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U.S. Department of Energy Energy Efficiency and Renewable Energy

Interconnection for Distributed Energy Resources

Distributed energy resources (DER) project facilitators and operators must address interconnection and permitting. Experience shows that inattention to the issues could be show-stoppers in the implementation process.

DER owners and operators must conform to the rules that have been set by environmental agencies and utility regulators. This takes time and money, so managers must anticipate these issues when planning for the installation of DER.

The following information is intended to help Federal agencies understand interconnection for DER systems, including:

Overview

DER can be standalone or interconnected to the grid. Simply put, interconnection refers to technical, contractual, rates, and metering issues that must be settled between the system owner, the utility, and local permitting authorities before the system is connected to the grid.

The problem facing DER interconnection is that the utility distribution system was not designed for DER operation. Unless the DER-utility interface is properly designed, a DER installation is a safety concern and could threaten the reliable operation of both the electric distribution system and DER equipment. DER equipment manufacturers, vendors, and installers; the Institute of Electrical and Electronics Engineers (IEEE); energy and environmental regulators; and many others are working to address the interconnection problem.

However, until standardized interconnection requirements are put into place, facilities interested in implementing DER should consider the issues around interconnection and how to overcome them.

Permitting includes the granting of permission by local and other authorities to site DER. Besides air and water permits, customers installing DER must often comply with local code and zoning requirements. Occupational Safety and Health Administration (OSHA) requirements may also need to be met. Larger DER projects may confront requirements set by the endangered species, wetlands, and historic preservation programs.

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Potential Barriers

Potential barriers to getting a DER system interconnected to the grid include technical, regulatory, and business practice barriers.

Technical barriers relate primarily to your local utility's electrical interconnection requirements, which are meant to ensure that your DER will not negatively affect the reliability, safety, and power quality of the electric grid system. Other technical barriers can include fuel availability or storage; space limitations; power quality impacts; fire, safety, and zoning requirements; and operations and maintenance issues.

Regulatory barriers include issues that arise from or are governed by statutes, policies, tariffs, or regulatory filings by utilities. Specifically, these include the numerous permits and approvals that may be required to move your DER project to the operational stage. These can be economic as well as regulatory barriers because time, effort, and money go into overcoming them. Because many permits require fixed fees regardless of the size of the DER project, the impacts on smaller projects can be greater than those for large projects. Other barriers arise because of utility regulations. Standby charges are assessed because the utility is obligated to serve your load if the DER is not available and the utility must maintain adequate distribution facilities. Exit fees repay the utility for distribution facilities already built that are "stranded" because your DER reduces the utility's return on investment. Similarly, regional transmission charges may be assessed for stranded transmission assets.

Business practice barriers involve the contractual and procedural requirements for interconnection, including contract length and complexity, contract terms and conditions, application fees, insurance requirements, and the timeliness of utility responses. DER projects should be easier to implement in states that have standardized interconnection requirements, such as California, New York, and Texas.

While local restrictions on grid interconnection place a burden on the individual or company that intends to buy and use the generator, they also cause difficulties for the manufacturers, distributors, and installers of DER technologies.

  • Manufacturers face uncertain requirements for their equipment, which could lead to over-design of a system to meet overly conservative requirements or, alternatively, could lead manufacturers to build a system that may not meet utility requirements in some areas.

  • Distributors face local restrictions that can drive up costs because of the need to track the local requirements and to stock items appropriate for a variety of requirements. Distributors may also incur additional costs if a system is delivered to a client that does not meet the requirements of that electric utility.

  • Installers face additional time, labor, and materials in determining the local utility's requirements and meeting those requirements.

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Overcoming Barriers

Federal energy managers considering DER systems at their facilities are encouraged to investigate interconnection requirements and potential barriers early in the system evaluation process. The first step in successfully navigating potential technical barriers in the interconnection of your DER system is finding a contact person at the utility and asking for their interconnection guidelines. Although the utility might not have formal guidelines or rules, someone there should be responsible for handling interconnection requests. Some utilities have expedited or simplified rules for certain types of DER. For example, renewable energy systems producing less than 10 kilowatts (kW) may require nothing more than an inspection by the utility. Larger DER installations may require an engineering review or even a full-fledged study. A study can take a utility from two to six weeks to perform and you will probably be required to pay the utility's costs to conduct it. The result may be that protective equipment or other hardware must be installed, and you will be required to pay for that as well.

