The Federal Energy Regulatory Commission (FERC) has spent increasing amounts of time considering regulatory issues related to energy storage. This report covers FERC’s consideration of the regulatory challenges facing hybrid resources and two recent FERC decisions indicating that FERC is not yet ready to resolve certain questions about how energy storage resources should be considered pursuant to the Public Utility Regulatory Policies Act of 1978, as amended (PURPA).
December 17, 2021 Feature
XI. Renewable Energy
Catherine McCarthy, Stephen Wald, and Ivan Wohner
A. FERC Efforts to Promote Hybrid Resources
FERC considers the participation of energy storage in the U.S. energy markets to be an essential component of a “clean energy future.”1 To this end, FERC has worked with Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) and other stakeholders to identify and work to remove barriers to entry facing energy storage developers. One approach that many developers are taking is combining storage capabilities with generation resources to create “hybrid resources.” Hybrid resources share a point of interconnection with the electric grid and include two different resource types. Some hybrid resources are modeled and dispatched together as a single resource, while other hybrid resources are collocated but dispatched separately.
To encourage the efficient and effective participation of hybrid resources in the energy markets, FERC held a technical conference on hybrid resources in July 2020. With participants including representatives from RTOs/ISOs, public utilities, generation developers, and other industry experts, the conference provided an opportunity to discuss the benefits and challenges facing collocated and integrated hybrid resources, as well as the status of the ongoing regulatory efforts to address these challenges.2 In May 2021, FERC staff issued a White Paper on hybrid resources.3 Below is a summary analysis of certain issues raised at the conference, in post-conference comments submitted by the stakeholders, and the FERC White Paper.
Hybrid resources are distinct in design and operation and are “very different from a conventional resource, or even different from a stand-alone [renewable] plant.”4 The current regulatory and market framework was designed to manage “conventional” generation facilities.5 The rapid growth of hybrid resources “presents challenges to RTOs/ISOs and other FERC-jurisdictional transmission providers and federal and state regulators to keep up with the pace of technological change.”6
The lack of a consistent regulatory framework and rules in the various RTOs/ISOs has led to a number of challenges, including unclear or inconsistent data submissions by interconnection customers and difficulty in modeling hybrid resources during the interconnection process for transmission service providers.7 The FERC White Paper suggests that “standardized terminology specific to co-located hybrid and integrated hybrid resources might offer the benefit of creating a shared understanding of how wholesale market rules may accommodate co-located hybrid and integrated hybrid resources.”8
The FERC hybrid resources proceeding also focused on the generation interconnection process. For example, currently effective material modification requirements for interconnection requests that appear in ISO/RTO tariffs and stand-alone Open Access Transmission Tariffs (OATTs) may not provide flexibility to allow for the addition of electric storage facilities to generation projects already in interconnection queues without the loss of queue positions. Also, the existing approach to interconnection studies may not appropriately model integrated hybrid resource operation.9
For projects already in a generation interconnection queue, adding a storage resource and becoming a hybrid generation resource raises an entirely different challenge. Such an addition might be considered a material modification by the interconnected transmission owner or the interconnected RTO/ISO, and, in the event that it is, the interconnection customer may be required to either abandon the addition or lose the project’s existing queue position.10 During the FERC hybrid resources proceeding, potential solutions suggested included (1) preserving queue positions for customers that seek to add electric storage to an existing request;11 and (2) allowing an interconnection customer to avoid a restudy process if it limits its dispatch to avoid exceeding the established existing interconnection limits.12
A consistent concern among participants both at the technical conference and in the post-conference comments was the appropriate modeling of hybrid projects for interconnection studies.13 While “some transmission providers [use] different modeling approaches tailored to their regions and customer needs,”14 in general, participants in the FERC proceeding expressed concern that current RTO/ISO practices treated hybrid resources the same as conventional resources and do not consider “the actual operating characteristics of co-located hybrid or integrated hybrid resources and their actual impact on the transmission system.”15 Examples of such inappropriate modeling referenced include:
- Studying electric storage under worst case assumptions (i.e., assuming electric storage charges during peak periods and discharges during light load periods);16
- Failing to model real-world practices, such as using “the electric storage resource to control output”;17
- Failing to study the likely injection of a hybrid resource based on rational economics behaviors, rather than the full injection impact of the resource;18 and
- Failing to account for the project’s full capabilities.19
The FERC proceeding also highlighted another existing challenge for hybrid resources—capacity valuation. “[C]urrent capacity valuation methodologies may not adequately capture the value of a co-located hybrid and integrated hybrid resource.”20 Several RTOs/ISOs are exploring the use of Effective Load Carrying Capability (ELCC), a method to determine capacity value, used to better address capacity valuation for hybrid resources.21 However, the FERC White Paper indicates that “there is no current consensus about the best way to model capacity accreditation . . . , other than the fact that the current methods are unlikely to reflect these resources’ full value, and it will take further operational experience to determine the best methods.”22
B. Energy Storage and Qualifying Facility Status Size Thresholds
Another issue before FERC in 2020, and again in 2021, related to how to measure solar generation facilities for purposes of PURPA’s 80 MW size limitation for small power production facility qualifying facilities (QFs) such as wind generation and solar generation facilities. QFs receive regulatory relief at the FERC and state public service commission level and in some circumstances are able to “put” their output to the interconnected utility at the utility’s avoided cost. The facts that FERC considered included energy storage collocated with a solar generation facility, and parties to the proceeding asked FERC to decide whether such energy storage capacity should be counted for purposes of the 80 MW small power production QF size limit. In a 2020 order on how to measure the size of a solar generation facility collocated with energy storage, Broadview 2020, FERC focused on the installed capacity of the solar array portion of the facility when applying the 80 MW limit and explained that the “best interpretation” of the 80 MW cap is “as a limit on the facility’s net output to the electric utility (i.e., at the point of interconnection), taking into account all components necessary to produce electric energy in a form useful to an interconnected entity.”23 In initially denying the generation owner’s QF self-certification for the facility, FERC explained that QFs “cannot meet the statutory limit by relying on inverters as a limiting element on a QF’s output.”24 Because the solar array at issue exceeded 80 MW under that test, FERC did not reach the collocation issue or whether and how to include the collocated energy storage when applying the 80 MW threshold and chose not to “address whether the associated battery storage system is a separate facility or whether and how the battery storage system should be considered in determining the facility’s power production capacity.”25
In its Broadview 2021 order, FERC’s order on rehearing of Broadview 2020, FERC reversed its 2020 approach and found that control systems or inverters that limit a facility’s output could satisfy the 80 MW threshold test and concluded that the facility did satisfy small power production QF standards.26 However, once again, FERC did not provide detailed guidance on how the use of collocated battery storage fits into the “power production capacity” calculus more generally.
