Electricity Markets

Interconnection Costs Have Risen Steeply in MISO: Berkeley Lab Report

The costs to interconnect wind, solar, and storage projects in the Midcontinent Independent System Operator (MISO) region have nearly doubled and, in some cases, nearly tripled over the last 18 years, according to a study by the Lawrence Berkeley National Laboratory.

For projects that have completed all required interconnection studies, average costs for more recent projects have nearly doubled relative to historical costs from 2000 through 2018, and for projects still moving through MISO’s interconnection queue costs have more than tripled over the last four years, the report, Generator Interconnection Cost Analysis in the Midcontinent Independent System Operator (MISO) territory, found.

Specifically, costs averaged $102 per kilowatt (kW) for projects that have completed interconnection studies between 2019 and 2021. Active projects had even higher interconnection costs of $156/kW on average. Withdrawn projects had the highest costs, $452/kW, on average, which was “likely a key driver for those withdrawals,” the report’s authors said.

Irrespective of request status, wind projects had the highest interconnection costs at $399/kW, followed by energy storage at $248/kW, and solar at $209/kW. Natural gas projects were at the lowest end of cost scale at $108/kW.

Wind projects that completed the interconnection study process in 2021 had even higher costs, $252/kW on average, nearly four times the historical average, the report found. And wind projects that ultimately withdrew from the queue had average interconnection costs of $631/kW, equivalent to 40 percent of total project costs.

Even though larger generators have greater interconnection costs in absolute terms, the study found that economies of scale exist on a per kilowatt basis with medium wind and solar projects facing twice the potential interconnection costs of very large wind and solar projects.

Interconnection costs also vary by location, the authors noted. Projects in eastern MISO reported overall lower costs, irrespective of request status – on average $50-$70/kW – than requests in northern MISO and parts of Texas with average costs of $508-$915/kW.  

Projects requiring network upgrades beyond the interconnecting substation explain most of the sharp rise in cost differences, the report found. For instance, among withdrawn projects broader upgrades accounted for an average of $388/kW for recent projects, or 85 percent of total interconnection costs, the authors said.

Berkeley Lab gathered estimated interconnection costs from project-specific MISO interconnection studies, representing nearly 50 percent of all projects requesting interconnection between 2010 to 2020, or 30 percent when going back to 2000.

While the data is “sufficiently robust for detailed analysis,” the authors noted that much data remains unavailable to the public, which “poses a significant information barrier for prospective developers, resulting in a less efficient interconnection process.”

At year-end 2021, MISO had over 160 gigawatts (GW) of generation and storage capacity actively seeking grid interconnection. Most of the projects are solar, 112 GW, followed by wind, 22 GW. MISO’s interconnection queue also has data for 366 GW of withdrawn projects and 62 GW of in-service projects.

MISO’s 2022 generator interconnection queue is set to break those past levels, increasing by 220 percent over 2021 levels, if all project submissions are accepted as valid. If that is the case, MISO’s queue would balloon to 289 GW, with more than 95 percent of the submissions either renewable or energy storage projects, the report said.

The capacity associated with those requests is more than twice as large as MISO’s peak load in recent years of about 120 GW, the report’s authors noted. And, if substantial amounts of those projects are built, they “will likely exert competitive pressure on existing generation,” the authors said, noting, however, that “most projects have historically withdrawn their applications, often in response to high interconnection costs.” Only 24 percent of all projects requesting interconnection between 2000 and 2016 have ultimately achieved commercial operation at the end of 2021, they noted.