Interconnection Queue Withdrawal Penalties by RTO: What Developers Need to Know

Why withdrawal penalties exist

Before FERC Order 2023 took effect in January 2024, the interconnection queue across most RTOs was a low-stakes waiting room. Developers could submit applications with minimal financial exposure — sometimes as little as $10,000 — and abandon projects at any point without meaningful consequence. The result was a queue clogged with speculative entries: projects that had no site control, no financing, and no realistic path to commercial operation.

According to the LBNL Queued Up 2025 report, only about 21% of projects that entered the interconnection queue between 2000 and 2018 ultimately reached commercial operation. The rest withdrew — but not before consuming study resources, delaying viable projects, and creating cascading restudies when their departure shifted network upgrade cost allocations to remaining projects.

FERC Order 2023 addressed this directly. The order introduced a tiered financial commitment structure designed to accomplish two things: (1) deter speculative queue entries by making early-stage participation more expensive, and (2) create escalating withdrawal penalties that increase as a project consumes more study resources. The logic is straightforward — if you enter the queue, you should have the financial capacity and project readiness to stay in it.

The practical impact for developers is that withdrawing from the interconnection queue is no longer a cost-free decision. Depending on the RTO, the project stage, and the network upgrade costs assigned to your project, a withdrawal can cost anywhere from tens of thousands to tens of millions of dollars.

The three financial layers

FERC Order 2023 establishes three distinct layers of financial commitment that a developer accumulates as a project advances through the queue. Understanding these layers is critical because each has different refundability rules and different triggers for forfeiture upon withdrawal.

Layer 1: Study deposits

Study deposits fund the RTO's interconnection studies — feasibility, system impact, and facilities studies. These deposits are typically required at application or at the start of each study phase. Study deposits are partially refundable: the RTO returns the unused portion after study completion. However, if you withdraw during a study, the RTO retains the full deposit for that study phase, plus any costs already incurred in subsequent phases.

Study deposit amounts vary by RTO and are often tiered based on project size (MW capacity). PJM's tiered structure ranges from $75,000 for small projects to $400,000 for large ones. CAISO's cluster study deposits can be significantly higher due to the volume of projects in each cluster window.

Layer 2: Readiness deposits

Readiness deposits are the Order 2023 innovation. These are financial commitments specifically designed to demonstrate project readiness — that you have site control, financing pathways, and a genuine intent to build. Readiness deposits are calculated on a per-MW basis and escalate at decision points. In PJM, Readiness Deposit No. 1 is $4,000/MW, due at Decision Point 1 after the system impact study. For a 200 MW project, that is $800,000.

Readiness deposits are refundable upon commercial operation but forfeited upon withdrawal after the decision point at which they were posted. This creates a powerful incentive: if you reach commercial operation, you get your money back. If you withdraw, you lose it.

Layer 3: Network upgrade cost allocation

This is where withdrawal penalties become truly expensive. When an RTO completes a facilities study, it assigns network upgrade costs to each project based on that project's contribution to the need for transmission upgrades. If you withdraw after these costs have been assigned, you may be responsible for your allocated share — and in some RTOs, your share gets reallocated to the remaining projects in the cluster, creating cascading financial impacts.

Network upgrade allocations can range from zero (if your project requires no upgrades) to hundreds of millions of dollars for projects in transmission-constrained areas. A 200 MW solar project in a congested PJM zone could be assigned $5M–$50M in network upgrade costs. Withdrawing after this assignment means forfeiting your study deposits, your readiness deposits, and potentially being liable for a share of the upgrade costs already contracted.

PJM withdrawal penalties

PJM's post-Order 2023 framework is the most clearly structured, built around two Decision Points that serve as financial commitment gates. Source: PJM Manual M-3.1S.

Study deposits are tiered by project capacity:

• Tier 1 (up to 20 MW): $75,000
• Tier 2 (20–100 MW): $150,000
• Tier 3 (100–300 MW): $250,000
• Tier 4 (300+ MW): $400,000

Decision Point 1 occurs after the system impact study. At this gate, the developer must post Readiness Deposit No. 1 ($4,000/MW) and confirm intent to proceed. For a 200 MW project, that is $800,000 in readiness deposits on top of the $250,000 study deposit — over $1M in committed capital before the facilities study even begins.

Withdrawal before Decision Point 1: The developer forfeits the study deposit for any completed or in-progress study phase but recovers the unused portion. No readiness deposit has been posted, so the total exposure is limited to the study deposit amount — $75K to $400K depending on project size.

Withdrawal after Decision Point 1: The developer forfeits the study deposit plus Readiness Deposit No. 1 plus their allocated share of network upgrade costs from the facilities study. For a 200 MW project with moderate network upgrade exposure, total withdrawal cost could easily exceed $2M — and in congested transmission zones, $10M or more.

Decision Point 2 occurs after the facilities study, when the developer must execute the Interconnection Agreement. Withdrawal at this stage means forfeiting all deposits and the full allocated network upgrade cost share. Use our PJM deposit calculator to model your specific exposure across scenarios. For the full PJM site control context, see our PJM compliance hub.

