ERCOT, contending with the fastest load growth in the US, set a record in 2024 for the amount of new capacity advancing toward the final stages of interconnection. This followed five consecutive years of such growth.
According to a December report by Lawrence Berkeley National Laboratory, ERCOT had 90 GW of draft and executed interconnection agreements (IAs) in 2024, the most of any regional wholesale market. CAISO followed with 74 GW, and the West with 67 GW. IAs follow a series of technical studies and mark the final application milestone before project construction can begin.
ERCOT also led in the proportion of IAs executed relative to its peak demand. The volume of cleared IAs as a share of its 2024 peak load topped 30%, reaching a new record, the report said.
Interconnection speed has become increasingly important in the face of surging demand across the US, especially from rapidly expanding data center hubs. Projects on average still spend years in queue in most regions. Across all markets, the typical project built in 2024 took 55 months from request to commercial operation, compared to 22 months in 2008, according to Lawrence Berkeley.
The acceleration of approvals presents a bearish market signal, as more capacity coming online increases the risk of oversupply, which ultimately depresses prices and raises the risk of curtailments. Nevertheless, valuations for long-term wind and solar PPAs across most hubs in ERCOT are at or near record levels.
Last year, ERCOT had 1,447 active projects, with 346 GW of capacity, in its interconnection queue, led primarily by solar and standalone BESS projects. While a signed IA is a critical step, it is not the only determinant of viability, with many projects cancelled post-agreement.
Texas’s regulatory framework for processing project applications is also a factor in large volumes. “ERCOT’s ‘connect and manage’ approach to generator interconnection does not require network upgrades for interconnections, instead managing grid congestion through redispatch and curtailment,” according to the report. “This approach differs from other balancing areas and is likely one reason for the higher IA rates seen in ERCOT.”
Source: Lawrence Berkely National Laboratory
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