Federal regulation of buyer hundreds situated subsequent to present energy producing services, known as “co-located hundreds,” have develop into a big space of curiosity for the electrical trade. Giant industrial hundreds have taken an curiosity on this configuration as a result of it guarantees a sooner, streamlined pathway to interconnecting to the grid and assembly their energy provide wants.
Information facilities, particularly, function 24/7 and require dependable and steady sources of electrical energy, however many different massive hundreds together with, for instance, electrolyzer services (that are used within the manufacturing of inexperienced hydrogen) are exploring co-location. Whereas the precise electrical configuration might differ, beneath one fashionable strategy, the info middle load is served totally and solely by the co-located generator pursuant to a long-term energy buy settlement. This explicit kind of association has led to disputes between builders and conventional regulated utilities on troublesome points together with grid reliability and value allocation.
COMMENTARY
As these points proceed to play out throughout a number of boards and proceedings, events are on the lookout for some measure of certainty that their desired enterprise preparations will cross regulatory muster and supply a cost-efficient, dependable supply of energy.
Based mostly on the current progress in knowledge middle hundreds nationwide, curiosity in co-location choices is prone to enhance. At present, solely 15 states account for 80% of the nationwide knowledge middle load. However with knowledge middle progress forecast to exceed $150 billion by 2028, a concrete and unified regulatory regime for co-located hundreds is changing into more and more essential.
How have regulators handled co-located load preparations from a authorized/regulatory perspective? On Nov. 1, 2024, the Federal Power Regulatory Fee (FERC) addressed the difficulty of co-location of huge hundreds at present producing services in two separate dockets. First, in Docket No. AD24-11, FERC convened a technical convention addressing lots of the points raised by one of these enterprise association. Second, in Docket No. ER24-2172, FERC issued an order rejecting an amended interconnection service settlement (ISA) within the PJM area that sought to facilitate one such co-location association. In each proceedings, FERC addressed considerations and points involving co-located hundreds with respect to reliability, price allocation, and nationwide safety. Each of those regulatory developments are mentioned beneath.
Commissioner-Led Technical Convention Addressing Key Points
On the technical convention, sure commissioners had differing opinions on FERC’s position with respect to co-located hundreds. Chairman Phillips expressed his concern about nationwide safety and the necessity to promote and protect the U.S. aggressive benefit within the synthetic intelligence (AI) trade, taking the place that facilitating the interconnection of huge hundreds by co-location is a matter of nationwide safety and is thus certainly one of FERC’s chief obligations. On the different finish of the spectrum, Commissioner Christie displayed a extra cautious strategy to co-located hundreds due to the potential impacts on reliability (mainly within the type of useful resource adequacy) and considerations of honest allocation of prices and the likelihood that this association will keep away from non-bypass-able expenses that each one retail hundreds should pay.
Among the key takeaways from the technical convention:
Find out how to body the useful resource adequacy concern: Opponents to the co-located load construction argued that taking some or the entire capability from an present generator and dedicating it to serve a behind-the-meter co-located load will lower the grid’s capability, hindering reliability. Proponents argue that these hundreds would require capability whether or not they’re situated in entrance of the meter or behind the meter.
There’s a diminished useful resource adequacy that isn’t a priority if the co-located load brings its personal technology (i.e., interconnects alongside new technology that’s developed particularly to serve that load, whether or not in complete or partly). However that idea comes with extra points, for instance, if the technology should enter the interconnection queue, which might create delays.
Panelists disagreed as as to whether classes discovered from mixed warmth and energy hundreds might be used within the context of knowledge middle load progress or whether or not new load fashions wanted to precisely forecast the expansion.
Each panelist agreed that enormous hundreds should pay their justifiable share of prices, however they disagreed on what these prices entail. Opponents argue co-located hundreds usually are not remoted from the grid and may bear some stage of transmission expenses as a result of they use ancillary companies, corresponding to black begin, and profit total from being related to the grid, which will be accessed for different energy provide when the on-site technology fails to function. Proponents argue that system safety schemes can actually totally isolate hundreds, and to the extent that such hundreds (or, extra exactly, the turbines themselves) use ancillary companies from the grid, the worth of these companies will be quantified (however might be a de minimis quantity).
