The Fundamentals of Solar Interconnection Agreements What is a Solar Interconnection Agreement? A solar interconnection agreement, or interconnection agreement, is an agreement for the interconnection of a solar energy system to the electric power grid that is entered into by the utility company serving the area where a solar power system is located. In cases where a solar energy system is going to be used to produce electricity for sale to the public, the solar interconnection agreement is often between the utility and the solar energy system owner.In short, a solar interconnection agreement is an agreement that sets out the terms, conditions, and procedures under which the solar energy system can be connected to and operate in parallel with the power grid, which enables the solar energy system to provide electricity either back to the electric grid or directly to the system owner. If the solar energy system is going to provide electricity back to the grid, then depending on the interconnection agreement, the terms under which that is performed will require payment to the utility for purchasing the excess electricity that is provided by the system, or provide for payment by the utility for electricity that is drawn from the grid, with a net credit being given to the system owner for any excess power that was provided back to the grid .The typical requirements and procedures set out in a solar interconnection agreement address such topics as the rights of the solar energy system owner to connect to and operate in parallel with the grid; the amount of surplus power that can be fed back to the electric grid and how the compensation for that excess power will be calculated; interconnection fees and payments (if any) to be made by the system owner to the utility for connecting to and operating in parallel with the grid; technical and installation requirements that must be met by the system owner; safety standards and certifications; metering requirements; maintenance responsibilities; operations procedures; roles of the parties in responding to outages; and indemnity, liability and insurance requirements.Utilities require interconnection agreements to protect their infrastructure and ensure that the connection to and operation in parallel with the grid of a solar energy system does not adversely affect the quality or reliability of the electricity distribution service provided to other customers. Interconnection agreements provide utilities with a mechanism for charging for and regulating the amount of energy produced by non-utility, non-ratepayer solar energy systems, regulate the quality of service of those systems so that they do not impact delivery of service to other ratepayers, and by making certain safety and procedural requirements for the operation of that equipment, help to ensure safe and economic operations of that equipment. Necessary Elements of an Interconnection Agreement Application Procedures: The application procedure indicates the steps required to connect to the grid. The application procedure often commences with an initial inquiry in which information is provided to the utility so that the utility can determine if the project is eligible for interconnection. If a project is eligible, the utility will then post application forms and a project manual on its internet website. For larger projects an applicant is often required to submit a Pre-Application Data Request to obtain detailed information regarding grid load data for a specific utility substation or area. These application forms can be quite detailed and require multiple submittals so it is often advantageous for developers to start this process early.Technical Requirements: The technical requirements are the standards that the system must meet in order to connect to the grid. The standards establish a baseline of quality for interconnections ensuring that the quality of the energy produced by a solar system is compatible with the quality of the energy distributed through the electrical grid. These technical requirements vary from state to state and even utility to utility. Additionally, as technology continues to develop, the technical requirements are frequently updated.Costs of Interconnection: There are both one-time (upfront) costs as well as O&M costs associated with interconnecting to the grid. One-time costs include fees charged for processing an application and costs of upgrades to the grid infrastructure. O&M costs are recurring costs that are charged throughout the operational life of the renewable energy system. These recurring O&M costs are often used by the utility to cover costs of maintaining the grid including monitoring the grid, periodic testing and calibration of metering equipment, and ensuring any grid upgrades necessitated by the system are performed.Timelines for Completion: Most interconnection applications must be completed within a certain timeframe after commencement. The timelines vary from state to state and utility to utility and are often very strict. Furthermore, as previously mentioned, the interconnection process is often subject to several stages thereby increasing the complexity of estimating a specific project’s timeline. Process for Securing an Interconnection Agreement While each utility will have different requirements, the general step that a customer must take to obtain an interconnection agreement is as follows: 1. Completing Application Utilities requesting advanced non-residential onsite solar systems are completing Application forms that typically request customer information, energy usage data, location of equipment and system size.After receiving the Application, the utility will review it to determine if the existing distribution facilities can accommodate the proposed interconnection. If it can, it will provide preliminary approval. A preliminary approval typically notes the maximum system capacity that is allowable on the customer’s meter transformer and notes the stage that the application is in.There are three stages:If the customer anticipates installing a system over 500 kW or that will require system upgrades, it should clearly state that on its Application form to avoid substantial delay in receiving the acceptance of an interconnection application. Solar Interconnection Hurdles and Remedies One key challenge faced by solar project developers is the uncertainty in the interconnection queue process. Different utilities have different practices with regards to updates to the queue. Some utilities post all changes to the queue on a daily basis, while others only post updates weekly, or monthly. The later style leads to guess work as to whether the queue position has in fact changed if the queue positions have not been posted for a number of weeks. This is especially difficult when the interconnection queue is filled with a large number of projects that are either proposed, or requesting to move forward with an engineering review. The key is to provide as much information as possible to the interconnection department as early in the process as possible to make sure that the proposed project has provided all of the information required by the utility to complete its review.Another