Growth in renewable energy requires careful policy reform

Although most people support renewable energy, nearly everyone’s eyes start to glaze over at the mention of regulatory reform in the energy world.  However, energy is a heavily regulated field and seemingly obscure regulatory changes can have massive impacts on the success of renewable energy in California and the rest of the country.  At this moment, a proposal at the California Independent System Operator (CAISO), the organization in charge of California’s transmission grid, would dramatically change how small renewable energy projects connect to transmission, threatening to substantially slow the development of renewable energy.  Even worse, the proposed changes would likely flow into the rules for the distribution grid, and smaller developers would find themselves effectively squeezed out of the renewable energy market.

CAISO is proposing to eliminate the Small Generator Interconnection Procedures (SGIP), which was standardized by the Federal Energy Regulatory Commission (FERC) in 2006 in order to “remove barriers to the development of needed infrastructure by reducing interconnection uncertainty, time and costs” for projects smaller than 20 megawatts (MW).  A 20 MW solar project can power the peak requirements of roughly 20,000 homes.  The SGIP is particularly important in California today, where the State is having trouble meeting its renewable energy goals, and many large-scale renewable projects are being stymied by land use issues, financing challenges, and the decade it takes to build new long-distance transmission lines.

To some degree, the SGIP has been a victim of its own success.  Drawn by the prospect of a more streamlined process, small developers have added large numbers of projects to the SGIP queue.  This is, of course, good news because rapid development leads more quickly to jobs, reductions in greenhouse gasses, and local industry growth.  Unfortunately, the CAISO and several of the utilities have not adjusted their procedures to handle this surge.  

Clearly, the growing SGIP queue needs to be addressed, but the CAISO’s reform process has been highly disappointing. The logical first step should have been to analyze the existing SGIP process to find potential areas for improvement. But the only people with in-depth information on historical SGIP applications are the CAISO and the utilities – and very little of this information has been shared.  In the public proceeding, there has been virtually no details about where the SGIP bottlenecks exist, how systems and staffing have been adjusted for these bottlenecks, whether systems and software could be improved, and/or what could be done to provide more up-front information to developers to ensure project applications with higher probability of success.  Instead, the CAISO proposal jumped past these steps and attempts to throw small projects in with much larger projects – recreating the problem that FERC tried to fix with SGIP in 2006.    

The reforms proposed by the CAISO will subject small developers to an average timeline of 617 days, as compared to the 390 days envisioned by the original SGIP.  However, many small developers cannot wait nearly two years to know for certain how they will connect to the grid.  This is particularly critical to 20 MW and smaller projects, where every additional delay and cost is more impactful.  To make matters worse, CAISO statistics show that very few of these smaller projects are clogging the queue, which means that the proposed reforms would punish smaller projects that are not the primary cause of the problem.

While the proposed changes appear to offer some options for smaller projects to have an expedited process, these options are likely nothing more than false hopes due to rules that would result in virtually no projects qualifying.  Unfortunately, this is a similar situation to the Fast Track component of SGIP today, which is supposedly available to really small projects (2 MW and smaller), but in reality no evidence has been produced that a single project has ever qualified for Fast Track.  Given that Fast Track was introduced with SGIP in 2006, Fast Track offers a discomforting example.

If California is serious about getting renewable energy online and creating green jobs TODAY, the State needs to have interconnection procedures that support smaller, ready-to-build projects.  The proposed CAISO reforms, however, move in the wrong direction and would effectively squeeze out smaller developers.  We recommend restarting the process to reform SGIP in order to assure that proper levels of data and analysis are applied. Only in that manner can we ensure that California will have the fair and effective processes that it needs for making renewable energy thrive and providing associated economic opportunities to all parties, large and small.