FERC is in search of feedback on the problems mentioned through the technical convention, that are due on Dec. 9, 2024. These feedback will assist develop a document for FERC to probably take some motion—whether or not that be a coverage doc, a discover of proposed rulemaking, or a call to handle these points on a case-by-case foundation. Any events taken with these points ought to think about contacting their power regulatory counsel with any questions or for help submitting feedback within the docket.
A Setback, However Not the Final Phrase
FERC’s November order rejected PJM Interconnection’s (PJM’s) proposed modification to the Susquehanna ISA, dealing a big blow to knowledge middle builders in search of to make use of present interconnections to speedily join their tasks to the grid. In a cut up 2-1 choice, FERC rejected PJM’s proposed nonconforming provisions within the Susquehanna ISA that may have allowed the generator to switch its interconnection services to interconnect a big load and totally serve it from the generator, with out utilizing energy from the transmission system or designating the load as a Community Load (a so-called Totally Remoted Co-Positioned Load). The bulk consisted of Commissioners Christie and See, with Chairman Phillips submitting a separate dissent and Commissioners Rosner and Chang abstaining.
The bulk discovered that PJM failed to fulfill the “excessive burden” positioned on non-conforming provisions to a transmission supplier’s professional forma settlement on file at FERC. Below that normal, “non-conforming agreements could also be mandatory for interconnections with particular reliability considerations, novel authorized points, or different distinctive elements.” In different phrases, the problems that warrant deviation from the professional forma settlement have to be particular and distinctive to that individual interconnection. However the majority discovered that the Susquehanna ISA didn’t meet that normal as a result of it relied closely on the “PJM Steerage on Co-Positioned Load” doc issued in March 2024, which FERC discovered was supposed to be usually relevant to all equally located interconnection clients and thus was not distinctive to that particular interconnection.
In a separate concurrence, Commissioner Christie, who led the bulk within the FERC order, asserted that he’s retaining an “open thoughts” on co-location, however the details of this explicit continuing have been inadequate for PJM to fulfill its burden of proof. Commissioner Christie additional acknowledged {that a} comparable co-location association could also be permissible beneath the Federal Energy Act, however the one proposed right here didn’t cross muster. For Commissioner Christie, the important thing points that must be addressed are grid reliability and shopper prices, which can be additional addressed following the November technical convention.
Chairman Phillips’ dissent argued that this continuing “represents a ‘first of its sort’ co-located load configuration” that warranted approval by FERC as proposed. By accepting the ISA and directing PJM to submit common informational filings that monitor sure points beneath dispute, PJM might have then labored by its stakeholder course of to develop a usually relevant coverage addressing co-located load points.
Chairman Phillips emphasised nationwide safety, as he did through the technical convention, which he believes is compromised if FERC creates “roadblocks” to the interconnection of knowledge middle hundreds wanted to advertise progress of the AI trade within the U.S.
Subsequent Steps
How can events have interaction within the ongoing dialogue impacting co-located load preparations? These points are nonetheless being performed out throughout the nation, affording numerous alternatives to develop into concerned, together with earlier than FERC within the PJM area and earlier than state commissions, such because the Maryland Public Service Fee. With a stronger document and new commissioners who’ve had extra time to study these points, it is vitally potential that FERC coverage will coalesce within the coming months in a approach that gives larger regulatory certainty for builders pursuing co-located load preparations.
Both approach, as FERC grapples with these points, trade individuals who’ve relied on, or are taken with, self-generation choices ought to monitor additional developments intently, to make sure their pursuits in self-generation choices sooner or later usually are not impaired or prevented. Power regulatory counsel ought to be consulted for help with taking part in FERC’s processes and monitoring developments and co-located hundreds. By remaining lively in these proceedings, builders can be advantageously positioned to adjust to future FERC precedent and account for the anticipated load progress of co-located assets.
—William D. DeGrandis is a companion, Gregory D. Jones is of counsel, and Alexander S. Kaplen is an affiliate within the Company Division on the Paul Hastings legislation agency.