MISO withdrawal penalties

MISO's Definitive Planning Process (DPP) uses milestone-based financial commitments. Source: MISO Generator Interconnection Procedures.

M2 milestone deposit: After the system impact study (which MISO maps to its Definitive Study Agreement phase), developers must post a milestone deposit that functions similarly to PJM's readiness deposit. The M2 deposit is calculated based on project capacity and the estimated network upgrade costs identified in the study.

DSA execution deposit: At the Definitive Study Agreement stage, MISO requires an additional financial commitment that locks the developer into the facilities study phase. This deposit is partially refundable if the developer proceeds to IA execution, but forfeited upon withdrawal.

Withdrawal after facilities study: In MISO, withdrawing after the facilities study results in forfeiture of all deposits — study deposits, M2 milestone deposits, and DSA execution deposits. Additionally, MISO's cost allocation methodology means that a late-stage withdrawal triggers a restudy for remaining projects in the DPP cycle, potentially increasing their allocated costs. MISO has implemented penalty provisions to ensure that withdrawing developers bear the cost of these restudies rather than passing them to remaining queue participants.

For MISO-specific site control requirements at each milestone, see our MISO compliance hub.

CAISO withdrawal penalties

CAISO operates under the Generator Interconnection and Deliverability Allocation Procedures (GIDAP), which uses a cluster study process rather than sequential project-by-project studies. This creates uniquely high financial commitments. Source: CAISO GIDAP BPM.

Cluster study deposits are among the highest in any RTO. Because CAISO studies projects in clusters, the deposit funds the developer's share of cluster-wide study costs. For large projects in oversubscribed clusters, initial study deposits can exceed $500,000.

Interconnection Financial Security (IFS) is CAISO's equivalent of readiness deposits, but with a critical difference: IFS postings are tied directly to the developer's share of network upgrade costs, not just a per-MW rate. CAISO requires IFS postings at multiple stages:

• IFS Posting 1: Due after Phase I cluster study results, typically 10% of assigned network upgrade costs
• IFS Posting 2: Due after Phase II cluster study results, an additional percentage of upgrade costs
• IFS Posting 3: Due at IA execution, bringing total financial security to the full allocated upgrade cost

CAISO has some of the highest financial commitments of any RTO because California's transmission system is heavily constrained. Network upgrade costs for projects in congested areas — particularly the Central Valley and desert regions where most utility-scale solar is developed — can reach $50M–$100M+ per project. A withdrawal after Phase II means forfeiting all study deposits plus IFS Postings 1 and 2.

For CAISO-specific site control thresholds and BLM ROW requirements, see our CAISO compliance hub.

ISO-NE withdrawal penalties

ISO-NE adds a layer of complexity that no other RTO has: the Forward Capacity Market (FCM). Source: ISO-NE Generator Interconnection Standards.

Interconnection study deposits follow the standard FERC Order 2023 structure — tiered by project size, partially refundable after study completion, forfeited upon withdrawal during a study phase.

The FCM complication: If a project has secured a Forward Capacity Obligation through the FCM auction, withdrawing from the interconnection queue does not eliminate the capacity obligation. The developer must either find a replacement resource to cover the obligation or face FCM capacity supply obligation penalties, which are calculated based on the clearing price and the unmet MW obligation. These penalties are separate from and in addition to the interconnection withdrawal penalties.

For a 150 MW solar project that cleared the FCM at $3.50/kW-month, the annual capacity obligation is approximately $6.3M. Failing to deliver that capacity triggers penalties that can exceed the clearing price — effectively doubling the financial exposure. A developer who withdraws from both the interconnection queue and the FCM faces interconnection deposit forfeiture plus capacity market penalties that can run into the tens of millions over the obligation period.

ISO-NE projects also face Massachusetts Chapter 61A ROFR risk on agricultural parcels, which can cause site control failures that lead to forced withdrawal. See our coverage thresholds article for details on how encumbrance policies affect coverage calculations.

NYISO withdrawal penalties

NYISO uses a Class Year study process where projects are grouped by application vintage and studied together. Source: NYISO Generator Interconnection Procedures.

Class Year study cost allocation: Each project in a Class Year is allocated a share of the study costs based on its capacity and impact on the transmission system. These costs are non-refundable once the study is underway. Withdrawing mid-study means the departing project's cost share is reallocated to the remaining Class Year participants.

Facilities study deposits: After the Class Year study, NYISO requires facilities study deposits that are forfeited upon withdrawal. The deposit amount is tied to the project's estimated network upgrade costs.

Article 10 / ORES complications: For projects requiring New York Office of Renewable Energy Siting (ORES) permits, withdrawal from the interconnection queue does not automatically terminate the siting process — but losing interconnection position makes the ORES investment largely worthless. Developers face sunk costs on both the interconnection and permitting tracks simultaneously.

NYISO's AG District notification requirements under NY Agriculture and Markets Law §305-a add another site control dimension. Parcels requiring agricultural district notification that has not been completed can cause coverage deficiencies at system impact stage, potentially triggering withdrawal.

