Sustainability Atlas
Clean Energy·14 min read··...

Trend analysis: Power markets, permitting & interconnection — where the value pools are (and who captures them)

Signals to watch, value pools, and how the landscape may shift over the next 12–24 months. Focus on interconnection queues, permitting timelines, and bankability constraints.

By the end of 2024, approximately 2,300 gigawatts of generation and storage capacity sat waiting in U.S. interconnection queues—representing more than 1.7 times the entire installed capacity of the American power grid (Lawrence Berkeley National Laboratory, 2025). Across the Atlantic, the situation proves equally sobering: over 1,700 GW of renewable energy projects remain blocked in European queues, with some wind developments facing nine-year wait times for grid connection (Beyond Fossil Fuels, 2024). These figures underscore a stark reality: while clean energy technology costs have plummeted and policy incentives have surged, the physical and regulatory infrastructure needed to deliver electrons from source to load has become the binding constraint on the energy transition. This analysis examines where value is accumulating in power markets, permitting, and interconnection—and which stakeholders are positioned to capture it over the next 12–24 months.

Why It Matters

The interconnection bottleneck represents far more than an administrative inconvenience; it constitutes a fundamental threat to climate targets and energy security. In the United States, 95% of capacity currently sitting in interconnection queues consists of solar, wind, and battery storage—the very technologies required to decarbonize the electricity sector by 2035 (FERC, 2024). Yet only 13% of projects that submitted interconnection requests between 2000 and 2019 reached commercial operation by the end of 2024, while 77% were withdrawn entirely.

The economic consequences are substantial. PJM Interconnection, the nation's largest grid operator serving 65 million people, saw interconnection costs increase by 800% for active queue projects between 2022 and 2024. MISO reported cost triplings during a similar period. In the EU, grid congestion management costs reached €9–11 billion in 2024, while 72 TWh of renewable generation—equivalent to Austria's annual electricity consumption—was curtailed due to insufficient transmission capacity (Ember, 2025).

For developers, investors, and corporate buyers, these dynamics create both risks and opportunities. Projects with secured interconnection rights command significant premiums in M&A transactions. Utilities able to accelerate connection timelines gain competitive advantages in attracting commercial and industrial load, particularly from data centers whose electricity demand could represent 7–12% of U.S. consumption by 2028. Software platforms that reduce queue processing times are experiencing explosive growth. The interconnection constraint has, paradoxically, created new value pools even as it destroys others.

Key Concepts

Understanding power market dynamics requires familiarity with several interconnected systems:

Interconnection Queues: The formal process through which generators, storage facilities, and large loads request permission to connect to transmission networks. In the U.S., this process is administered by Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs), with FERC providing regulatory oversight. Queue position, study timelines, and cost allocation mechanisms vary significantly across regions.

Cluster Studies vs. Serial Studies: Traditional interconnection processes evaluated projects sequentially (serial studies), creating cascading delays when earlier projects withdrew. FERC Order 2023, issued in July 2023 with compliance due in 2024, mandates a transition to cluster studies where multiple projects are evaluated simultaneously. This shift promises efficiency gains but requires higher upfront financial commitments from developers.

Transmission Upgrade Cost Allocation: When new generation requires grid reinforcements, costs may be assigned to the interconnecting project (participant funding), spread across ratepayers (socialized), or allocated through hybrid mechanisms. Cost uncertainty remains a leading cause of project withdrawal.

Permitting Timelines: Distinct from interconnection studies, permitting involves environmental reviews, land use approvals, and construction authorizations. In the EU, Projects of Common Interest (PCIs) require an average of five or more years for permit completion, while typical renewable projects can wait close to a decade.

Bankability Constraints: Lenders and tax equity investors require certainty around interconnection timelines, cost exposure, and curtailment risk. Projects with conditional interconnection agreements or exposure to significant network upgrade costs face financing challenges that can doom otherwise viable developments.

