How New Mexico’s New Interconnection Rules Position It as a Clean Energy Leader
By Gwen Brown and Sky Stanfield
New Mexico’s updated interconnection rules—adopted by the New Mexico Public Regulation Commission on November 30, 2022—represent a major win for New Mexico communities, clean energy developers, and the environment. Interconnection rules determine how technologies that generate or store electricity, like solar PV systems, are reviewed and granted permission to connect safely and reliably to the electric distribution grid.
These improvements to New Mexico’s interconnection policies were shaped substantially by IREC’s regulatory team. They reflect a number of cutting-edge best practices developed under the BATRIES project, a multi-year effort to reduce barriers to energy storage and solar-plus-storage interconnection, funded by the U.S. Department of Energy’s Solar Energy Technologies Office and led by IREC, in partnership with the Electric Power Research Institute, utilities New Hampshire Electric Cooperative and PacifiCorp, the California Solar and Storage Association, the Solar Energy Industries Association, and law firm Shute, Mihaly, & Weinberger, LLP.
In addition to aligning New Mexico’s interconnection rules with national best practices, the update will pave the way for greater use of energy storage and smart inverters in the state. This is critically important as both of these technologies have an important role to play in enabling high levels of renewable energy to be incorporated safely and reliably into the electric grid.
This article explores the changes adopted in the New Mexico Public Regulation Commission’s ruling, why they matter, and where there is more work to be done.
Background: The Need for Interconnection Reform in New Mexico
Prior to this update, New Mexico’s interconnection rules had not been updated in over a decade. As a result, they did not reflect the latest best practices for renewable energy technologies, which have become significantly more prevalent since the rules were written.
Customer demand for solar and energy storage has increased, along with requests to interconnect these systems. Additionally, legislative developments in New Mexico put it on a path for significant increases in renewable energy deployment. These included the Energy Transition Act (2019), which commits the state to sourcing 50% of its electricity from renewable sources by 2030, and the Community Solar Act, signed in 2021 with implementing rules approved in March of this year. This made it all the more important to resolve inefficiencies and gaps in the state’s interconnection policies to ensure that new clean energy projects could connect to the grid more quickly and cost-efficiently, while maintaining safety and reliability.
Additionally, New Mexico’s interconnection policies were somewhat unique from other states because some of the processes and requirements resided in a “manual” that was separate from the rules. In this rulemaking process, the Commission merged the rules and the manual so that there is one central document that transparently explains the interconnection process and requirements. It also came to light that some utilities in the state were adopting additional restrictions on interconnection that were not identified in either the rules or the manual. The updated rules will ensure consistency in interconnection policies across utilities, which can create a more uniform playing field across the state for New Mexico’s clean energy developers, and better position the state for success in achieving its clean energy goals.
In the sections below, we explore the major changes in New Mexico’s updated interconnection rules; why they matter for distributed energy resources (DERs), like solar and energy storage; and where additional work will be needed.
Updated rules recognize projects’ ability to control export, significantly improving interconnection for systems with energy storage
One of the most noteworthy outcomes of the ruling is the creation of pathways that will make it easier to interconnect solar-plus-storage and standalone energy storage to the grid. Specifically, the updated rules now recognize the concepts of both “non-export” and “limited-export” DER projects and provide specific review processes for these cases. The rules also include measures to guide how to evaluate the potential impacts of “inadvertent export,” which can occur while an export control device responds as on-site load drops off.
Projects with export controls are designed in such a way that they either 1) will not send electricity back to the electric grid (non-export projects), or 2) will limit the amount of electricity they export to the grid so that it doesn’t exceed a certain amount (limited-export projects). There are multiple different technologies available to control a project’s export and they can be deployed on solar-only systems, but are particularly valuable for systems with energy storage.
For example, when a solar system is coupled with energy storage, they are often designed such that the solar and storage will not export simultaneously. The batteries can be used to store the excess clean energy the solar system produces for the customer to use later, instead of sending it immediately to the grid.
Until now, interconnection processes in New Mexico (and in many states) did not differentiate between export limited systems and more traditional projects that export all of the electricity they produce. In other words, the utilities would just study a project as though it exported all of its power to the grid, even if it was designed to prevent that export. This has been a major barrier to the interconnection of energy storage systems because the amount of electricity a DER system “exports” is one of the most significant factors in how it will interact with the electric grid, and thus whether upgrades may be needed to safely interconnect it. Limited-export projects that send less electricity back to the grid can have less of an impact on the grid.
