BESS Interconnection: Managing Grid, Cost, and Schedule Risk

For battery energy storage system (BESS) developers, securing equipment and site control is only part of the development equation. A project must also connect to the electric grid, and increasingly, BESS interconnection is one of the biggest sources of schedule, cost, and contractual risk.

Key Takeaways

• Start interconnection diligence early. Grid availability and required upgrades can materially affect both project cost and schedule.
• Coordinate permitting and interconnection. A fast equipment delivery date does not guarantee a fast commercial operation date.
• Pressure-test customer schedules. Measure a requested six-month deployment against utility, permitting, construction, and commissioning requirements before it becomes contractual.
• Allocate cost risk expressly. Contracts should address responsibility for utility upgrades and unexpected interconnection costs.
• Align liquidated damages provisions. Developers should avoid assuming customer-facing delay exposure that they cannot reasonably pass through to responsible contractors or suppliers.
• Protect against third-party delays. Specifically address utility and governmental approval delays in schedule, extension-of-time, and damages provisions.

This article is Part 3 of our Battery Storage Legal Roadmap Series. If you missed them, start with Part 1: Utility-Scale Battery Storage Projects: A Legal Roadmap for Developers, Property Owners and Other Stakeholders and Part 2: Before You Buy: Managing Real Estate and Permitting Risk for BESS Projects in New York and New Jersey. See all articles in the series here.

BESS Interconnection Challenges

BESS interconnection is a growing challenge as data centers and other large-load customers seek to bring new facilities online on increasingly aggressive schedules. A BESS provider may ordinarily quote a project lead time of approximately 12 months, while a data center customer may request delivery and operation within six months. The problem is that equipment availability is only one component of the schedule.

Utility review, interconnection studies, land use approvals, construction permits, equipment procurement, utility upgrades, inspections, and commissioning can all affect the commercial operation date. For developers, property owners, contractors, and customers, the key is to address those dependencies before aggressive project milestones become binding contractual obligations.

BESS Interconnection Is More Than Connecting a Battery

A BESS project can both withdraw electricity from and inject electricity into the grid. Depending on the project’s size, configuration, location, and point of interconnection, the utility or regional transmission organization may need to study the project’s effect on the surrounding electric system and determine whether upgrades are necessary.

The applicable process also varies significantly by project. In New York, for example, the state’s Standardized Interconnection Requirements apply to distributed generation and energy storage systems of 5 MW or less that operate in parallel with utility distribution systems. Larger projects may implicate NYISO procedures. In New Jersey, transmission-level projects generally operate within the PJM framework, while distribution-connected projects may involve the applicable electric distribution company and state requirements.

These processes can’t be safely treated as administrative items to address after equipment is ordered or a construction schedule is established. The point of interconnection can affect project economics, engineering, required upgrades, and ultimately whether the proposed schedule is achievable.

Interconnection Queues Remain a Schedule Risk

Federal and regional regulators have been working to address longstanding interconnection delays. FERC Order No. 2023 required transmission providers to implement significant reforms, including a shift toward a “first-ready, first-served” cluster study process and stronger financial and site-control requirements intended to move viable projects through the queue more efficiently.

PJM has similarly restructured its interconnection process. As of September 2026, PJM reported that 617 projects representing nearly 169 GW remained in Phase 1 of its first new study Cycle. PJM says the reformed process is designed to take about one to two years, depending on each project’s impacts.

That timeframe illustrates the disconnect that can arise when a customer approaches a BESS project expecting commercial operation within six months. Even when a battery supplier can manufacture and deliver the equipment within the requested period, the BESS interconnection process may operate on a very different timeline.

Importantly, interconnection is not the only potential bottleneck. PJM has acknowledged that projects that have completed interconnection may still face permitting and supply-chain delays before reaching construction and operation.

Permitting and Interconnection Schedules Must Be Coordinated

One of the most common project-development risks is treating permitting, interconnection, procurement, and construction as separate workstreams without identifying how they depend on one another.