How can you tell if the utility's demands are appropriate for your specific installation? And, how do you make sure that the process is handled with a minimum of delays? Here are some tips:

  • Ask the utility contact for proper application forms and make sure you understand the technical data they are requesting. You or the contractor will have to provide this data when applying, and you may need to contact equipment vendors or other resources to obtain the data. If your power provider does not have an individual assigned to deal with grid-connection requests, try contacting your public utilities commission, state utility consumer advocate, or state energy office.

  • Ask the utility to specify how long it will take to process the application and what fees must be submitted with it.

  • Investigate all potential utility charges that may apply to your system, such as standby charges, exit fees, or regional transmission charges.

  • Utility commissions in some states have established regulations specifying the interconnection process. Find a contact person at your state's utility commission and ask for any guidelines or rules that apply. Also ask whom to contact for dispute resolution if that becomes necessary.

  • Requirements for smaller DER systems should be easier, especially those for renewable energy systems. For installations under 10 kW, requirements are often minimal or non-existent. This is particularly true for renewable energy systems. For systems up to 100 kW, a study is likely to be required, but it should not take more than a few hours for the utility engineer to determine impacts, and interconnection requirements should not be great. Above 100 kW, the impacts on the utility system can be significant, so a more in-depth study, or series of studies, is likely to be needed and interconnection costs are likely to be higher.

  • If the DER will be used for on-site power requirements only and no power will be exported or sold back to the utility, the interconnection requirements may be different from those for an exporting condition. For safety, utilities will require that the DER has protection equipment that will disconnect it if the utility system shuts down.

  • If the utility has an interconnection handbook, as many do, it will specify the process and requirements both for the utility and for the DER applicant. It should also specify time limits for various steps in the process and what costs must be borne by the applicant.

  • Some utilities have expedited rules for "certified" DER equipment (i.e., systems that have been tested and approved for use on the utility's distribution system).

  • The Institute of Electrical and Electronics Engineers (IEEE) has developed a standard labeled P1547 for interconnection of DER facilities. States are expected to adopt this new standard. If your facility meets this proposed standard, the process should be expedited.

  • If possible, find out what other facilities in your utility's service area have done or are considering in terms of DER projects. Other facility managers may be able to offer you valuable advice based on their own experiences. If your DER project involves the use of natural gas or propane, don't forget to contact your local gas utility if it is not the same as your electric utility. Your gas utility may have additional or different requirements and procedures for implementing DER projects.

It is often possible to require your DER contractor to take care of all necessary interconnection and permitting studies, paperwork, and fees as part of the project contract. Such integrated service providers (ISPs) can simplify the implementation of DER projects and bring needed expertise and experience in navigating the interconnection and permitting processes. The DG Monitor newsletter has provided an overview of ISPs, including some examples of such companies located across the country. For more information, see the July/August 2002 (PDF 242 KB) and the March/April 2003 (PDF 205 KB) issues. Download Adobe Reader.

For more information on the potential barriers to interconnecting DER systems, see Making Connections: Case Studies of Interconnection Barriers and their Impact on Distributed Power Projects (PDF 1.9 MB). This document reviews the barriers that DER installers encounter when attempting to interconnect to the electrical grid and provides solutions for overcoming those barriers.

For more information on planning DER systems, see Using DER: A How-To Guide for Federal Facility Managers (PDF 422 KB).

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Interconnecting Renewable Energy DER Systems

All power providers face a common set of issues in connecting small renewable energy systems to the grid, so you will likely encounter regulations regarding safety and power quality, contracts (which may require liability insurance), and metering and rates. You can learn more about the types of regulations that you may encounter in working with your utility to connect your system to the grid from the following links:

Additional information on interconnection issues and guidance particular to renewable energy DER systems is available on the Department of Energy Consumers Guide to Renewable Energy Web site.

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