“An Empirical Analysis of the US Generator Interconnection Policy”

Sarah Johnston* (University of Wisconsin-Madison), Yifei Liu (University of Wisconsin-Madison), and Chenyu Yang (University of Maryland)

Generators applying to connect to the US power grid go through an interconnection queue. Most wind and solar generators that begin the process do not complete it, in part due to high interconnection costs and long wait times. We use new data to find that interconnection costs are highly correlated with the decision to withdraw from the queue. We also find that congestion in the queue increases the average waiting time. We develop and estimate a dynamic model of the queue and quantify the effect of policy reforms. We first compare two forms of subsidy: (1) a percentage of the interconnection cost (e.g., 20% of the interconnection cost) and (2) a fixed amount per megawatt (e.g., $100,000/MW). We find the percentage subsidies are more effective at increasing renewable energy capacity on a per dollar basis. We also consider a cost stabilization program combined with subsidies. For example, the grid operator commits to charging a $100,000/MW interconnection cost and uses subsidies to make up the difference between the actual interconnection costs and the costs paid by generators. Such a program would achieve less new capacity on a per dollar basis than either form of subsidy. Finally, an optimal queueing mechanism that assigns generators different priorities can add significant capacity by fast tracking select generators.



*Denotes presenter