Clean energy groups got to work on the first part of the challenge back in 2024, asking FERC to force PJM to restructure how it studied the grid impacts of adding new resources to an existing generation or battery project. They cited a number of technical barriers that PJM imposed but other grid operators didn’t.
But that alone hasn’t opened up the market, Gordon said. In fact, no new SIS project has moved forward in PJM since those changes were made. That’s because it still hasn’t dealt with the second part of the challenge — related to how it differentiates between old resources and new resources at the same point of interconnection.
To understand this barrier, keep in mind that owners of power plants, wind and solar farms, and batteries sign power purchase agreements with utilities, corporations, municipalities, and other offtakers that commit the generators to deliver the energy and capacity from those projects for years into the future. Adding a new resource at the same grid interconnection point will require some modification to those contracts.
That’s especially true if the owner of a project wants to sell the capacity value from the newly added resource — say, a battery that’s storing power to deliver at times when the solar or wind farm isn’t generating power — to a different customer altogether.
In parts of the country where SIS projects are moving forward, grid operators have structured straightforward rules around such contracts, said Connor Valaik, a senior transactions manager at LevelTen Energy, a company that manages markets for these kinds of deals.
He offered the example of Southwest Power Pool, which “makes it easier to add batteries to existing resources,” even in “places where you have an existing PPA, even with a different offtaker. You can add surplus storage, and sell the capacity rights from that.”
But PJM’s existing market rules mean this is almost impossible. In essence, PJM insists that a “hybrid resource” — a power project that combines more than one type of technology — be treated as a single “market unit” in both its energy markets and its capacity markets.
That’s a near-insurmountable barrier to arranging workable deals between existing and new customers who might want different values out of the old and new resources being combined, said Katie Siegner, a manager on RMI’s Clean Competitive Grids team.
For example, PJM rules would bar a solar farm from continuing to comply with a contract to deliver power to an existing offtaker while also adding batteries that could provide valuable capacity to a data center looking to offset its impact on PJM’s grid. “The solar and battery might have different offtakers, different obligations,” she said.
To fix this problem, PJM has proposed a set of changes that, in essence, will allow hybrid projects to separate the contributions of their different resources in both PJM’s energy market and capacity market. “You might think of it as an itemized receipt,” Siegner said. “It makes it easier to split the bill.”
These market rule changes could still be a long way off. Even if PJM moves proposed reforms through swiftly, FERC’s approval of them might take until late next year.
That slow pace is “frustrating,” Advanced Energy United’s Gordon said. “We’re not talking about physical limitations to the grid. We’re just talking about this quagmire of administrative processes and legal rights.”
If the barriers to surplus interconnection service can be lifted, that could spur a lot of investment in batteries, relatively cheaply and speedily, he said. “Given PJM’s desperate situation for capacity, anything that would help PJM manage peaks better — like getting batteries online — would make a massive difference.”
In particular, data center developers might want to bankroll batteries. Data centers are under increasing pressure from state and federal regulators to build their own capacity resources to avoid pushing more costs onto everyday customers — and PJM’s attempts to solve that problem have been stalled.
Earlier this month, FERC rejected PJM’s painstakingly developed plan to require data centers and other “large loads” to supply their own capacity or face having their power cut off during grid emergencies.
Given that setback, data center developers and other PJM stakeholders that are trying to curb rising electricity prices are eager for options that can serve their needs as quickly as possible, Siegner said — and surplus interconnection is one of the best ones out there.
“I would like to think that if you threw a battery onto an existing solar project, given how capacity-constrained PJM is today, you could find someone as an offtaker,” she said.
