On May 15, 2019, the Federal Energy Regulatory Commission (FERC) approved an updated generator replacement procedure proposed by the Midcontinent Independent System Operator (MISO). This new procedure allows generators to bypass the new interconnection request queue so long as the replacement generation does not exceed current generator capacity. If it does, then only the incremental exceedance will be studied.
According to the FERC ruling, the new procedure “establishes a transparent and fuel-neutral process for replacing aged or uneconomical existing generating facilities with newer equipment and technology at the same electrical point of interconnect in order to respond to changing economics and policies.”
Why is this a big deal? Prior to approval of the new procedure, projects to replace or repower assets at an interconnection point were required to go through the same process as all new generation development opportunities. This lengthy approach subjected potential projects to an unpredictable timeline, ranging from 1.5 to three years, for MISO transmission impact assessment reviews.
Opportunity to Retire Aging Assets
A key benefit of the new procedure is the opportunity for generators to replace aging and inefficient assets with lower-cost solutions. According to MISO’s filing, multiple proposals over the past few years to replace coal units with natural gas-fired generation would have had favorable cost impacts for customers, but the existing tariff process “effectively bar[s] complete replacements or refueling regardless of their benefits.”
Reusing existing interconnections provides ample opportunity to replace fossil and nuclear assets with more efficient, reliable, state-of-the-art generation as well as renewable energy. In addition to the potential production cost savings associated with newer generation, customers benefit from reusing transmission infrastructure previously built to deliver the generation from the retired asset. This double benefit in cost savings is likely to result in many attractive options when assessing reuse of existing interconnections.
Opportunity for Solar Development
The 30% solar investment tax credit (ITC) as we know it today ends at the end of 2019. Beginning in 2020, the ITC begins to scale down, first to 26%, then to 22% and finally to 10% by 2023. To receive a tax benefit greater than 10%, construction of new solar farms must be completed no later than Dec. 31, 2023.
The new MISO procedures allow solar generation to replace existing capacity on a much faster schedule. This presents an opportunity for solar generation to be installed in MISO before the tax credits wane. However, large-scale projects must be filed in the MISO interconnection queue in 2019 in order to complete the three-year interconnect, engineering and construction process and achieve online status by the 2023 deadline.
The new procedure also substantially reduces transmission costs required to interconnect the facility. An influx of wind generation within MISO during the past decade has caused power congestion and the need for additional transmission buildout. As a result, in many locations throughout MISO, it is typical for a utility-scale renewable generation project to incur $10 million or more in transmission costs just to interconnect. Under the new procedure, a new solar facility at an existing interconnect would be subject to a $60,000 no-harm study, bypassing the long queue study delay so long as the new facility does not exceed the capacity of the existing interconnect.
Opportunity to Optimize Output Per Interconnect
Intermittent renewable resources, such as wind and solar, underutilize existing interconnections because the generation output rarely reaches the full interconnection capacity. However, wind and solar generation generally are complementary since wind often peaks during nighttime hours. A recent study conducted for a potential co-located solar facility at an existing wind farm showed that if solar capacity matched the existing wind nameplate capacity, solar generation would need to be curtailed approximately 25% in order to not exceed the interconnection capacity. A solar farm at 40% of the capacity of the existing wind farm had an approximately 10% curtailment risk.
When considering the cost of transmission interconnection, co-locating a new solar array at an existing wind farm, or replacing a retired fossil fuel facility with a combined wind and solar facility, provides a potentially economically viable solution even with curtailments. However, the type of interconnection agreement will influence the feasibility of co-locating assets. An existing wind farm might be more likely to have an Energy Resource Interconnection Service (ERIS) agreement that allows MISO to curtail or interrupt transmission service from the plant. Retiring fossil fuel facilities are more likely to have a Network Resource Interconnection Service (NRIS) agreement that allows firm transmission services up to the full plant capacity.
Similar treatment for repowering existing facility interconnections is accepted by FERC for California Independent System Operator (CAISO), ISO New England (ISO-NE), New York Independent System Operator (NYISO) and PJM Interconnection. While Southwest Power Pool (SPP) currently does not allow for it, a future similar change in procedure is conceivable.
The first step in maximizing an existing interconnection is to conduct a feasibility study evaluating the practicality of repowering, repurposing or co-locating additional generation. If the site and interconnect provisions appear feasible, an economic study should be conducted to evaluate the levelized cost impact of curtailment, locational market pricing, potential transmission savings and capital cost differences as compared to siting at a greenfield site.
Nuclear and coal-fueled facilities account for more than half of MISO’s current generation mix. However, MISO anticipates a dramatic change to its generation resource mix within the next four years. The new MISO procedure supports utilities and generation asset owners within the region who want to retire inefficient, aging assets; meet renewable mandates; and maximize previous interconnection investments.
For more on solar, read about how to reduce project risk in a supply constraint market.