When interconnection rules do not recognize the possibility that a project could limit export, the local distribution utility may use inaccurate assumptions when assessing how these systems will affect the grid. Specifically, some of the screens utilities use to review projects evaluate the “nameplate rating” of the system, i.e., the maximum amount of electricity it could possibly export, instead of the “export capacity,” which refers to the amount of electricity it will actually export. When a system is designed, for example, to not have the solar and storage export simultaneously, but the interconnection review process assumes it will export the combined nameplate rating of both, this could result in an over assessment of impacts that are not reflective of the system’s actual design.
To remedy this problem, the new rules contain a number of changes that are designed to ensure that projects that limit export using reliable means are evaluated appropriately. This included adding a section that identified what types of export control methods are considered to be safe and reliable, such as certified power control systems and utility-grade relays. Under the new rules, when projects utilize one of these acceptable methods, the utility can then safely distinguish between a project’s export capacity and full nameplate rating when it applies the screens and in the study process. The screens have thus also been carefully updated to distinguish when export capacity should be used and where it is appropriate to continue to evaluate a project’s full capacity (such as for protection evaluations).
As part of these changes, New Mexico also became the first state in the nation to adopt an “inadvertent export screen” in its interconnection policies. Inadvertent export occurs when load (electricity consumption) drops off suddenly and it takes a few moments for the export control system to respond. This typically occurs for a few seconds or less, before the export control system responds to the signal to limit or stop export. When allowing export-controlled projects, utilities need to understand how to evaluate the potential impacts of inadvertent exports on grid conditions.
New Mexico adopted a new inadvertent export screen that was developed through research and modeling conducted by the BATRIES project. As export-controlled projects become more prevalent, inadvertent export screens will be an important tool for states—especially those with high levels of renewable energy deployment—to support the safe and reliable interconnection of solar and storage more rapidly and efficiently.
Improved screening processes and higher project size thresholds streamline the interconnection process
Building upon the new recognition of export-limited projects, New Mexico’s updated interconnection rules now also contain improved interconnection review (screening) processes, which allow more projects to potentially be interconnected using screens instead of lengthy study processes.
First, a more accurate screen, referred to as “100% of minimum load,” will now be used in place of the existing “15% of peak load” screen. The 15% of peak load screen is a rougher approximation of the impacts of a DER project on the grid that a number of states have used for years, but which has been problematic because it is based on a conservative (and often inaccurate) rule of thumb, rather than a more accurate evaluation of grid conditions.
The new screens take effect upon implementation of the rules, with the caveat that utilities may continue to use the 15% of peak load screen if they do not have minimum load data in a given area. By 2024, New Mexico’s utilities will be required to have that minimum load data and use the 100% of minimum load screen across the board. This data will be used for both simplified, fast track, and supplemental review screens.
Second, the “simplified review” process track, which was previously available only to projects with a nameplate capacity of 10 kW, is now open to projects with an export capacity up to 25 kW and nameplate rating up to 50 kW. The eligibility criteria will provide greater access to the most efficient review process and could prove to be particularly valuable for projects with solar and energy storage that manage the total amount of export.
In addition to expanding access to the simplified review process, the Commission also raised the eligibility limit for the “fast track” process to up to 5 MW and added a more robust and defined supplemental review process. These changes are consistent with those made by many states and the Federal Energy Regulatory Commission in recent years.
These changes will improve the review processes for proposed DER projects, streamlining them and making them more accurate and reflective of best practices. They also have important long-term considerations for enabling high levels of renewables on New Mexico’s grid. That’s because more DER capacity can be added to the distribution grid when projects appropriately manage their export.
New reporting requirements will provide greater transparency into the interconnection process and grid conditions
Another important development in the ruling is the adoption of a set of reporting requirements so that the Commission and the public can be kept informed about the status of interconnection requests.
As IREC has written previously, although interconnection is one of the most important factors in whether clean energy can be developed efficiently, few states require utilities to keep robust records tracking key interconnection performance metrics (such as how many projects are in different stages of the interconnection process, how long different stages are taking, and data on why interconnection applications fail). Without this data, it can be impossible for regulators to know if utilities are fulfilling their obligations in the process or to identify challenges and solutions.
New Mexico’s updated interconnection rules will now require biannual data reporting by the utilities to “provide the Commission with a sense of application trends, numbers of resources, types of resources, and more general information that the utilities should collect and maintain.”