MetricUnited States (2024)European Union (2024)
Queue capacity2,300 GW1,700+ GW
Median time to connection4–5 years5–10 years
Project completion rate13%Not systematically tracked
Grid congestion costs$3B+ annually€9–11B annually
Curtailed renewablesVariable by region72 TWh
Clean energy share of queue95%>90%

What's Working

Regulatory Reform Implementation

FERC Order 2023 represents the most significant interconnection reform in decades. By mandating cluster studies, increasing financial readiness requirements, and establishing timeline discipline, the rule aims to reduce speculative applications and accelerate processing. Early indicators are promising: the U.S. queue shrank 12% in 2024—the first decline on record—driven partly by elevated withdrawal rates as non-serious projects exited under stricter requirements.

Regional operators are innovating beyond federal mandates. PJM's Reliability Resource Initiative, approved by FERC in February 2025, creates a fast-track pathway for 50 shovel-ready projects critical to system reliability. SPP has implemented cluster processing reforms that substantially reduced study backlogs. These regional variations offer natural experiments in regulatory design.

Automation and Software Solutions

Technology platforms are compressing what once required months of manual engineering analysis into days or hours. Pearl Street Technologies, acquired by Enverus in March 2025, claims its SUGAR engine delivers power flow analyses 200 times faster than industry-standard tools. GridUnity's platform, deployed at MISO, SPP, CAISO, and Southern Company, has demonstrated 12+ month time savings in lifecycle management. The DOE awarded GridUnity $49.5 million through its GRIP program in October 2024, matched by $50 million in company investment, for a five-year AI training initiative using anonymized interconnection data.

European Permitting Acceleration

The EU's December 2024 Grids Package introduces binding permit timelines with tacit approval provisions—if authorities fail to decide within prescribed deadlines, approval is presumed. Eight designated "Energy Highways" will receive centralized EU planning for cross-border infrastructure. While implementation remains to be seen, these reforms signal serious political will to address the grid bottleneck.

What's Not Working

Transmission Infrastructure Lag

Regulatory reform cannot substitute for physical infrastructure. Transmission line construction still requires 7–10 years from planning to energization. The EU Commission estimates €1.2 trillion in grid investment is needed by 2040; current funding mechanisms fall dramatically short. The Connecting Europe Facility allocated only €5.84 billion for 2021–2027, though the EU has proposed a fourfold increase for 2028–2034.

Cost Uncertainty and Allocation Disputes

Even after completing interconnection studies, projects face unpredictable network upgrade costs that can triple during the queue process. Participant funding models, while providing cost causation signals, create first-mover disadvantages that discourage development in congested areas. Socialized funding raises equity concerns about ratepayer exposure to speculative projects. No jurisdiction has solved this tension satisfactorily.

Demand-Side Competition

The explosive growth of data center and AI computing loads introduces new competition for scarce grid capacity. DOE directed FERC in October 2025 to create fast-track interconnection rules for large loads, with proposals due by April 2026. This directive has sparked federal-state jurisdiction disputes and concerns that data centers will crowd out renewable generation in constrained areas.

Regional Disparities

The Iberian Peninsula maintains only 2.8% interconnection with the rest of Europe versus a 15% target, effectively operating as an "electricity island." Italy is expected to reach only 4% by 2030. These geographic bottlenecks strand low-cost renewable generation in southern regions while northern load centers continue relying on higher-cost or carbon-intensive alternatives.

Key Players

Established Leaders

PJM Interconnection: Serving 65 million customers across 13 states, PJM manages the largest interconnection queue by capacity. Its February 2025 Reliability Resource Initiative and December 2025 data center colocation rules position it as a regulatory laboratory for the industry.

Midcontinent Independent System Operator (MISO): Covering 15 states and serving 45 million people, MISO has been an early adopter of Pearl Street's SUGAR technology for study automation and is deploying full interconnection automation by Q1 2025.

