The Michigan Public Service Commission has started what could be a two-year process to govern how renewable energy projects are connected to the electric grid.
The plan to make new interconnection rules seeks to resolve an unprecedented backlog of requests from independent power producers to build solar projects at a time when utility customers increasingly are turning to solar for self-generation.
The interconnection process between developers and utilities is a fundamental first step before beginning plans, whether for large projects or smaller residential installations. Utilities have to prepare the distribution system for new generation that comes online, but the problem is they haven’t seen hundreds of requests come in virtually at once, as recently happened.
Late last year, the MPSC opened a docket seeking input from interested parties before it officially begins a rulemaking process, which takes about 18 months. The MPSC says Michigan’s interconnection rules are outdated based in part on new federal guidelines and Institute of Electric and Electronics Engineers standards, as well as new state energy laws passed in 2016.
More immediately, Consumers Energy and DTE Energy have hundreds of megawatts of proposed solar projects from developers waiting in their interconnection queue.
“We’re looking at a system to handle maybe five or six (projects) in a year,” said Paul Proudfoot, director of the energy resources division at the MPSC. “Now we have hundreds of projects.”
Integrating all of this additional generation into the grid is a complicated equation for utilities and regulators, he added.
“You end up with an unsolvable problem, and I don’t know if the rules will really fix that problem,” Proudfoot said. “Is this a passing phase (of development interest)? Should we gear up with expertise and processes to handle this activity of interconnecting? DTE, Consumers and developers are struggling with this.”
‘Things have changed’
Michigan’s first interconnection rules date back to the early 2000s and were updated in 2009 following energy legislation encouraging more renewable energy.
The rules apply both to small and large projects divided into four categories up to 2 MW and a fifth beyond 2 MW.
Tim Lundgren of Energy Michigan, a trade association representing independent power producers, said “things have changed” since the first rules were put in place to address new merchant power plants.
“We’ve seen changes nationally and in Michigan with a movement from large centralized utility-owned generation into smaller localized projects,” Lundgren said. “Adding all of that local generation places different kinds of demands on the grid.”
MPSC Chair Sally Talberg said last month that interconnection rules are a “foundational element that’s going to help us adapt to a world where increasingly distributed generation is on the system.”
A key solar driver involves ongoing proceedings over the federal Public Utilities Regulatory Policies Act, or PURPA, and developers hoping to build projects under these contracts with utilities. PURPA requires utilities to purchase power from an independent producer at a set price if it’s cheaper than the utility could build it.
“Both (DTE and Consumers) are overwhelmed with the number of projects coming into their queue,” Lundgren said. “They weren’t anticipating the scope and size of interest.”
Michigan is following Minnesota’s lead on new interconnection rules. Minnesota faced a similar backlog of projects following a state-mandated program for community solar, which allows ratepayers unable to build their own projects to buy into solar.
The MPSC plans to address timelines, required studies, costs, legal responsibilities of parties, microgrids and energy storage, among other topics.
Lundgren hopes new rules particularly address the timeline and cost of new projects so developers can “make accurate development plans.”
The interconnection process for larger projects also comes after a determination from the MPSC of whether the new capacity is needed. Utilities have debated this issue recently by suggesting they don’t need the additional capacity from independent projects and therefore should pay less for the generation.
“The utility views many of the interconnecting projects as a competitor,” Lundgren said. “The rules need to be very clear about specific timelines, expectations and costs that don’t allow a lot of room for utility discretion.”
Consumers Energy spokesperson Brian Wheeler said in a statement that updating interconnection procedures “will be key to enable a balanced transition to expanding renewable, distributed generation resources in Michigan.”
He added that the utility supports rules that will “appropriately account for the significant changes we have seen in the state’s interconnection landscape — particularly a strong and growing interest in solar generation. New rules must also build in flexibility to account for possible additional changes as new energy technologies become more widespread. … Consumers Energy supports policies that share costs for electric service fairly among the households and businesses we serve, without asking any group of customers to subsidize another.”
The Chicago-based Environmental Law and Policy Center has been involved with interconnection rulemaking across the Midwest for more than a decade, including recently in Minnesota.
Staff attorney Brad Klein said Michigan lags other states “most fundamentally” by not following standard procedures adopted by the Federal Energy Regulatory Commission (FERC) meant to serve as a model for states. In addition to consistency, the federal rules “provide fast-track pathways to get small systems interconnected more quickly,” Klein said.
Additionally, transparency could be improved to help developers determine utilities’ needs.
“The current situation (in Michigan) has a large number of projects going in at one time, but going into a very opaque black-box process at the utilities,” Klein said. “The problem is no one can really see inside that process to know whether the delays are justified or how to avoid them in the first place.”
Without that clarity, “the result is a lot of frustration in the market and uncertainty, which leads to higher prices, confusion and not a good investment landscape,” Klein said.
The MPSC’s Proudfoot said it may take up to two years to get some of the larger proposed solar projects interconnected.
“I think it’s going to be an exciting next few years,” he said. “We’re going to be operating a different system 10 years from now.”
EDITOR’S NOTE: This story has been updated to note the MPSC opened a docket — not a rate case — to take input from interested parties on the interconnection process.
MiBiz energy news coverage is supported by Consumers Energy, a public utility that provides natural gas and electricity to 6.6 million Michigan residents. For more information, visit consumersenergy.com. This sponsorship is advertising. It has no effect on editorial consideration in MiBiz.