Additionally, clean energy developers and customers will now have access to improved data on the conditions of the grid at the proposed project site that can help them understand the likelihood that their envisioned project will be able to interconnect or whether another project site or system design may be better. That’s because New Mexico utilities will now be required to provide a “pre-application report” when requested.
The pre-application report will provide a range of valuable grid data including the available capacity on the section of the grid that will serve the site, data on peak and minimum load (which are used in certain screens as discussed above). Before submitting a full interconnection application, a customer may now request this report for a specific project site.
The Commission adopted a consistent price for these reports for all customers ($300 for projects of up to 1MW, and $500 for projects over 1 MW) and requirements for how quickly these reports must be provided by the utility (20 business days for projects of up to 1 MW, and 30 business days for projects over 1 MW).
The data in the pre-application report represents a snapshot of the grid at the time the report was prepared, meaning conditions could change prior to when the system is reviewed for interconnection, and the customer is not guaranteed to be able to interconnect. However, having access to this data is a significant improvement for clean energy customers and developers because it will allow them to make more informed decisions about their projects before investing significant time and money. And when evaluating between multiple potential sites, developers may be able to direct their projects to sites that are both more advantageous to the grid and more likely to be approved for interconnection.
Project developers now have an opportunity to modify their projects to match grid conditions in response to data from the interconnection review process
In the interconnection screening process, the utility may determine that a project cannot connect at its proposed location without costly upgrades that may make the project economically unviable. However, there might be ways that a developer could modify the project to accommodate grid conditions and avoid those upgrade costs—particularly with the addition of energy storage and export limiting.
However, in most interconnection processes, the developer has no opportunity to modify their project without forfeiting their position in the interconnection queue and reapplying. Given the sometimes lengthy interconnection queues, this could mean months or even years before the project is reviewed again, at which point the conditions on the grid could have changed (such as due to the development of additional DER projects) and the data received in the previous review might no longer be applicable. In addition, utilities often do not provide sufficient information during the screening or study process to adequately inform an applicant about what thresholds have been violated. This lack of information thus limits the ability of an applicant to determine whether or how design changes could avoid violating the thresholds.
Drawing on recommendations established through the BATRIES project, New Mexico’s interconnection rules will now offer a pathway for some project modifications that are directly responsive to the screening or study results. To start, the rules require the utilities to provide applicants with detailed screening or study results that can be used to inform whether modifications are feasible. The rules then provide a limited opportunity for applicants to propose specific types of modifications (such as reducing the export amount) to remedy the violations. Whether this is feasible will depend on the particular size and type of the violation.
Developers will need to comply with tight timelines to make this work, but the change is noteworthy in that it provides a pathway that could enable more projects to interconnect in a manner that suits their grid location. It will be important to monitor the use of this pathway and explore developer experiences over time to determine if developers are able to realistically make use of this opportunity.
New Mexico now has a plan for requiring the use of smart inverters and adopting the related technical standards
Another key outcome of the Commission’s ruling is the establishment of a timeline and requirements for the use of smart inverters in New Mexico. Smart inverters are advanced inverters that can sense conditions on the grid and modify the DER system’s operation to support the stability of the grid (among other functions).
Specifically, the rules require the adoption of technical standard IEEE 1547-2018 and specify a framework for the adoption process. They also require the utilities to establish default settings for smart inverters and provide guidance on specific settings that must be addressed.
IEEE 1547-2018 establishes how DERs can connect to the grid. In particular, it establishes interconnection requirements for smart inverters, whose advanced “grid support” functions can help the grid accommodate higher levels of renewable energy. States across the nation are adopting these requirements to enable the use of advanced smart inverter functions.
An earlier draft of New Mexico’s interconnection rules touched upon the adoption of IEEE 1547-2018, but IREC’s involvement was instrumental in aligning the proposed process and requirements with the details of the standard and what is technically feasible.
The new rules establish March 28, 2023 as the date by which all new inverters will be required to comply with the functionalities enabled by IEEE 1547-2018. The rules provide the basic framework for the default functions that will be required, and requires each utility to establish specific smart inverter settings in its own Technical Interconnection and Interoperability Requirements (TIIR). The TIIR is a new concept for New Mexico and will act as a public document that provides additional details on interconnection that may be specific to the needs and constraints of each utility’s system. Updates to the TIIRs will be subject to Commission oversight and public comment.
When interconnected DERs use the smart inverter grid support functions enabled by IEEE 1547-2018, the electric distribution grid can accommodate significantly higher levels of DER capacity with less need for costly grid upgrades. As such, this forward-looking policy will better position the state to achieve its clean energy growth goals.
