Average interconnection costs for the Southwest Power Pool are stable for projects that complete all interconnection studies but have escalated sharply for projects that withdraw from the queue, according to a report from Lawrence Berkeley National Laboratory.
The report, Generator Interconnection Cost Analysis in the Southwest Power Pool (SPP) Territory, found that the interconnection costs for projects completed in the 2020-2022 timeframe were largely unchanged at $57 per kilowatt, from completed projects in the 2002-2009 timeframe at $54 per kilowatt.
Projects that withdrew from the interconnection queue, however, saw large cost escalations in the 2010s, from $22 per kilowatt in the 2000s to $247 per kilowatt in the 2010s and $304 per kilowatt in the early 2020s.
Projects still moving through the queue had an average cost of $106 per kilowatt in 2020-2023.
Average costs for withdrawn projects are now five times the costs of completed projects, likely a key driver for those withdrawals, the Berkeley Lab researchers said in the report. They also noted that project-specific interconnection costs in the Southwest Power Pool differ widely due to many factors and do not have the shape of a normal distribution.
The Southwest Power Pool’s queue has ballooned over the past decade, the Berkeley researchers said, noting that the cumulative active queue is now more than five times larger than in 2013, with 2022 additions being nearly three times the size of 2021 requests.
At year-end 2022, the Southwest Power Pool had 109 gigawatts of generation and storage capacity actively seeking grid interconnection, a level of capacity more than twice as large as the power pool's roughly 51-gigawatt peak load in recent years.
Almost all, more than 96 percent, of the capacity in the Southwest Power Pool’s queue is clean energy, including solar and solar hybrids at 51 gigawatts, wind at 35 gigawatts, and standalone storage at 13 gigawatts.
Broader network upgrade costs are the primary driver of recent cost increases, especially for withdrawn projects, the Berkeley researchers found. No costs for upgrades beyond the interconnecting substation were reported in the 2000s, but they have recently increased on average to $23 per kilowatt in the 2020s. For withdrawn projects, network costs grew sharply in the 2010s to $180 per kilowatt and continued to climb for some projects in the 2020s, to $230 per kilowatt.
The report also found that a very small subset of generators seeking interconnection in the Southwest Power Pool face lower network upgrade costs by choosing interconnection services as an energy instead of a capacity resource. However, those project owners of energy resources forfeit preferential treatment during high load hours, cannot participate in the Southwest Power Pool’s resource adequacy market, and may face increased curtailment, the researchers said.
SPP initiated interconnection process reforms in 2009, transitioning to a clustered, “first-ready, first-served” approach and increasing project deposits and readiness criteria; despite these and other reforms, some of which are ongoing, SPP’s active queue interconnection wait times have increased steadily, with the typical project taking nearly six years to reach commercial operations in 2022, the report found.
Another recent report from Lawrence Berkeley said requests to connect clean energy projects to the grid have soared in recent years, leading to longer wait times and backlogs for project developers.
The Southwest Power Pool report is the fourth in a series analyzing interconnection costs in wholesale electricity markets, with prior studies analyzing the Midcontinent Independent System Operator, the PJM Interconnection, and the New York Independent System Operator.
Berkeley Lab is working on a forthcoming study that will analyze ISO New England’s interconnection queue.