An unprecedented surge this year in requests to connect new renewable energy and battery storage resources to California's electric transmission grid has emerged as both a boon and a boondoggle for the Golden State's clean energy transition.

State energy regulators have asked the California ISO to plan for roughly 85 GW of additional renewables and storage capacity by 2035, and the influx of applications gives an early glimpse of the tantalizing and abundant possibilities. But the staggering size of the grid operator's interconnection queue — totaling more than half a terawatt, or about 10 times the system's record peak demand — has paralyzed the processing of new requests. That includes 354 GW that entered the queue in April in CAISO's latest application window, known as Cluster 15, which dwarfed all previous 14 clusters.

Although CAISO has opened the door for one of the world's largest operating clean energy portfolios, its process for interconnecting new projects has become unwieldy, obsolete and a major obstacle to California's decarbonization, according to participating transmission owners and power plant developers. Proposals for improving access to the state's envisioned clean grid of the future, however, are beginning to emerge through a CAISO-led initiative.

The grid operator's governing board approved "Track 1" of its interconnection enhancements initiative in May, which delayed Cluster 15 phase one studies to the second quarter of 2024 to first complete a daunting volume of Cluster 14 phase two studies. Deeper reforms are under consideration in "Track 2," with a straw proposal targeted for September and a potential vote by CAISO's board in February 2024.

The underlying dilemma facing CAISO and other US grid operators is whether they can connect new resources at least as fast as they retire old ones, said Jason Burwen, vice president of policy and strategy at energy storage developer GridStor LLC.

Unless solved, California's queue conundrum could delay its transition to carbon-free electricity and further prolong its phase-out of aging natural gas-fired generators, Burwen added, echoing concerns voiced by many involved in the CAISO queue reform effort.

"That's a bad outcome, certainly for decarbonization, and that's also a sign that the basic fundamental mechanism of the market ... is broken," Burwen said in an interview. "I don't know of anyone who thinks it's not a big problem."

CAISO clearly acknowledges it.

"The massive increase in interconnection requests seeking to meet the accelerated cadence of resource development now needed by the state on a sustained basis has overwhelmed critical planning and engineering resources across the industry," grid operator officials said in June in a set of updated principles and problem statements guiding its initiative. "Both the volume of capacity and individual interconnection requests in Clusters 14 and 15 compromise the ISO's ability to produce meaningful study results within necessary commercial time frames, making it challenging to bring resources online in time to meet state policy and reliability needs."

Hybrids, stand-alone storage proliferate

Perhaps no other state has clean energy ambitions and challenges as big as California, which is seeking to cover 90% of retail power sales with zero-emission resources by 2035 and 100% by 2045. Such policies have sparked a flood of interest from developers, now supercharged by more lucrative tax incentives passed in the Inflation Reduction Act of 2022.

CAISO's current queue of 536 GW, 97% of which is renewables and energy storage, is the largest of any independent system operator, regional transmission organization or any area of the US not organized into an ISO or RTO, according to a new S&P Global Commodity Insights report. That includes interconnection requests for 422 GW of resources inside California and the rest from out of state, largely Nevada and Arizona.

Battery-backed solar arrays and other hybrid configurations dominate CAISO's queue, with nearly 350 GW of requests, followed by stand-alone battery storage at 146 GW.

"More than 94% of the proposed solar projects in the CAISO interconnection queue and nearly 81% across the non-ISO Western US are part of a hybrid system," Commodity Insights senior research analysts Adam Wilson and Tony Lenoir said in the report.

The largest volume of hybrid capacity under consideration in US interconnection requests is in PG&E Corp. operating arm Pacific Gas and Electric Co. (PG&E) territory in northern and central California, closely followed by Edison International utility subsidiary Southern California Edison Co. (SCE), according to the Commodity Insights analysis.

SCE and PG&E lead all US utilities in terms of requested interconnections of stand-alone storage as well.

Call for 'more skin in the game'...

Officials of the two investor-owned utilities, which are the largest participating transmission owners within CAISO's domain, presented proposals at a July 11 CAISO workshop, highlighting possible ways to streamline the review process, yield more meaningful study results and reduce the number of projects lingering in the queue for years — some for more than a decade.

SCE, for instance, proposed the use of "generic and standardized" models for vetting and speeding up application reviews earlier in the process, freeing up planning and engineering resources to focus on more viable projects with generation interconnection agreements. PG&E's proposal also endorsed more generic models at the beginning of the process, in addition to "higher interconnection financial securing posting" and a "commercial viability demonstration" to weed out more speculative projects, according to its presentation.

NextEra Energy Resources LLC, the competitive generation arm of NextEra Energy Inc., echoed the proposal for higher financial commitments to deter speculative projects.

Jim Shandalov, vice president of development and origination at NextEra Energy Resources, called for "more skin in the game" through a new nonrefundable $100,000 fee to enter the queue, and a refundable study deposit of $8,000 per MW. For a 500 MW project, that would equal a $4 million deposit.

NextEra also proposed higher deposits for network upgrades and interconnection facilities. "We're suggesting just ratcheting those up a little bit ... to reduce the amount of speculation and make developers think a little harder about whether to advance after phase one or to advance after phase two," Shandalov said.

... and 'shared responsibility'

Vistra Corp., which is developing up to 1,500 MW/6,000 MWh at its Moss Landing Battery Storage Facility, colocated with its Moss Landing combined-cycle gas plant in Monterey County, Calif., proposed new cluster study options for more speculative ventures, rather than higher financial commitments.

"Our thought process is that one of the main reasons ... for there being so many projects submitted to the queue is that some developers are looking for different kinds of information," Cathleen Colbert, a senior Western markets policy director at Vistra, said at the workshop. "They're using the queue not necessarily to progress [projects] that are ready to move to commercial operations. They're using the queue as a way to get feasibility or some preliminary estimates."

To provide key information up front, members of AES Corp.'s clean energy development team proposed that CAISO publish an annual interconnection report including details on pricing, network constraints, planned upgrades and other key metrics. AES also proposed a scoring system to determine project eligibility for "interconnection priority zones," based on CAISO's transmission planning process. Points would be determined by factors such as site control, permits, commercial readiness and engineering design.

To achieve the best possible outcomes in the CAISO interconnection reform effort, GridStor's Burwen highlighted the need for "shared responsibility."

"If transmission providers can't meet predictable timelines, especially for constructing network upgrades, we could shift some of the costs and risks from those delays off of the backs of the interconnection customers so that it's not just the deepest-pocketed companies able to do the work of clean energy," Burwen told Commodity Insights.

Given open access transmission principles, which CAISO has said the reforms must continue to ensure, and the Federal Energy Regulatory Commission's review of any proposed changes, "it requires avoiding undue discrimination when it comes to the interconnection process," Burwen said in a workshop presentation. "And I think that that compels us to look at as many options as we can that do not limit open access for interconnection."

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