New cost sharing language opens the door to more equitable distribution of the costs of needed grid upgrades
Another notable development in the ruling relates to how the costs of required grid upgrades are distributed and who pays for them. Historically, interconnection rules have followed a simplistic application of the “cost causation” principle. This application of the principle holds that the project that “triggers” the need for upgrades of grid equipment must pay the full cost of those upgrades.
However, there are a number of issues with this traditional approach. For one, subsequent projects that are developed after those upgrades share in the benefits provided, without contributing financially. Likewise, all of the prior DER generating projects that connected before the triggering project contributed to the need for upgrades but did not have to support the cost.
There is also a practical reason why cost sharing is advantageous. Upgrade costs are expensive, often hundreds of thousands of dollars, meaning that many projects simply become unviable if such large upgrades are needed. Until a project comes along that is capable and willing to cover those costs, whole sections of the distribution grid can remain closed to DER development, slowing customer access to clean energy and progress on climate change mitigation.
The updated rules in New Mexico allow the Commission “to consider, on a case by case basis, whether a particular situation may be eligible for cost-sharing (whether among similarly situated applicants or in rates).” The details of a cost sharing policy will be deferred to a future Grid Modernization rulemaking, but the change is significant in opening the door to more equitable and efficient cost sharing which will be a boon to clean energy growth.
However, it will be important that attention is paid to the procedural details when the Commission revisits this issue to ensure that future cost sharing rules are designed in an effective and equitable manner.
Commission rejects use of arbitrary capacity reservation which would preference some customers over others
As solar penetration grows, it is increasingly common for customers seeking to install solar to serve their on-site load to be hit by prohibitive upgrade costs. This issue has arisen in New Mexico where the state’s largest utility, Public Service Company of New Mexico (PNM), effectively closed a number of feeders to new small solar capacity due to the high cost of upgrades needed to accommodate more generation.
Ostensibly to resolve this issue, PNM chose to implement a practice of reserving 50% of the available capacity on feeders for behind-the-meter projects. While this may sound appealing for individual customers, this policy would have raised many more problems than it would have solved. In addition, El Paso Electric Company (EPE) also sought to reserve half of a feeder’s capacity for “operational flexibility” reasons.
The process of connecting to the grid should be fair and transparent. The decision to reserve capacity for one set of customers (i.e., residential homeowners) necessarily means that the utility is restricting available capacity for another set of customers (i.e., community solar customers). Deciding to provide preferential treatment to one class of customers over another is a very significant policy choice that should be made by the Commission with broad stakeholder input, and not by the utility alone.
In addition, proposals to reserve capacity must be supported by technical analysis demonstrating that the reserve is reasonable. The utilities’ proposals in New Mexico, which recommended reserving half of every feeder’s capacity for behind the meter systems, were not supported by data to show that there is any likelihood that amount of capacity will ever be needed for behind-the-meter projects. This is an expensive way to address the problem of hosting capacity limitations. It is likely that a reservation this substantial would result in a significant amount of capacity going unused in some places, which raises costs for customers who do not have access to the reserved capacity. Utilities must retain some operational flexibility, and the interconnection study process provides a better way to evaluate operating capacity constraints on a case-by-case basis. Holding back half of the entire system’s capacity is an inefficient and blunt instrument, like using an ax where a scalpel is more appropriate.
Ultimately, capacity reservations are an energetically and economically inefficient method for providing utilities with continued operational flexibility while ensuring consumers have the ability to offset their load with clean electricity. More progressive solutions would look to find ways to expand capacity more cost-effectively so that all customers interested in solar have an opportunity to participate. IREC thus supports the Commission’s rejection of PNM and EPE’s attempt to impose arbitrary limits on available interconnection capacity. The Commission can take further steps by addressing how to ensure capacity exists for all solar customers as it implements the cost sharing framework or future distributed grid planning proceedings. The Commission did leave open the possibility that utilities could impose interconnection limits that are supported by valid technical explanation on a case-by-case basis and parties should keep an eye out to see how the utilities respond to this language.
New Mexico’s revised interconnection rules will significantly benefit its residents and communities by making it easier to access clean, renewable energy–whether on their own property or through a community solar project. They will ensure equitable access to the electric distribution grid for all clean energy developers across the state, while maintaining safety and reliability. Finally, they bring New Mexico in line with national best practices for clean energy interconnection, including the interconnection of energy storage.
