US utilities, independent power producers eye 'solvable' development challenges

Grid interconnection bottlenecks remain a major development hurdle for US renewable energy and battery storage projects, but independent power producers and utilities see a series of additional obstacles as they race to bring online more supplies to meet surging demand for electricity.

Chief among them are supply chain challenges, project permitting requirements, and landowner and community relations, according to market participants.

"It's that interface of those at least four commercial components layered on top of [the interconnection queue] that are really kind of driving some real concerns and some challenges for the industry. ... Solvable challenges, but challenges nonetheless," Conor Branch, a senior vice president and head of business development at Enel Green Power North America Inc., said Dec. 4 during a panel discussion at the Reuters Events Energy Live event in Houston.

The subsidiary of Italy-based energy giant Enel SpA has 32 GW of wind, solar and storage assets under development in North America.

Lengthy regulatory proceedings, such as waiting for actions from the Federal Energy Regulatory Commission or grid operators, can delay projects and add costs, added Kelly Snyder, senior director of origination at EDP Renewables North America LLC, an affiliate of Portugal-based EDP SA.

That can put smaller buyers of renewable energy at a disadvantage.

"It makes me feel a little bit sad for the small buyers, because the small buyers are having a difficult time adjusting to the prices where they are," Snyder said. "They can't move as fast as everybody else, [like] the big tech [companies]. Hopefully, some of this ... goes away, but the reality of the situation is they get pushed out."

North American power purchase agreements for solar, the leading source of newly installed capacity, have more than doubled since the first quarter of 2020, according to PPA marketplace operator LevelTen Energy Inc.

The Meta model

Entergy Corp.'s recently unveiled electric service agreement with Facebook parent Meta Platforms Inc. to power a new datacenter in Louisiana is a model for future stakeholder collaboration, according to one utility executive at the event.

"The great success with what they've announced with Meta last month, from initial contract to when they energize, is [a timeline of] sub-36 months," Muss Akram, vice president of utility strategy at CenterPoint Energy Inc. "That, in and of itself as an announcement, is incredible. The industry hasn't done this in 60, 70 years."

The deal was accomplished because Meta, Entergy, regulators and parish government all got together in one room, Akram said.

"I can't think of another deal that's happened that fast where a load of, let's call it three to four gigawatts, is coming online at that speed with new construction," Akram said.

Previously, there wasn't a focus on load as a participating stakeholder in the process, according to Enel's Branch, noting that big buyers now have become key collaborators in driving business for new generation and helping to solve supply chain complexities.

"We're competing now for high-voltage equipment in a way that wasn't typically present when there were very scarce loads," Branch said. "That's another challenge, but also an opportunity for the industry to see how [we can] marry up those interests in a variety of ways."

Under recently enacted state law in Texas, utilities such as CenterPoint must submit their expected load as part of their regional transmission planning process every year, Akram said. For CenterPoint, large load growth is expected to come from datacenters, the emergence of a hydrogen market, additional energy exports, the electrification of medium and heavy-duty transportation and the electrification of industry, the executive added.

'Never been a more exciting time'

Power grid disruptions in Texas in recent years highlight the need for winter weatherization and new supply-side resources, including generation and battery storage.

"For those of you who live in Houston, I apologize for the interruptions you experienced after Hurricane Beryl," Akram said. "We are working on it. The grid will be more resilient."

The Electric Reliability Council of Texas Inc. interconnection queue, like those in most other regions around the US, is dominated by renewables and batteries. CenterPoint is focused on how to most closely synchronize supply, transmission and load, Akram said.

"That's how we've been thinking about it over the last year," he said.

Although new infrastructure will be necessary to meet load growth, including upgrading transmission lines, demand response will also be necessary, Akram added. This includes a focus on improving the efficiency of buildings and deploying heat pumps at homes, he said, pointing to an ERCOT-commissioned study that cited the potential to reduce peak demand by 19 GW.

"There's never been a more exciting time to be in this industry," Akram said.