Solar power's lost opportunity in PJM
Second in an occasional series on PJM. Read the first here.
Seven years ago, RWE, a multibillion-dollar German clean energy builder, launched a bold solar power program aimed at American farmlands.
It proposed 28 solar and storage projects totaling 2,700 megawatts of new capacity. To move that electricity to cities and suburbs, RWE had to tie onto the mid-Atlantic region's interstate grid, PJM Interconnection.
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But RWE soon found itself caught in a Bermuda Triangle of delay — PJM's 'interconnection queue' — where solar, wind and gas projects wait for years for technical analysts to assess how the new power supply will affect the carefully balanced regional grid.
The regional transmission organization responsible for coordinating flows and managing the power market across a 13-state region from Illinois to Virginia saw its requests to tie onto the grid quadruple between 2015 and 2020 and continue to rise. In 2022, PJM stopped accepting project proposals to attack the backlog.
By the end of 2023, according to a review by Lawrence Berkeley National Laboratory, half of those projects were shelved by their developer.
RWE shared that fate. It is still waiting for PJM to complete the approval process on 13 of the 28 projects, PJM's data shows. On 15 others, it has simply given up, withdrawing the projects after spending nearly five years waiting for final decisions.
Unless the trends change, PJM — serving 20 percent of the U.S. population — will end this decade as a case study of a wasted opportunity to deploy mature, carbon-free solar technology.
Solar power production is up dramatically from a year ago, but it remains a bit player inside PJM, contributing to just over 2 percent of the power generated in 2024, according to Monitoring Analytics, PJM's independent market monitor.
'Why are all those projects in the queue?' said Abraham Silverman, former general counsel of the New Jersey Board of Public Utilities. 'Because there was consumer demand to buy clean energy. Those projects all thought that they had a market opportunity in PJM.'
The slow work of PJM as a gatekeeper for entry onto the grid is now colliding with skyrocketing electricity demand set for states like Ohio, Pennsylvania and New Jersey. As a result, old coal plants primed for closure may run for longer, and a rush to plan for more natural gas generation to power the tech industry's data centers could cement fossil fuel use for decades longer.
PJM Chief Executive Manu Asthana has faced withering questions from Washington and state capitals about why PJM had not acted with greater urgency to shift into higher gear when it was clear electricity supply and demand were out of sync, with one eye on getting more of that potential solar power built.
PJM has made strides in overhauling its interconnection policy and hiring staff, cutting into the queue backlog, Asthana told Congress. 'We had a queue of about 200,000 megawatts of generation,' he said in March. 'We have whittled that down to 67,000 megawatts, an incredible amount of progress.'
But most new solar projects with interconnection agreements from PJM never started construction. Project financing became wobbly. Landowner agreements ran out. Supply chain issues cropped up. Plans changed during their time in the queue, according to an analysis by POLITICO's E&E News.
PJM and MISO, operator of the central U.S. grid that stretches from Canada to the Gulf Coast, are pushing to narrow the gap between the number of projects entering their queues and the number that make it out with any hope of being fully developed.
Solar power has been by far the fastest growing new source of power in many parts of the country. It can be deployed relatively fast and at a lower cost than gas plants. Texas alone added enough solar power last year to power roughly 8 million homes. And solar and battery storage were expected to be more than 80 percent of the new utility-scale electricity added across the nation in 2025, the U.S. Energy Information Administration estimated in February.
'Imagine how projects deteriorate'
The whipsaw effect of American politics and the relentless upping of future power projections are rapidly changing renewable energy's prospects, building the case for gas power now and nuclear power after 2030.
Under former President Joe Biden, 15,000 megawatts worth of offshore wind projects were green-lighted along the Atlantic Coast. Democratic governors inside PJM counted on those projects to meet clean energy goals and power economic development. Their fate today is clouded at best, confronted by President Donald Trump's fossil energy 'dominance' agenda.
Under Trump and in PJM, coal is getting a new lease on life. But it's also a result of deepening concerns about whether enough power will be running across PJM wires in 2028 to ensure (with room to spare) that the lights stay on and factories keep humming.
With the extraordinary rise in projected power demand, PJM CEO Asthana, who has said he will leave PJM at the end of the year, told lawmakers coal has to keep burning.