SPP withdrawal penalties

SPP's interconnection process follows the Definitive Interconnection System Impact Study (DISIS) framework. Source: SPP Tariff Attachment V.

DISIS study deposits: SPP requires study deposits at the start of each study cluster. These deposits fund the cluster-wide system impact study and are partially refundable after study completion. Withdrawal during a study phase results in forfeiture of the current phase deposit.

Attachment V-R financial requirements: SPP's Attachment V-R to the Open Access Transmission Tariff establishes the financial security posting requirements that parallel other RTOs' readiness deposits. Developers must post financial security based on their allocated network upgrade costs after the facilities study. Withdrawal after posting triggers forfeiture.

SPP's withdrawal penalties are generally lower in absolute dollar terms than PJM or CAISO because network upgrade costs in SPP's footprint tend to be lower — the Great Plains transmission system has more available capacity than the congested Northeast or California grids. However, for wind projects in high-congestion areas of the Texas Panhandle or western Kansas, upgrade allocations can still reach $20M+, making late-stage withdrawal extremely costly.

Cross-RTO comparison

The following table summarizes the key financial commitment and withdrawal penalty structure for each RTO under FERC Order 2023.

For a 200 MW solar project in a congested PJM transmission zone, total withdrawal exposure after Decision Point 1 can exceed $2M in deposits alone — before network upgrade cost allocation. In CAISO, the same project could face $5M+ in total forfeiture due to IFS postings tied to California's high upgrade costs.

The site control connection

Withdrawal penalties matter to every developer, but they matter most to developers with site control risk. Here is why: every RTO requires site control coverage to increase at each queue stage (see our full coverage threshold reference). If your coverage drops below the required threshold at a decision point — because a lease expired, an option was not converted, or an encumbrance disqualified a parcel — the RTO can automatically withdraw your project from the queue.

An automatic withdrawal triggered by a site control failure carries the full withdrawal penalty for whatever stage the project has reached. There is no reduced penalty for involuntary withdrawal. The RTO does not distinguish between a developer who chose to leave and a developer who failed a compliance gate.

This creates a specific and preventable failure mode:

1. A developer enters the queue with 95% coverage, including options-to-lease on 30% of the project footprint.
2. The project advances through feasibility and system impact studies, accumulating $1M+ in deposits and readiness commitments.
3. At the facilities study or IA execution decision point, the options have not been converted to executed leases. Coverage drops from 95% to 65% — below the 90% or 100% threshold.
4. The RTO withdraws the project. The developer forfeits all study deposits, all readiness deposits, and their share of network upgrade costs.

The financial exposure was avoidable. If the developer had been tracking option expiration dates against queue milestones, the conversion could have been completed in time. For a detailed walkthrough of how option expirations interact with queue deadlines, see Option-to-Lease Expiration and Interconnection Milestones.

This is also why 2026 is the critical year for FERC Order 2023 compliance. The first wave of projects that entered the queue under the new rules are now reaching Decision Point 1 and facilities study stages. Developers who have not been proactively monitoring their site control coverage are discovering coverage gaps at the worst possible time — when withdrawal penalties are at their highest.

Protecting against forced withdrawal

The most effective way to avoid interconnection queue withdrawal penalties is to never be in a position where withdrawal is the only option. That means proactive site control monitoring:

• Track option expiration dates against queue milestones. Every option-to-lease has an expiration date. Every queue stage has a deadline. If the option expires before the milestone, your coverage drops. Map these timelines and trigger conversion negotiations 6–12 months before the deadline.
• Monitor encumbrance status continuously. A Williamson Act contract, a conservation easement, or a Chapter 61A classification can disqualify a parcel from coverage at later stages. Know which parcels carry encumbrances and whether those encumbrances will be resolved before the next decision point.
• Run coverage audits at every stage transition. Do not wait for the RTO to tell you that your coverage is insufficient. Run the 5-filter coverage audit yourself before each stage gate to identify and remediate gaps proactively.
• Model withdrawal cost at each stage. Know your total financial exposure before you post each deposit. If your site control risk is high, it may be better to withdraw early (when penalties are low) than to advance and face a larger forfeiture later.

For more answers on interconnection compliance, visit our FAQ.

Sources

• FERC Order 2023 — Interconnection Final Rule Explainer
• LBNL Queued Up 2025 — Characteristics of Power Plants Seeking Transmission Interconnection
• PJM Interconnection Queue and Manual M-3.1S
• MISO Generator Interconnection Procedures
• CAISO GIDAP Business Practice Manual
• ISO-NE Generator Interconnection Standards
• NYISO Generator Interconnection Procedures
• SPP Generator Interconnection (Tariff Attachment V)

Related articles

• FERC Order 2023 Site Control Coverage Thresholds by RTO and Stage — The per-stage, per-RTO coverage requirements that determine whether your project passes each decision point.
• Option-to-Lease Expiration and Interconnection Milestones — How option expirations interact with queue milestones and the conversion timeline that determines whether your coverage holds.
• FERC Order 2023 Compliance in 2026: Why This Is the Year — The full market analysis: RTO implementation status, deposit escalation math, queue data, and where the compliance landscape is heading.