What Does It Actually Mean for a Project to 'Have Interconnection'?

If someone tells me a project "has interconnection," my next question is always the same: What exactly does that mean?

It can mean the project submitted a request. It can mean it has a queue position. It can mean the system studies are finished. It can mean the interconnection agreement is signed. It can mean the utility-side facilities are built and the project is energized.

Those stages are not remotely equivalent. A development model that treats interconnection as a yes/no field is therefore hiding one of the largest sources of cost and schedule risk in the project.

At the most basic level, interconnection is the process that answers whether a specific project can connect at a specific point, what the grid needs in order to accept it, who pays for that work, and when the connection can actually be used.

The queue is part of that process. It is not the whole thing.

Start with the point of interconnection

The point of interconnection, or POI, is the electrical location where the project connects to the transmission or distribution system. That sounds like an engineering choice. It is also a commercial assumption.

Two sites with the same resource, same EPC cost and same PPA can have completely different economics because they connect at different nodes. One may need modest substation work. The other may trigger a line rebuild or transformer upgrade that kills the project.

The location also affects the gen-tie, land rights, losses, basis exposure and schedule. So when the development team is still evaluating POIs, the finance team should not lock one interconnection cost into the model and move on.

The POI is still an assumption.

What the request actually contains

An interconnection request is not a generic request for permission to build a solar plant. It describes a particular facility.

The request includes the project size, technology, site, electrical characteristics and proposed POI. A battery may have both import and export requirements. A hybrid project may have multiple resources behind one connection. An inverter-based project behaves differently from a synchronous generator during faults and voltage events.

The grid operator or transmission provider studies that configuration against the system. The studies are trying to answer questions such as:

• does the project overload existing equipment?
• does it create a voltage problem?
• does short-circuit duty exceed equipment capability?
• does the system remain stable?
• what protection or control changes are needed?

The finance team does not need to reproduce the power-flow study. It does need to understand what happens when the answer is "this project works, but only if we build another $40 million of transmission equipment."

A queue position is a place in a process, not a grid right

This distinction matters because queue positions can acquire a lot of psychological value inside a development company. A project may have been in the process for years. That does not mean it has the right to inject 200 MW.

Under the FERC Order 2023 framework, transmission providers moved toward cluster studies and stronger readiness requirements, including site control, study deposits, commercial-readiness deposits and withdrawal penalties. The idea is to spend study resources on projects that are more likely to be real.

The queue therefore does two jobs. It organizes the study process, and it defines which other projects are being studied against the same network.

The second one is the dangerous part. Your project can change economics because somebody else leaves.

A withdrawal can change which upgrades are needed or how costs are allocated among the projects that remain. This is why a study result can move even when your own MW, equipment and site have not changed.

The milestones finance should distinguish

I would keep interconnection status in the model as a ladder, not a checkbox.

Status	What it tells you	What it does not tell you
Request submitted	Project entered the process	Cost or schedule
Cluster / system study underway	Grid impacts are being evaluated	Final upgrade scope
Study complete	Current facilities and cost assignment known	Final construction cost
Facilities study / design advanced	Scope is more detailed	Utility work is complete
IA executed	Contractual rights and obligations are documented	Project is energized
Utility facilities complete	Grid-side physical work is ready	All testing / COD conditions are met
Energized / in service	Connection is usable	Every financing milestone has necessarily occurred

That table is much closer to the way a lender sees the project. "Queue position secured" can be a development milestone.

"Executed IA" can be a bankability milestone. "Energized" is an operating milestone.

They should not share one Boolean cell.

The study result is where engineering turns into capex

A study can come back with direct interconnection facilities, broader network upgrades, operating requirements, or some combination. The project may need substation equipment, protection changes, a transformer, line work, reactive support or other transmission-system upgrades.

The dollar amount is only half the issue. The other half is who builds it and when.

If the work sits inside the EPC scope, the sponsor has a contract with a contractor and a familiar risk allocation. If the work sits with the transmission owner, the project can become dependent on utility procurement, outages, internal engineering and construction schedules that do not sit under the EPC LD regime.

