Distribution Upgrade Deferral Fee
A distribution upgrade deferral fee is a payment DER developers make to postpone or resize utility upgrades triggered by their interconnection. Instead of constructing the full upgrade immediately, utilities collect a fee that covers interim monitoring, protection adjustments, or targeted non-wires measures, buying time to cluster additional DERs or to evaluate lower-cost solutions.
Fees are calculated from engineering studies that estimate upgrade cost and deferral duration. Developers benefit from earlier energization while utilities retain the option to complete the upgrade later if feeder conditions warrant.
Regulators oversee deferral fees to ensure cost transparency and equitable treatment across developers. Fees are often paired with performance conditions requiring DERs to participate in managed charging, dynamic operating envelopes, or flexibility markets that mitigate grid stress.
Investors evaluate deferral fees when modeling interconnection cash flows, comparing them against full upgrade costs and schedule impacts.
Technical Details
- •Applies when interconnection-driven upgrades can be delayed
- •Fee covers interim protection, monitoring, or targeted reinforcement
- •Requires regulatory approval and reporting on deferral performance
- •Often conditioned on DER participation in flexibility programs
- •Utility retains right to complete full upgrade if conditions deteriorate
Why It Matters
Deferral fees accelerate DER energization while preserving grid reliability. Tera tracks jurisdictions offering deferral options, associated costs, and performance criteria so developers can plan interconnection budgets.
Exclusive Market News
Newsletter
Get exclusive market intelligence, data-driven insights, and strategic analysis on global electricity markets. Receive updates on emerging trends, regulatory developments, infrastructure projects, and investment opportunities that impact your energy strategy and decision-making.
