This is the third part of a Q&A series with members of the KLG team highlighting key areas in which renewable energy project developers encounter pitfalls that can end up delaying or derailing projects. This part is presented by Courtney Feeley Karp, who handles energy regulatory matters. (A version of this Q&A appeared in the Sustainable Bottom Line newsletter published by Rodman CPAs prior to its merger with BerryDunn.)
What are key areas in which renewable energy project developers encounter pitfalls that can end up delaying or derailing projects?
Key areas in which developers face critical stumbling blocks include permitting and environmental matters, site control, interconnection, and preparation for project sale. Missing opportunities to timely and adequately tackle these challenges can increase project costs and even jeopardize an entire project.
What are common pitfalls that renewable energy developers encounter in obtaining interconnection information and rights for their projects?
There are three things that come to mind: misunderstanding the availability and limits of pre-application data; missing opportunities to leverage interconnection process rules; and the challenges of adapting to group and regional interconnection dynamics.
What kinds of things should developers know about pre-application data?
Pre-application data may be available – often at modest or no cost – from the relevant electric distribution company (the “EDC”) and can include important data points such as the distance to the closest feeder, how much generation (kW) is currently interconnected to that feeder, as well as how much generation (kW) is in the interconnection queue. This information can be very helpful for a preliminary project feasibility assessment but is often not enough to support an accurate prediction of interconnection costs or timeframe.
Some states provide “mapping” that shows more specifically where projects are located and in some instances where grid capacity is available, where distributed generation is desirable, or the location of saturated areas, where applications would likely face increased costs or other challenges. California has provided this information and New York is beginning to provide it as well. Although Massachusetts ranks 7th in the U.S. in solar installations, it does not yet provide this extremely helpful tool to applicants.
How can interconnection process rules help or hurt a project?
Even before a project undergoes a system impact study or receives an interconnection service agreement (an “ISA”), there can be delays by the EDC or the applicant. It is important to remember that, where there are required timelines in effect under an interconnection tariff or other source of law, the EDC will often “stop the clock” when it asks the applicant for additional information or clarification. Applicants should work to respond as soon as possible, and try to document each communication in writing so that there is a clear record of timeline compliance (or noncompliance, in the case of the EDC) should that become an issue.
Although a tariff or ISA may contain deadlines for applicant payments, construction start, or other milestones, there may also be procedures for you to seek extensions, such as in the case of a permit appeal. Or you may be able to cure an issue before having your ISA terminated or losing your spot in the queue – such as by making a late payment after a due date but before expiration of a cure period specified in an EDC default notice.
Another challenge can arise when a project needs to make a design change after it has been studied or after executing an ISA. Some EDCs require projects to be restudied or, worse, reapply (putting the project at the end of the queue) if there is a major or substantial project change. Some states and EDCs have struggled with defining this threshold, although some jurisdictions like Massachusetts have technical standards working groups to address these types of issues. As an example, in many instances, if a project decides to change inverters many EDCs would require a new study. Also, some applicants might assume that a decrease in project size would result in less impact and not require restudy. This is not always the case and in some instances the EDC has required a new study. It is generally best practice to have as final a design as possible when the applicant submits a one-line diagram and other project information to the EDC to conduct its system impact study.
What opportunities and challenges are associated with group and regional dynamics?
In areas where there are multiple proposed projects, in most instances the EDC will provide the applicant with a cost estimate for total system modifications along with the project’s pro rata share. The opportunity to spread grid upgrade costs over multiple projects can be a significant benefit. What can be difficult here is that, if other projects drop out, the need for some of the upgrades may not be necessary and costs may go down, but it may also mean that the project will shoulder a greater share of the costs. Most states have an accounting or true-up process that applicants should explore to ensure there is a full, transparent record of costs incurred, especially when shared with other projects.
We are also seeing new challenges emerging at a regional level where there has been a good deal of renewable energy development. In the ISO New England (“ISO-NE”) region, many solar projects in the 1-5 MW size range, which have been studied at the distribution level but rarely triggered a study by the transmission operators (“TOs”), are now being subjected to additional, time-consuming transmission-level studies by the TOs. We have even seen instances where such additional studies are being imposed after the project has been studied or, more recently, for projects that have an executed ISA and have timely made payments to the EDC. It will be increasingly important for developers to be aware of such risks and to know what rights they have in these circumstances.
FURTHER INFORMATION
For further information about these matters, please contact Courtney Feeley Karp at cfeeleykarp@klavenslawgroup.com or 617-502-6284.
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