursuant to this requirement, projects must demonstrate annually that their commercial viability remains valid. This requirement is intended to refresh the existing queue and will not apply to new interconnection requests until 5 years from interconnection facilities study. Failure to meet these requirements will result in withdrawal of the interconnection request.
Timing and Implementation
The final proposal will be presented at the CAISO Board of Governors Meeting and filed for approval at FERC in May 2024. Additionally, the IPE process is running parallel with FERC Order No. 2023 compliance. CAISO intends to propose that Clusters 14 and earlier generally remain subject to the existing interconnection procedures, and Clusters 15 and beyond will be subject to a new set of interconnection process enhancements and Order No. 2023 reforms. CAISO plans to allow Cluster 15 interconnection customers to modify their pending interconnection requests to comply with the new reforms by December 1, 2024. Between January and May 2025, CAISO will apply the interconnection process enhancements criteria to determine with interconnection requests are eligible to move forward to validation and proceed into the interconnection study process. Lastly, CAISO received approval from FERC on March 29, 2024, to forgo a new interconnection request window for Cluster 16 in 2024. CAISO will propose a date for the next interconnection application window in its Order No. 2023 compliance filing.
[1] The Federal Energy Regulatory Commission approved CAISO’s tariff changes on August 1, 2023 in Docket No. ER23-1028-000.
[2] In July 2023, the FERC issued Order No. 2023, the largest overhaul of interconnection procedures in the last 20 years. For a summary of Order No. 2023, please see: FERC issues Final Rule on Improvements to Generator Interconnection Procedures and Agreements | Renewable + Law (lawofrenewableenergy.com). Order No. 2023 reforms are considered beyond the scope of this initiative.
