What Is a Solar Interconnection Agreement?

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Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your solar interconnection agreement bonding needs.

What Is Interconnection?

Interconnection is the process through which a solar project can be connected to the grid. It is governed by published interconnection standards for various types of solar projects. It aims to identify all the possible impacts on the grid, such as transformers in the area not being large enough to take on the additional power load. Small residential projects are unlikely to have a significant grid impact and therefore can enter into an interconnection agreement faster than may be the case with larger solar projects.

Interconnection is a three-step process. The first step is to apply for interconnection, which involves ensuring that all the various state and local standards for interconnection are met. The second step is the actual installation of the solar energy system. The final step is to apply for and receive a PTO, or permission to operate. Upon receipt of the PTO, the customer begins receiving compensation for the solar energy they supply to the grid.

How Does a Solar Interconnection Agreement Work?

A solar interconnection agreement is a legally binding contract between an electric utility and a customer. The agreement establishes all the terms and conditions associated with operating the customer’s solar system in parallel with the utility’s electric power system. Such agreements typically apply to distributed generation (DG) behind-the-meter residential and commercial facilities that are net energy metered. Currently, 43 states plus the District of Columbia and Puerto Rico have adopted distribution-level interconnection policies.

The agreement is a written notice to a utility company of a plan to build and operate a solar system that ultimately will be connected to the grid. This notice must be submitted before construction begins. A parallel permitting process may be required to obtain a local building permit.

After installation of the system, a local electrical inspection must be performed, and the solar installer must then apply for a permission to operate (PTO).

Once the interconnection process has been completed, and a bidirectional meter has been installed, the solar energy system can import electricity from the grid to supplement what it produces or export excess power to the grid if the solar energy system produces more electricity than the customer needs.

What Standards Must be Met for Approval of a Solar Interconnection Agreement?

Interconnection standards determine how renewable energy systems can be connected to the electricity grid. The Interstate Renewable Energy Council (IREC) publishes a guide to the issues associated with policy and technical considerations for grid-integrated renewable energy. In fact, there are a number of authoritative guides to solar interconnection standards and best practices. IREC refers to interconnection standards as “rules of the road” for the electricity grid.

Is There a Bonding Requirement for Solar Interconnection?

Some utility companies may require the developer or contractor to provide a solar interconnection bond. This bond effectively guarantees the maintenance of the solar system to ensure the interconnection can stay up and running smoothly. Often times, utility companies may require an ILOC or cash to be posted as collateral – a surety bond can provide a better, uncollateralized option and can usually be substituted for the above instruments.

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