European Network of Transmission System Operators for Electricity (ENTSO-E): The association of 40 European transmission system operators coordinates cross-border grid planning and publishes the Ten-Year Network Development Plan guiding €584 billion in transmission investments by 2030.

Southern Company: With 4.5 million customers and 27,000 miles of transmission, Southern Company announced adoption of GridUnity's platform in March 2025, signaling major utility commitment to interconnection modernization.

Emerging Startups

Pearl Street Technologies (now Enverus): Carnegie Mellon spin-out that processed 300+ GW of queued projects before acquisition. Named 2024 RE+ Start-Up of the Year by Mercom Capital Group.

GridUnity: Summit, NJ-based provider of interconnection lifecycle management software serving utilities representing 50%+ of the U.S. population. GridSync product launched at DISTRIBUTECH 2025 specifically targets transmission owner coordination.

Interconnection.fyi: Open data platform providing real-time visibility into queue status across U.S. RTOs, funded in part by RMI and enabling developer decision-making.

Key Investors

Breakthrough Energy Ventures: Bill Gates-backed fund with $3.5 billion in committed capital across 110+ companies, with grid infrastructure identified as a 2024 priority investment theme.

DOE Loan Programs Office: Authorized to deploy over $400 billion in loans and guarantees for clean energy infrastructure, increasingly focused on transmission projects.

European Investment Bank: Partner in the €840 million Breakthrough Energy Catalyst Europe program, providing concessional financing for first-of-a-kind clean energy infrastructure.

Examples

1. MISO + Pearl Street Technologies Partnership: In September 2024, MISO announced a partnership with Pearl Street to deploy its SUGAR engine for interconnection study automation across the 15-state territory. The collaboration targeted modeling nearly 1,000 queued renewable projects—approximately 10% of the national backlog—with full automation deployment expected by Q1 2025. Early results demonstrated 200x acceleration in power flow calculations, potentially reducing study timelines from months to weeks. The partnership illustrates how incumbent grid operators are acquiring startup capabilities to address queue backlogs without waiting for federal reform implementation.

2. Southern Company + GridUnity Implementation: Southern Company's March 2025 announcement of GridUnity platform adoption marked the largest investor-owned utility commitment to interconnection software modernization. With 40 GW of peak demand and complex coordination requirements across transmission, distribution, and generation subsidiaries, Southern Company's implementation will test whether enterprise software can deliver claimed 12+ month time savings at utility scale. The deployment includes integration with SAP, Docusign, and legacy engineering systems, potentially creating templates for other vertically integrated utilities.

3. EU Grids Package and Iberian Interconnection: The EU's December 2024 Grids Package designates the France-Spain-Portugal corridor as one of eight priority "Energy Highways" for accelerated permitting. Spain currently faces 67 GW of grid connection requests with only 10% authorized and 50% rejected—representing €60 billion in stranded investment. The package's tacit approval provisions and centralized EU planning authority could unlock development in renewable-rich Iberia while addressing the region's chronic under-interconnection with continental markets. Success would validate whether supranational authority can overcome local permitting obstacles.

Action Checklist

  • Assess interconnection risk exposure across your project portfolio by analyzing queue position, cost allocation mechanisms, and regional processing timelines using platforms like Interconnection.fyi
  • Incorporate FERC Order 2023 compliance requirements into development processes, including higher financial readiness deposits and cluster study participation strategies
  • Evaluate software-enabled study acceleration options; consider whether Pearl Street (via Enverus) or GridUnity tools can reduce your project timelines
  • For EU developers, map projects against designated Energy Highway corridors and prepare for tacit approval provisions in the Permitting Acceleration Directive
  • Structure PPA and offtake agreements to address interconnection timeline and curtailment risk, potentially incorporating interconnection delay clauses
  • Monitor data center interconnection proceedings at FERC and in key RTO territories; assess whether large load competition affects your target interconnection points
  • For investors, incorporate interconnection due diligence as a priority screening criterion in clean energy transactions, recognizing that secured interconnection rights increasingly drive valuation premiums

FAQ

Q: What is FERC Order 2023 and how does it affect renewable energy developers?

