Study Finds Steeply Rising Interconnection Costs In PJM

by Peter Maloney
APPA News
February 6, 2023

The costs to connect a power project to the grid in the PJM Interconnection region have risen steeply, according to a new report by Lawrence Berkeley National Laboratory.

Interconnection costs have risen across the board, according to the report, Interconnection Cost Analysis in the PJM Territory.

For projects with completed studies and plants in service, costs have doubled. For active projects still in the interconnection queue, estimated costs have grown eightfold since 2019.

More specifically, average costs for completed projects have doubled, rising from a mean cost of $42 per kilowatt in 2000-2019 to $84/kW in 2020-2022 and a median cost of $18/kW in 2000-2019 to $30kW in 2020-2022.

Costs of active projects in the queue have risen even more steeply, with mean costs growing from $29/kW in 2017-2019 to $240/kW in 2020-2022 and median costs rising from $8 in 2017-2019 to $85/kW in 2020-2022.

Withdrawn projects had the highest costs of all, with a mean cost of $599/kW in 2020-2022 and a median cost of $156.kW, which was likely a “key factor in those withdrawals,” the authors of the report said. “Project costs vary widely and a small number of high cost projects caused average costs to rise above median costs,” the authors noted.

The main driver behind the cost increases has been broader network upgrade costs, the Berkeley report found. Average costs for upgrades beyond the interconnecting substation have risen sharply since 2019, to $71/kW for complete projects, $227/kW for active projects, and $563/kW for withdrawn projects, the authors said.

A small subset of generators faces lower network upgrade costs by choosing interconnection services as an energy instead of a capacity resource, but those owners forfeit preferential treatment during high load hours, cannot participate in PJM’s capacity market, and may face increased curtailment, the report said.

PJM’s interconnection queue has ballooned in recent years, with 2021’s active queue increasing by 240 percent compared with year-end 2019, reaching a level nearly twice as large as PJM’s peak load in recent years of about 155 gigawatts.

At year-end 2021, PJM had 259 GW of generation and storage capacity actively seeking grid interconnection. Most of that capacity is represented by solar interconnection requests, 116 GW, followed by standalone battery storage, 42 GW, wind projects at 39 GW, and solar-battery hybrid projects at 32 GW.

PJM’s data also shows that 79 GW of projects have dropped out of the queue because they entered service while 432 GW of projects dropped out of the queue because they withdrew.

The rapid growth of interconnection requests, along with lengthy study timelines and high project withdrawal rates, motivated PJM to reform its interconnection process in 2022, adopting a “first-ready, first-served” cluster study approach and increasing study deposits that are at risk if a project is withdrawn.