That is how a plant can be mechanically complete and still have no commercial output. For finance, interconnection cost and interconnection schedule belong in the same discussion.

The network-upgrade article goes into that result in detail.

The IA turns the study into obligations

The interconnection agreement is where the project stops dealing only with studies and starts dealing with a contract. For large generators under FERC jurisdiction, the pro forma LGIA is the starting architecture, with regional tariff variations and accepted departures.

From a financing perspective, I care about a handful of questions:

• what MW and configuration are actually covered?
• what facilities have to be built?
• who builds them?
• what security or payments remain outstanding?
• what milestones apply?
• what happens if the project misses them?
• can the agreement be assigned or pledged?
• what operating requirements survive COD?
• what transmission-owner work is still on the critical path?

An executed IA can remove a huge amount of uncertainty. It does not remove construction risk.

Energization deserves its own date

One of the cleanest ways to make a project schedule more realistic is to stop using COD as the only end-of-construction date. At minimum, I would separate:

Project facilities complete
Transmission-owner facilities complete
Network upgrades ready
Initial energization
Commissioning / testing
Full interconnection service
PPA COD
Debt conversion
Tax-equity funding

In the base case, some of those dates may be identical. That is fine.

The reason to keep them separate is the downside case. A transformer delay on the utility side can move energization without changing EPC mechanical completion. A PPA may have its own COD test. Tax equity may need placed-in-service evidence and other deliverables. The construction lender may have a separate conversion test.

One delay can therefore hit four financing documents differently. That is a much better description of completion risk than "COD slips three months."

Storage makes the request more interesting

A standalone battery may need the right to import as well as export. A co-located battery may share a POI with solar. The commercial model may assume the battery charges from the grid in some hours, from the solar plant in others, and exports when the host project is not using the full interconnection capacity.

None of that should be assumed merely because the assets are on the same site. The studied operating configuration matters.

For a hybrid, I would want clear answers to:

• what is the maximum net export at the POI?
• is grid charging allowed?
• was simultaneous generation and charging studied?
• are controls required to keep injection within a limit?
• does adding the battery require a modification or restudy?
• does the storage configuration change assigned upgrades?

A storage model can optimize a dispatch pattern the project does not actually have the right to run. That is not a modelling nuance. It is a revenue error.

Order 2023 changed who gets to stay in the process

FERC's Order 2023 was aimed at a queue system that had accumulated too many speculative or immature requests. The final rule moved the pro forma process toward first-ready, first-served cluster studies. It also increased the financial and site-control requirements for projects to enter and remain in the queue. FERC requires 90% site control at the interconnection request stage and 100% by execution of the facilities study agreement, subject to limited alternatives where regulatory restrictions make site control infeasible.

The commercial-readiness deposits also become more meaningful as the project advances. At later stages they are tied more closely to identified network-upgrade costs.

For a developer, the queue is therefore no longer just elapsed time. It is a ladder of capital commitments.

The next article is about that ladder: when deposits increase, why withdrawals matter, and how much development capital is really at risk before the project has a financeable IA.

What I would put in the model before the studies are done

Not one interconnection cost. Use cases.

For example:

Case	Upgrade cost	Utility delay	Project decision
Good	$10m	0 months	keep moving
Base	$35m	3 months	keep moving
Bad	$70m	9 months	re-underwrite
Kill case	$110m	18 months	likely exit

The numbers are assumptions. The exercise is the important part.

Before the study arrives, the investment committee should already know roughly where the project breaks. If a $70 million result still produces an acceptable return, the team can react quickly.

If $70 million destroys the project, everyone should know that before the study lands, not after another deposit is posted. The interconnection team is trying to get the project connected.

The finance team has a slightly different job: understand what connection is worth paying for. Those are not always the same answer.

Sources: FERC — Order No. 2023 Fact Sheet · FERC — Order No. 2023 Explainer · FERC — Order No. 2023-A Explainer · FERC — Large Generator Interconnection Rules