Reactive investments in transmission infrastructure cost consumers more than they would otherwise need to pay for a reliable and clean electricity supply. When electric grid needs are identified in advance, proactive planning of transmission lines can solve multiple problems—reliability challenges, costly market inefficiencies, and lack of access to clean energy—at a lower cost for ratepayers compared to solving each of these problems with individual lines or upgrades.
Offshore wind represents one such opportunity. Transmission infrastructure is a key bottleneck in the development of offshore wind projects in the Delmarva Peninsula—the large peninsula on the East Coast occupied by the majority of Delaware, the Eastern Shore of Maryland, and the Eastern Shore of Virginia. Improved regional and interregional transmission planning are critically needed to minimize long-term cost and risk for offshore wind. Without full state level coordination, projects slated for construction in 2030 and beyond will face significant delays due to transmission and interconnection constraints and expensive transmission and interconnection costs.
Interconnection Costs
The cost to interconnect new offshore wind projects onto the Delmarva has already reached extreme levels, with additional radial interconnection (plugging in one project at a time) effectively cost prohibitive beyond the planned US Wind and Orsted projects. The power grid on Delmarva was not designed at a scale necessary to incorporate large amounts of new power generation. The extreme cost of interconnection for new projects is illustrated in recent Lawrence Berkeley National Lab study of conditions in PJM.
Interconnection costs for all energy projects actively moving through the PJM interconnection queue has increased eightfold from the 2017-2019 timeframe to the 2022-2022 timeframe. These increased costs are being driven by broader network upgrades. Said another way, the additional energy added to the grid by proposed power plants is exceeding capacity of not just the specific substation where a project chooses to plug in but also the broader network of transmission lines.
Delmarva is particularly challenging because of its bottleneck geography, and the Department of Energy’s data clearly shows that Delaware (where many Mid-Atlantic offshore wind projects would connect) has the highest overall interconnection costs of any state in the region. If Delaware, Maryland, and New Jersey are going to meet their offshore wind targets, and clean energy policies more broadly, there is no time to waste pursuing proactive transmission planning.
Transmission Planning
Fortunately, Delaware, Maryland and New Jersey have policy tools to pursue effective planning and have already begun to explore their options. For example, Maryland’s POWER Act legislation in 2023 authorized the PSC to investigate multi-state opportunities for proactive transmission planning. These states should accelerate work together to identify a path forward on transmission planning by the end of 2024, otherwise offshore wind projects in future procurement rounds will have no viable interconnection points on Delmarva and adjacent areas.
New Jersey previously used the State Agreement Approach (SAA), a FERC Order 1000 compliant mechanism for transmission expansion driven by state policies, to plan and invest in a shared interconnection point for offshore wind projects. SAA entails a state (or states) requesting that PJM plan for and aid in the solicitation of transmission solutions to help attain state policy goals—with the state or states voluntarily agreeing to a cost breakdown for that transmission. Though New Jersey previously decided to go it alone, there is nothing stopping Maryland or Delaware from working with New Jersey or other groupings of states to procure cost-saving transmission that could help multiple states meet their goals.
State Agreement Approach has occasionally drawn criticism due to the voluntary cost allocation mechanism. Under the recently enacted FERC Order 1920, RTOs like PJM must implement a long-term transmission planning process that includes a much broader range of factors than was previously considered, including state policies. Order 1920 also empowers states to work together to agree on cost allocation for lines that benefit multiple states, much like SAA. The key difference is that Order 1920 also requires transmission owners (utilities) to develop an ex-ante cost allocation mechanism that follows a beneficiary-pays framework. This mechanism will require cost sharing to some extent if states cannot agree, with details yet to be determined.
These are all significant improvements to transmission planning, and it may seem prudent to await Order 1920 implementation. However, the timeline for Order 1920 implementation, especially considering uncertainty around litigation, will take far too long to result in actual transmission buildout. Consumers may be left paying for additional unplanned and, by extension, costly transmission (such as the solutions planned for the Brandon Shores’ coal plant retirement) while PJM-wide transmission planning is sorted out. Furthermore, given that coastal states including Delaware, Maryland, and New Jersey are likely to reap the largest benefits from proactively planned transmission built to support offshore wind, there is little reason to wait for Order 1920 to start working on a cost-allocation agreement.
A multi-state SAA focused on the Delmarva Peninsula (and potentially other states) would capture most of the costs and benefits that would come out of a regionally-planned transmission project and save consumers money compared to a go-it-alone approach by the states. There’s past evidence of these cost savings—the New Jersey Board of Public Utilities estimated that their proactively planned & coordinated SAA transmission projects will save New Jersey ratepayers $900 million compared to the cost of transmission without utilizing this coordinated approach.
Ensuring adequate, affordable, and timely transmission access for offshore wind is critical to achieving state’s offshore wind goals and we look forward to further coordination with the PJM states to maximize consumer benefits.