A: FERC Order 2023, issued in July 2023 with compliance required by April 2024, represents the most comprehensive reform of U.S. interconnection procedures in decades. The order mandates a shift from serial to cluster studies, where multiple projects are evaluated simultaneously rather than sequentially. It also requires higher upfront financial deposits and site control documentation to deter speculative applications, and establishes firm timelines for study completion. For developers, this means higher upfront costs but potentially faster and more predictable processing. Projects currently in queue can choose between continuing under legacy procedures, joining transitional cluster studies, or restarting under new rules depending on their status.

Q: Why do most projects in interconnection queues never reach commercial operation?

A: Only 13% of projects that submitted U.S. interconnection requests between 2000 and 2019 achieved commercial operation by end of 2024, while 77% were withdrawn. Multiple factors drive this attrition: speculative applications that were never intended to proceed, interconnection cost increases that destroy project economics (costs increased 44% on average from 2019–2023, and 800% in some regions), cascading delays caused by earlier project withdrawals requiring restudies, extended timelines that exceed development financing terms, and changes in market conditions that make originally viable projects uneconomic. FERC Order 2023's higher financial readiness requirements aim to screen out speculative projects earlier, though this raises barriers for smaller developers with limited upfront capital.

Q: How are grid bottlenecks affecting corporate renewable energy procurement?

A: Corporate buyers seeking power purchase agreements (PPAs) to meet sustainability commitments increasingly face interconnection-related delivery risk. Projects may sign PPAs years before achieving commercial operation, with substantial risk of delay or cancellation. Sophisticated buyers are incorporating interconnection due diligence into procurement processes, assessing queue position, regional processing timelines, and cost exposure before executing agreements. Some buyers are accepting higher PPA prices for projects with secured interconnection agreements, effectively paying premiums for reduced delivery risk. Data center operators, whose electricity demand is projected to reach 7–12% of U.S. consumption by 2028, face particular challenges as their load growth competes for the same constrained grid capacity as renewable generators.

Q: What investment is needed to solve the transmission bottleneck?

A: The EU Commission estimates €1.2 trillion in grid investment is needed by 2040, including €730 billion for distribution networks and €584 billion for transmission and interconnectors by 2030. Current EU funding through the Connecting Europe Facility allocates only €5.84 billion for 2021–2027, though a fourfold increase is proposed for 2028–2034. In the U.S., the DOE's Transmission Facilitation Program authorized $2.5 billion for transmission investment, while the Loan Programs Office can deploy over $400 billion in loan guarantees for qualifying projects. Globally, the IEA estimates $2.4 trillion in grid upgrades is needed from 2024–2030, with 35% for transmission and 28% for distribution. The fundamental challenge is that transmission investment has systematically lagged generation investment for decades, creating infrastructure deficits that cannot be closed quickly.

Q: How will data center demand growth affect clean energy interconnection?

A: The explosive growth of AI and data center electricity demand is creating new competition for constrained grid capacity. U.S. data center demand could add 120 GW of peak load by 2028, representing 7–12% of national electricity consumption. In October 2025, the DOE directed FERC to create fast-track interconnection rules for large loads, with proposals due by April 2026. This has sparked federal-state jurisdiction disputes—the National Association of Regulatory Utility Commissioners (NARUC) argues that retail load interconnection falls under state authority. For renewable developers, data center demand creates both competition (for scarce queue positions and grid capacity) and opportunity (data centers are major PPA buyers). Some regions are exploring co-location arrangements where generators and loads share interconnection points, potentially accelerating both renewable deployment and demand growth.

Sources

Topics

powerpermittingtransition planLCAinterconnectiongrid reliabilityPPA

Related Articles