A customer may assume that if equipment can be delivered in six months, the system can be operational in six months. In practice, the developer may need local land-use approvals, building and electrical permits, fire-code review, environmental approvals, utility approvals, and potentially utility infrastructure upgrades before the system can be energized.

The sequencing matters. A project team should identify early which activities can proceed concurrently and which depend on completion of another step. It should also determine whether permits or approvals require a substantially final design and whether interconnection-study changes could force revisions to previously submitted plans.

This is particularly important for projects supporting data centers. The pressure to obtain power quickly is now attracting federal regulatory attention. In June 2026, FERC initiated proceedings involving all six regional grid operators under its jurisdiction, directing them to justify or reform their existing rules governing how large loads, including data centers and manufacturing facilities, connect to the electric grid.

BESS Interconnection Costs Can Change Project Economics

Schedule is only half of the BESS interconnection equation. Cost can be equally significant. An interconnection study may identify network or system upgrades necessary to accommodate a project. Depending on the applicable tariff and project structure, the developer may bear responsibility for some or all of those costs. Changes in the point of interconnection, project capacity, charging profile, or equipment configuration can also affect the analysis.

Developers should therefore be cautious about committing to fixed project economics before understanding the likely interconnection requirements. Agreements should address who bears responsibility for utility upgrade costs, what happens if those costs exceed assumptions, and whether either party has termination or renegotiation rights if interconnection becomes economically impractical.

Early technical diligence can help. For example, PJM provides a Queue Scope screening tool that lets prospective interconnection customers evaluate potential generator locations before formally entering the interconnection process. Although screening can’t eliminate interconnection risk, evaluating grid conditions and potential points of interconnection before making major commercial commitments can reduce avoidable surprises.

The Liquidated Damages Problem

Schedule risk becomes especially consequential when contracts across the project supply chain include liquidated damages provisions.

A data center owner may require its BESS provider to meet a specific commercial operation date, with liquidated damages accruing for delay. The BESS provider may impose similar obligations on its equipment supplier, EPC contractor, electrical contractor, or other vendors. Those parties may, in turn, impose schedule requirements on their subcontractors.

The result is a chain of contractual obligations built around a date that may depend partly on utilities, permitting authorities, or other third parties outside the contracting parties’ direct control.

Contracting parties should allocate that risk expressly rather than leave it to interpretation after a deadline is missed. Contracts should distinguish between delays within a contractor’s control and delays caused by utility studies, interconnection approvals, government permitting, required grid upgrades, or changes imposed by authorities having jurisdiction. They should also address notice requirements, extensions of time, force majeure where applicable, owner-caused delays, change orders, and the circumstances under which liquidated damages may or may not accrue.

Pay particular attention to whether obligations align throughout the contracting chain. A developer that accepts broad liquidated damages exposure from the customer but receives only limited schedule protection from its suppliers may retain a substantial gap in risk.

Build the Schedule Around Approvals, Not Just Equipment

For projects under significant time pressure, the better approach is to develop the schedule backward from the required commercial operation date and identify every regulatory, utility, procurement, and construction milestone necessary to reach it.

Before committing to a six-, nine-, or twelve-month completion date, project participants should understand the BESS interconnection pathway, permitting requirements, equipment lead times, utility construction obligations, commissioning requirements, and realistic contingencies. Where uncertainty remains, the contract should reflect it.

This does not mean aggressive BESS schedules are impossible. It means the commercial agreement should not assume that equipment availability equals project availability.

How Scarinci Hollenbeck Can Help

BESS projects require coordination among developers, utilities, equipment suppliers, contractors, property owners, regulators, and local permitting authorities. Scarinci Hollenbeck’s Commercial Real Estate & Land Use attorneys can assist clients in New Jersey and New York with site diligence, permitting and land use issues, BESS interconnection and utility agreements, EPC and equipment contracts, schedule and liquidated damages provisions, and other project-development matters. Addressing these issues early in a project can help identify grid, cost, and schedule risks before they become disputes or threaten a project’s commercial operation date. To discuss a BESS project, contact Nicholas R. Wall or another member of the firm’s Commercial Real Estate & Land Use team.