'We must keep the supply that we have today,' he said, going one step further. 'We must try to bring back what we can from retirement.'
RWE, the third-largest U.S. solar energy developer, has pulled back into a more conservative, risk-wary investment plan that may foreshadow a slower path for new renewable power in this country.
'President Donald Trump has set a new course for the country's energy and climate policy,' RWE observed in its just-issued 2024 annual report. 'It is impossible to predict the consequence of the change of course in U.S. energy policy for the expansion of renewable energy in the U.S. at this time.'
A company spokesperson declined to discuss strategy but pointed to RWE AG Chief Executive Markus Krebber's remarks prepared for the company's annual meeting last month. There, Krebber outlined a policy to move away from competitive energy markets like PJM, which supply two-thirds of U.S. electricity by taking bids from generators' to fill each's day's supply. (The rest of the U.S. is served by traditional regulated utilities.)
Given Trump's policy and tariff whipsaws, the company has said RWE's solar and wind deals will require data centers, utilities and other customers to pay up front for clean power.
'Only if these conditions are met will further investments be possible, given the political environment,' Krebber said.
His caution around new development is echoed by Mark Rostafin, co-chief executive of Texas-based Vesper Energy. Vesper just opened a 600-megawatt solar farm in the Texas Panhandle.
'You'll wait till the permitting is done and you have good visibility into equipment supply,' Rostafin said. A customer commitment will be part of the final financing agreements.
Just four years ago, PJM's cluster of states seemed ready to host a sharp expansion of solar and wind energy to back Biden's aspirational goals for a carbon-free power grid. PJM states could not approach the solar power potential of the Sun Belt, but renewable energy's prices were competitive in PJM's power market. And many of the states had renewable energy targets.
PJM's Grid of the Future report in 2022 predicted a bright future for carbon-free power. 'PJM's fuel mix will drastically change due to state and corporate clean energy policy targets, with solar and wind generation increasing and replacing coal and natural gas generation.'
The report expected wind and solar resources to grow between three and eight times over the next 15 years. The prediction didn't factor in the near-paralysis in the PJM interconnection queue as project proposals poured in.
'Let's call it sort of a slow-motion car pileup,' said Kent Chandler, former chair of the Kentucky Public Service Commission. PJM has tended to react to problems, not get ahead of them, added Chandler, who led the Organization of PJM States, a sounding board for state interests in the regional grid.
'It seems like PJM management fixes issues with a 'squeaky wheel gets the grease' mindset,' Chandler added. 'Whatever issue poses the biggest risk, that's the one they go to next.'
Jeff Shields, PJM senior manager of external communications, asked to respond to such criticism, said the organization has had to deal with costs of new generation that are higher than consumers want to pay. That has led to some 'piecemeal' policy changes, he said.
PJM saw project applications accelerate in 2020 and had its new strategy in place in 2022, he said. 'We have processed two-thirds of our backlog and will be fully through our backlog next year.'
New projects will be accepted in 2026 and decisions made in two years, he added. '[We] expect them to be a high percentage of renewable and batteries.'
PJM's leadership is squeezed by conflicting climate policies in its domain, where blue states with strict clean energy mandates sit alongside red states that share Trump's romance with coal. When Pennsylvania's Democratic Gov. Josh Shapiro threatened this year to pull his state out of PJM over rising energy prices, PJM listened.
Would-be developers faced detailed analyses by PJM to make sure the new generation wouldn't overload the grid, notes University of Wisconsin, Madison, assistant professor Sarah Johnston. In PJM's case, three increasingly complex and expensive studies were required. Only at the end of the process did developers learn whether they would need to build new power lines or even substations to prevent possible overloading.
'Interconnection costs can be very high and are hard to predict,' Johnston and colleagues wrote in a 2023 analysis, with high-end charges reaching $41 million for a 100 MW plant. That is roughly one-quarter of the typical installation costs for a wind or solar generator plant, they said.
'Over half of the developers who reported withdrawing, suspending or pausing projects identified interconnection upgrade costs as a significant concern,' concluded Silverman, the former New Jersey regulatory counsel, and research colleagues who surveyed developers in the PJM queue for a 2024 report for the Columbia University Center on Global Energy Policy.
