January 23rd, 2024 — A growing chorus of policy experts, renewable developers, climate advocates, and even government agencies have pointed to the interconnection process as a major impediment to achieving the U.S.’ decarbonization goals. Too often, we paint interconnection as purely a policy problem — experts advocate for FERC orders, ISO rules, and legislation as the primary solutions.
However, interconnection challenges are too big and too impactful to wait for policy solutions alone. The private sector can and should play a crucial role in solving the interconnection problem. At Powerhouse Ventures, we’ve identified four areas in which startups can provide software solutions that both generate exciting profit and help unlock grid decarbonization.
The extent of the problem
Interconnection represents one of the most uncertain, expensive, and time-consuming hurdles for renewable energy projects seeking to come online in the U.S. Outdated modeling processes that weren’t built for intermittent generation or batteries, plus ballooning requested capacity and strained utility and ISO engineering teams, have left proposed generators with uncertain timelines and the risk of extreme upgrade costs.
Even for those familiar with the interconnection queue challenge, the stats can be staggering.
Over 2 TW of generation and battery capacity is sitting in queues across the U.S., of which 95% is a zero-carbon resource.
These projects can expect to spend 5 years in the interconnection queue, and wait times are only expected to increase as the IRA fuels renewables’ growth—solar installations alone are expected to increase by 40% due to IRA incentives. This new capacity will be critical to meet the growing demand from electrification.
Significant queue wait times can trigger challenges in permitting and financing, as stakeholders may require progress in the interconnection queue to award permits and contracts. While firm numbers on this domino effect are hard to come by, it can meaningfully impact a project’s chances of successful development.
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This problem is exacerbated by an aging power grid that isn’t built for intermittent renewables. To achieve a 100% clean electricity grid, transmission capacity will need to at least double, and the cost of expanding capacity may be passed on to developers through triggered interconnection upgrades. Yet long study times can result in developers only learning about these major, costly upgrades years into developing the project.
Due to constantly changing study assumptions, these upgrades may be out-of-date by the time a developer needs to make a decision about proceeding with a project. For example, in an analysis by Pearl Street Technologies, SPP's queue variability from April to December 2022 shows an average of 11 material changes in the queue per month.
How the private sector can help
Despite these challenges, software solutions can meaningfully accelerate the pace of interconnection for new energy generation. Given the vast implications of interconnection reform and its impact on the entire electricity system, these solutions can have an outsized impact on achieving the energy transition.
1. Engineering modeling for interconnection studies
Powerhouse Ventures was an early investor in Pearl Street Technologies, which develops interconnection software solutions to prepare the transmission system for the energy transition. Its foundational product, SUGAR™, helps grid operators and utilities manage increasing interconnection queue volumes by accelerating modeling and simulation studies, with up to a 200x reduction in time-consuming study processes.
Pearl Street’s newest product, Interconnect™, automates interconnection studies end-to-end and provides same-day cost estimates for actively queued projects, enabling developers to make quicker decisions about staying in or exiting the queue. By reducing analysis time for all stakeholders, Pearl Street hopes to mitigate the interconnection backlog and expedite the transition to a decarbonized grid.
Similar opportunities exist for distribution-scale modeling. Distribution grids aren’t built for bi-directional energy flow. Outdated engineering studies are ill-equipped to manage the growing number of distribution-level interconnection requests for smaller utility-scale, community, and C&I renewable projects, not to mention the likely growth in bidirectional EV charging. Improved engineering analysis could increase the accuracy of distribution interconnection studies and facilitate more rapid small-scale installations.
2. Interconnection request applications
Each utility has variations in their queue request forms, processes, and requirements which means that developers spend precious time and money trying to meet utilities’ individual requirements. A valuable software tool would either 1) make interconnection request processes easy to understand through simplification of dense and lengthy process documents, or 2) enable straightforward adaptation of standard project documentation to each utilities’ unique interconnection request requirements. While generative AI may play a role in the solutions, the results need to maintain credibility and will likely require review and approval by a licensed engineer. For this reason, the solution cannot replace engineering teams, but rather could increase the speed and efficacy of their work.
3. Interconnection queue management
There are currently two portals used by most transmission providers for managing information flow between developers and utilities: PowerClerk and Salesforce. Both leave significant room for improvement, especially since they serve as vital tools for coordination among parties in interconnection processes.
While replacing these incumbent providers may prove challenging, there are opportunities to augment components of their work, in particular through PowerClerk and Salesforce APIs that enable map and data transfer into their portals from external sources.
4. Grid data acquisition and management
Utilities often have data gaps related to legacy equipment on their grid and its capabilities. This is particularly acute at the distribution level, though older transmission infrastructure suffers similar challenges. Collecting and managing this data generally cannot be rate-based and therefore suffers from underinvestment.
This dearth of data hinders interconnection analyses as well. Without complete information, utilities have to pursue conservative study assumptions, as reliability is their primary mandate. This limits available capacity on existing transmission and distribution lines and can trigger unnecessary upgrades.
New technologies can help utilities gather this data in an effective manner. While this could be accomplished through sensors installed across the grid, we believe the most scalable solutions will involve innovative algorithms that infer the information using existing data streams. With this data, utilities and grid operators can better manage existing infrastructure and assess how additional installed capacity will impact reliability.
If you have also been looking closely at this space, or are a founder tackling interconnection reform, we would love to hear from you! Tell us about your startup or contact us.
Authored by Powerhouse Ventures Summer and Fall Associate Erin Kirton.
To read more about our work at Powerhouse and Powerhouse Ventures, visit our Insights page.