Developers are concerned about MISO queue reform proposals

Although MISO says a "high majority of stakeholders" agree with its proposals to reform its interconnection process, early reactions appear decidedly more negative.

NPM spoke to a number of developers and other industry sources about the issue. Virtually all had similar concerns regarding rising costs and the impact placing limits on cluster sizes could have on the market.

One developer said that, while they understood MISO is dealing with a record number of requests, they were of the opinion that the reform as proposed would not reduce demand and only “create further constraints” for generators. This was echoed by Chris Barker, Managing Director of Transmission and Grid Integration at Clearway Energy Group.

“Placing arbitrary restrictions on new generation projects will not solve the problem and distracts from meaningful reforms,” Barker said.

Barker added that capping the size of queue cycles also creates the problem of deciding which projects will move forward and which will be held behind. MISO has already proposed to fill its cycle on a first come, first serve basis, an approach Barker says is lacking.

“Selecting project applications because they arrive seconds before the next one is highly arbitrary and does little to help advance the best projects,” Barker said.

The revised payment schedule unveiled by MISO will require earlier payments as well as significantly higher withdrawal fees.

Separately, a developer lamented the “already skyrocketing” costs in MISO and discussed their concern that enforcing higher withdrawal costs could have a limiting effect on the number of firms able to participate in the queue process.

Another developer echoed these concerns, adding that utilities are already “passing through inflation” costs to developers including adding labor and uplift charges.

“Some interconnects are seeing upwards of 50 percent of the costs being engineering, labor and padding and not actual materials,” the developer said. “Developers have to be savvy to know how to fight against this.”

Ultimately, this developer estimates a developer “with few projects moving forward” will need to expose USD 30m or more on projects without significant network upgrade requirements. They say projects with upgrade requirements will be “significantly higher.”

This is a concern for smaller and even midsize companies that don’t have the balance sheet for this level of exposure and some developers are arguing this is going to heighten imbalances in the market. For instance, one developer noted that larger entities can use parent guaranties for security that is unavailable for smaller developers having to use up real portions of their lines of credit.

There is also a growing trend of attempting to work around the interconnection process as a whole, something one developer said they expect to become more commonplace if these reforms are enacted. This is particularly common from utilities that are able to leverage self-build projects that can interconnect with existing power plant sites.

NPM has spoken with a number of utilities in the MISO footprint taking utilizing this tactic including Entergy Louisiana, Ameren Missouri, Xcel and Otter Tail, some of which are actually skipping RFPs altogether or bidding their own proposals into them and selecting them over third party options.

MISO did introduce one specific proposal to limit developers to 10 percent of the capacity of the overall cycle, perhaps in an attempt to limit the advantage larger developers with stronger balance sheets will have in what will be a much more crowded annual queue environment. This will have impacts on some of the firms who have been operating above that cap.

NPM is tracking firms like NextEra Energy Resources and Invenergy that currently have more than 20 GW in the MISO queue and has spoken with EDPR who recently told NPM it is openly utilizing the strategy of putting more projects into the queue than they expect to complete.

An industry source said this is likely where the new requirement that would limit project sales until Phase 2 of the interconnection process comes in. Otherwise, they say, large developers could pay smaller ones to enter the queue and then flip the project.

But while much of the feedback has been negative, some developers are hopeful the new reforms will at least provide interconnection customers with more certainty earlier in the process.

That said, virtually everyone agrees they want to see a more robust stakeholder process from MISO. Baker in particular says MISO should create space in its stakeholder process to reimagine how its interconnection studies work as a whole.

“The way MISO currently studies projects take far too much time and resources and produces study scenarios that will never happen.”

For now, MISO’s ongoing internal comment period for the reform proposal will remain open until August 7. After that, it expects to rework some of the proposals and present a final version on August 30. FERC proposals are to follow, and the grid operator is hopeful its reforms will be in place by the end of the year.

*This story was originally published exclusively for NPM subscribers last month.


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