Agreements with landowners are only good for one or two years typically. 'And then you have to start the whole process over again,' Silverman noted. 'You can imagine how the projects deteriorate.'
AI stunner
If the backlog was a surprise, the generative artificial intelligence blockbuster stunned PJM and the rest of the industry.
In just the past two years, private-sector and government projections of power demand across the country through 2030 have changed a lot. Six months after the release of the Grid of the Future report in 2022, OpenAI released ChatGPT, triggering what is now a relentless drive by big tech companies to secure electricity supply. PJM's estimate of future peak demand skyrocketed.
PJM leadership is now riveted on the risk that existing coal- and older gas-fired power plants will retire faster than they can be replaced. Today, according to PJM, the grid has a comfortable level of spare capacity to meet the top demand forecast for this summer of 154 gigawatts.
By 2030, however, PJM predicts maximum demand could exceed 180 GW if enough power can be brought on line to satisfy data center developers. At the same time, today's peak capacity of 183 GW could drop by 40 GW if plant retirements go as planned, leaving PJM's market far short of supply.
To replace shuttered coal and gas plants with variable renewable power would require at least building 83 GW of wind, solar and storage, according to PJM.
Now, with energy scarcity dominating the outlook, the value of around-the-clock gas-fired and nuclear generation appears to have vaulted ahead of renewable power in PJM.
Evidence of this shift was the organization's decision this year to offer fast-track reviews to 'shovel ready' power plant projects that could have the biggest impact on future supply shortages. PJM's criteria favored gas plants, which ended up by far the biggest source of proposals, offering more than 16 GW of potential new capacity. Just one small solar project asked to be included in the process.
This month, PJM announced it had selected 51 of the projects, and natural gas unsurprisingly dominated the list. Storage projects were chosen, but the solitary solar proposal wasn't picked.
Opportunity lost
The Federal Energy Regulatory Commission has approved major changes in the interconnection process proposed by PJM that can help future solar, wind and storage projects, industry leaders and energy analysts say.
But many wish it had come sooner.
For example, PJM has scrapped a 'first-come, first-served' policy that considered projects as they arrived and now prioritizes proposals that are closest to construction. Many of the renewable energy projects that piled up in the queue previously were speculative, but they still took the time of PJM analysts. The new policy should help the strongest applicants, including renewable projects, advocates say.
Another proposed change, not yet approved by FERC, would make it easier for new generators to take over the grid connection of a closed-down coal or gas plant as long as the total power output didn't increase. A relatively simple, speedier review would replace the yearslong queue analyses.
'That's a really important piece of creativity that PJM has embraced in order to move things along more quickly,' Andrew Levitt, senior consultant at the Brattle Group and former PJM market expert, said in an interview.
'I don't know why it took them a while to get there,' he said.
'If these changes had been available three or four years ago, it would have been much easier to bring solar and battery storage on using the grid connections of retiring fossil plants,' said Hannes Pfeifenberger, a Brattle Group principal, in the same interview. 'It would have made a big difference.'
'The human condition can be summarized as we ought to, but we don't,' Pfeifenberger added.
'We would all say, 'How come it took so long?'' said George Hershman, chief executive of SOLV Energy, one of the largest U.S. solar project builders.
'We should have solar plants and storage plants at every decommissioned power plant in the country,' he said. 'It should have been a quick study.'
PJM, a nonprofit with more than 500 energy sector voting members — who can leave the organization if they choose — deserves great credit for managing a secure, competitive power market, says Rob Gramlich, president of Grid Strategies, a research and analysis firm. But the members aren't looking for more competition, he added.
'It doesn't help that probably the stakeholders in PJM — the incumbent companies — tend to benefit from high prices,' Gramlich said, adding that a jammed-up interconnection queue that blocks new entrants serves that goal. 'That's not PJM staff's fault, but sort of the structure of the situation.'
Hershman and other clean energy advocates hold on to hopes for solar power's future in PJM despite the darkening present.
Looking ahead, if Congress cancels the clean energy tax benefits in the Inflation Reduction Act, 'that is whole new kettle of fish that developers would have to look at very carefully' Silverman said.
'But in an alternative universe where PJM's interconnection queue is a predictable, two-year process,' Silverman said, 'I don't think there's any reason why you wouldn't see solar projects flooding back in to PJM. The economics are all there.'
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