For several reasons, most CHP systems need to interconnect with a local utility's electrical distribution system to operate economically. Electric usage at a particular site may be highly variable, and when the electrical generation equipment is sized to meet the bulk of customers' "baseload" needs, customers still tend to rely on grid power during peak times. Typically it is not economically viable to install enough generation to serve peak needs and thus leave expensive generating capacity unused during other hours. Furthermore, because many CHP systems are sized to serve a site's thermal load, not its electric needs (with electricity effectively a by-product of the heat production), sites where electric load perfectly matches thermal needs are relatively rare.
It is also important to remember that it is in society's interest for CHP customers to stay connected to the grid. Interconnection allows CHP to help assure reliability, and for customers using CHP to remain ratepayers that continue to help pay for the electric delivery infrastructure.
Because CHP customers want or need to interconnect with the grid, predictable, transparent and fair interconnection processes and standards are critical to the development of a viable CHP industry. In particular, developers need the ability to accurately budget both time and money for the interconnection process, including any required studies, and clear standards detailing any necessary protective equipment. For the CHP industry to thrive and provide all of its potential benefits to the public, interconnection standardization, both on larger geographic and in broader technical areas, must be achieved.
Network electric distribution systems, as opposed to radial configurations, pose special challenges. The critical missing link in interconnection policy is a clear standard for interconnection to the network distribution systems that are common in major cities, where power prices tend to be high and the density of activity and thermal load can make CHP an attractive option for many potential customers. Unfortunately, for technical and other reasons, interconnection standardization has advanced mainly for radial systems, and network interconnections continue to be approved on an ad hoc basis. The Massachusetts Distributed Generation Collaborative is addressing network interconnection issues. Most standardized interconnection procedures are limited to the relatively simpler radial distribution systems.
Several states have begun developing standardized interconnection requirements (SIRs) that will apply to all the utilities in each state. For example, New York State recently adopted an interconnection standard for distributed generators of 2 MW or less, and the Massachusetts DG Collaborative completed a model interconnection tariff that was approved in February 2004. Other states that have standardized interconnection procedures include New Jersey, Texas, and California, and many other states are considering or have initiated processes to establish them.
The Federal Energy Regulatory Commission (FERC) has also addressed interconnection standardization, and has developed an interconnection rule for small generators up to 20 MW in size. The rule, established in Order No. 2006, applies only to interconnections with facilities that already are subject to FERC jurisdiction; the Commission emphasizes that the rule does not apply to local distribution facilities under state jurisdiction. However, despite acknowledging that the rule will not apply to most CHP interconnections, it does advance the interconnection goal. Much of the rule is based on pre-existing state policies, and the FERC rule may serve as a model for states newly adopting interconnection standards. Both factors could help improve consistency throughout the nation.
The Order includes two components: the Small Generator Interconnection Procedures (SGIP), which describes the technical procedures that utilities and customers shall follow, and the Small Generator Interconnection Agreement (SGIA), which defines the legal rights and obligations of each party, addresses cost responsibility, lays out milestones for completing the project, and sets forth a process for dispute resolution. The SGIP contains three distinct ways to evaluate an interconnection request. One, a Fast Track Process for certified (or precertified) generators up to 2 MW, which uses technical screens to evaluate interconnection requests, will be most interesting to CHP developers. The other two processes are a 10 kW inverter process for small inverter-based technologies, and a default Study Process applying to all other generation under FERC jurisdiction up to 20 MW.
In addition to the State and federal regulatory initiatives listed above, several other organizations are working to promote standardization. The National Association of Regulatory Utility Commissioners (NARUC) has published a Model Interconnection Procedures and Agreement for Small Distributed Generation Sources and the Interstate Renewable Energy Council (IREC) has posted a "DRAFT - Model Distributed Generation Interconnection Procedures and Net Metering Provisions." Also notably, interconnection policy took a leap forward in 2003 with the adoption of IEEE 1547: "Standard for Interconnecting Distributed Resources with Electric Power Systems" , which is part of a series of interconnection standards being developed by the Institute of Electrical and Electronics Engineers (IEEE).
Standards, and State and Other Activities