USA – CALIFORNIA Trends and Developments Contributed by: Nora Sheriff, Gwenneth O’Hara and Samir Hafez, Buchalter LLP
Federal policy developments associated with the “One Big Beautiful Bill Act” (OBBBA) signed into law by President Trump on 4 July 2025 have introduced additional complexity. The expansion of Foreign Entity of Concern (FEOC) restrictions has increased compli- ance burdens and constrained supply chain options for clean energy developers. Beginning in 2026, these rules limit the use of equipment, components, and financing tied to foreign entities of concern and impose escalating domestic content thresholds. The effect has been to increase project costs and intro- duce uncertainty into procurement strategies, with downstream impacts on retail rates. Taken together, these global and federal forces rein- force a structural tension in California’s energy policy: balancing decarbonisation goals with affordability. Rising capital costs, supply chain constraints, and fuel price volatility have increased pressure on ratepayers. CAISO Transmission Planning Process The CAISO Transmission Planning Process (TPP) for the 2025–2026 cycle reflects a fundamental shift toward accommodating rapid load growth and ensur- ing system reliability in a decarbonising grid. A central development is the increasing prominence of large load demand, particularly from data centres and electrification. CAISO and state agencies have incorporated updated demand forecasts, including several gigawatts of projected data centre load, into transmission planning assumptions. This has required expanded co-ordination between the California Ener- gy Commission (CEC), CPUC, and CAISO under their joint planning framework. The TPP has also emphasised the need for transmis- sion infrastructure to support:
reform to streamlining permitting and aligning plan- ning timelines with resource development. Another notable development is the increasing align- ment between CAISO planning determinations and CPUC regulatory processes. Under other recent reforms (discussed below), CPUC now applies a rebuttable presumption of need for projects identified in CAISO’s transmission plans, reducing duplicative analysis and accelerating permitting. Overall, the 2025–2026 TPP cycle reflects a transition from incremental expansion to rapid, system-wide infrastructure scaling, driven by both decarbonisation and load growth. CAISO Interconnection Process Enhancements (IPE 5.0) CAISO’s Interconnection Process Enhancements (IPE), culminating in Version 5.0, represent ongoing efforts to address longstanding queue backlogs and improve the efficiency of connecting new resources to the grid. Although specific procedural details continue to evolve, the direction of reform has been consistent: • increased reliance on cluster study approaches; • enhanced readiness requirements for project appli- cants; and • improved cost allocation transparency for network upgrades. The reforms aim to ensure that only viable projects advance through the interconnection queue, reducing speculative entries and accelerating study timelines. Given the scale of renewable and storage develop- ment required to meet California’s targets, these enhancements are critical to maintaining development timelines. In practice, however, interconnection challenges remain closely linked to transmission constraints identified in the TPP. As a result, IPE 5.0 should be understood as part of a broader system of reforms that includes transmission planning, CPUC permitting changes, and CEQA streamlining measures.
• large-scale renewable integration; • battery storage deployment; and • geographically concentrated new loads.
At the same time, delays in transmission development have become a critical concern. State analyses indi- cate that a significant share of renewable and storage resources face delays due to transmission constraints. These challenges have elevated the importance of
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