common challenge is a utility’s insistence that the developer (rather than the host customer) be the interconnection customer. This forces the customer to go out into the open market and bid for offtake of the power, or to otherwise sign-on as a stakeholder in the next renewable energy procurement that the utility is undertaking. A common practice of large utilities is to simply insist that this is an unspoken requirement of their policy. However, with some states there is an explicit prohibition against utilities requiring that the interconnection customer have a certain profile. For example, in California Rule 21—Section E requires the utilities to use an interconnection agreement which "shall not contain additional requirements or entail additional obligations from the interconnection customer than specified in the Agreement." The issue of ownership of the system has arisen in Puerto Rico where the regulatory agency is requiring the utility to have 20% offtake of the project in order to grant access to the grid. The proposal is in the public hearing phase, and if implemented, would create a significant problem for developers regarding projects which are not allowed to build out to 20%. Legal and Regulatory Aspects of Interconnection The legal and regulatory framework surrounding solar interconnection is crucial to creating a successful solar installation. On the federal level, the Federal Energy Regulatory Commission (FERC) regulates interconnections between large-scale (100 kW or greater) distributed generation – such as solar photovoltaic (PV) or wind energy – and the interstate electric grid. FERC does not issue interconnection agreements for small-scale distributed generation – solar PV or wind energy less than 100 kW – but they provide guidance and oversight to states on the development of these agreements. FERC has taken specific actions relating to net metering, requiring states to make this information publicly available through their public utility commissions (commonly referred to as NARUC), but leaving it to the states to implement, so long as the process developed gives any interested person an opportunity to participate in the creation of the tariff . The Federal Communications Commission also plays a role, specifically in security and neutrality of smart grid communications, and in creating guidance for Smart Grid investments and technologies by both government and non-governmental entities. Currently, there are some 35 states and Washington, DC that have adopted some sort of net metering legislation or regulation, essentially allowing customers to offset their demand with renewable generation systems, at the retail rate (NARUC). Most states that have net metering coverage extend it beyond just solar PV, to include a variety of renewable generating systems, including wind and anaerobic digestion. Net metering creates the right of distributed generation owners to receive the benefits of the renewable generation offsetting its demand. Interconnection agreements allow for that distributed generation to tie into the electric grid. The owner of the renewable generation must extend that interconnection agreement in the event of future expansion of the system – expanding from 10kw to 20kw, for example — but interconnection agreements cannot be denied based solely upon the expansion of a renewable energy system. Advantages of a Sound Interconnection Agreement A well-organized and carefully drafted interconnection agreement will benefits both the utility and the end user. The structure and process for connection to the utility’s grid allows the utility to ensure its systems can accommodate the additional capacity, and to implement the project in such a way that does not "upset" other projects or cause unnecessary grid congestion. Likewise, the interconnection agreement benefits the end user by providing this same assurance. In other words, the interconnection agreement clearly lays out who will be responsible for what aspects of development of the grid connection so that both parties have a clear understanding of their roles, and so that after the agreement is signed, any changes to roles/responsibilities will be known to have been agreed upon prior to the existence of the agreement. In some cases, near the end of the process, the parties may discover that a transmission upgrade is necessary – and that is understood, at that point of time, to be a cost borne by the end user. Alternatively, without a clear interconnection agreement that defined the process and sequence of analysis, the utility might be able to sidestep any obligation to share in the cost of the transmission upgrade, momentarily shifting the burden back onto the end user until after project completion.Overall, an interconnection agreement benefits both sides because it satisfies several needs: Allows for the participation of smaller end users in order to bring solar projects online Puts in place a system of fair allocation of costs of interconnection Provides a system for evaluating incremental system costs due to new connections Provides a system that allows for orderly and consistent integration of renewable energy sources into the grid Provides a means of introducing sources of energy that may not otherwise be connected to the grid, and makes available the environmental benefits that those technologies provide. By adhering to the methodology laid out in the interconnection agreement, the utility will integrate increasingly larger amounts of renewable energy projects into the system, while maintaining system reliability. At the same time, the interconnection agreements allows the utility to match the demand for renewable energy with the capacity available, so that there are neither too many nor too few renewable energy projects and the associated capacity on the grid.This dialogue between utilities and end users (project developers) has been carried out at FERC, NARUC (the National Association of Regulatory Utility Commissioners), and other forums for over five years following the passage of ARRA Title II. Solar Interconnection Trends As with all rapidly developing technologies, the field of solar interconnection continues to grow and evolve at a fast pace. Future advances will likely be rooted in three areas: technology, regulations, and consumer demand. Technology innovations will probably result in more refined and sophisticated interconnection agreements, which will reflect increases in safety, reliability, and efficiency. Regulators and policymakers may also alter thresholds that affect interconnection procedures . Such changes could make it easier for utilities to decommission or upgrade older energy grids or perhaps to implement more advanced Smart Grid technologies. As more states consider community solar, which allows multiple customers to benefit from a single solar array, they may develop more streamlined processes for allocating credits to customers of investors in community solar facilities. Finally, as overall demand for solar energy increases, particularly with the popularity of distributed generation, regulators and policymakers may respond by including provisions for net metering, capacity, and reserve requirements.