A dissent in Broadview 2020 provides insight into the approach that then-FERC Commissioner and now FERC Chairman Richard Glick may support to measure collocated battery storage in the QF context: “Broadview’s 50 MW battery system cannot ‘produce’ power in any conventional sense of that term.”27 Commissioner Glick’s dissent reasoned that, because any electricity discharged from the battery is produced solely by the solar array, the battery may increase the solar generation facility’s capacity factor but does not increase the power production capacity.
In Broadview 2021, in reaffirming decades long precedent and reversing Broadview 2020, FERC emphasized the distinction between power production capacity and capacity factor. FERC recognized that the battery storage system affected the efficiency of the facility. However, because inverters limit the production capacity below the 80 MW limit on their own, the Commission did not resolve the collocated battery storage question or explain whether it should not count towards a facility’s production capacity.28
This case leaves the renewable energy industry with an unresolved question. A protest in the proceeding challenging the Broadview facility’s QF status referenced Section 292.204(a) of the PURPA-implementing regulations as to “the power production capacity of a facility for which qualification is sought, together with the power production capacity of any other small power production facilities that use the same energy resources . . . and are located at the same site may not exceed 80 MW.”29 Commissioner James Danly’s dissent in Broadview 2021 builds upon this view, arguing that the electricity stored in the battery system is still technically delivering power to the grid and “[t]herefore, the Facility is capable of delivering the entire 160 MWh generated by the solar panels to the purchasing utility.”30 A subsequent order on rehearing of Broadview 2021 did not resolve the issue when it addressed Section 292.204(a) arguments about aggregating small power production facilities at the same site.31 There will likely be more on this issue from FERC during the Biden administration.
Endnotes
1. See Transcript of FERC Technical Conference on Hybrid Resources, Docket No. AD20-9-000 at 7 (July 23, 2020) (former FERC Chairman Neil Chatterjee) [hereinafter Transcript].
2. Id.
3. Hybrid Resources White Paper: A Staff Paper: Federal Energy Regulatory Commission, Docket No. AD20-9-000 (May 26, 2021) [hereinafter FERC White Paper].
4. Transcript, supra note 1, at 37 (Mark Ahlstrom).
5. Id.
6. FERC White Paper, supra note 3, at 22–23.
7. Id. at 21.
8. Id. at 24.
9. Id.
10. Id. at 26.
11. Id.; Solar Energy Indus. Ass’n, Post-Tech. Conf. Comments of Solar Energy Indus. Ass’n on Hybrid Resources, Docket No. AD20-9-000, at 6 (filed Sept. 24, 2020).
12. Id. at 2; Am. Wind Energy Ass’n, Comment of Am. Wind Energy Ass’n, Docket No. AD20-9-000 at 17–18 (filed Sept. 28, 2020) [hereinafter AWEA Comments].
13. FERC White Paper, supra note 3, at 28.
14. Id.
15. Id.; Enel N. Am., Inc., Post-Tech. Conf. Comments of Enel N. Am., Inc. on Hybrid Resources, Docket No. AD20-9-000 at 3 (filed Sept, 24, 2020) [hereinafter Enel Comments].
16. Enel Comments, supra note 15, at 3.
17. AWEA Comments supra note 12, at 20.
18. Savion, LLC, Post-Tech. Conf. Comments of Savion, LLC, on Hybrid Resources, Docket No. AD20-9-000, at 7 (filed Sept. 24, 2020).
19. AWEA Comments, supra note 12, at 24–25.
20. FERC White Paper, supra note 3, at 33.
21. See also Mark Specht, ELCC Explained: The Critical Renewable Energy Concept You Have Never Heard of, Equation (Oct. 12, 2020), https://blog.ucsusa.org/mark-specht/elcc-explained-the-critical-renewable-energy-concept-youve-never-heard-of.
22. FERC White Paper, supra note 3, at 35.
23. Order Denying Application for Certification and Revoking Status as a Qualifying Small Power Production Facility, Broadview Solar, LLC, 172 FERC ¶ 61,194 (2020) [hereinafter Broadview 2020]; Order Addressing Arguments Raised on Rehearing and Setting Aside Prior Order, Broadview Solar, LLC, 174 FERC ¶ 61,199, at P 26 (2021) [hereinafter Broadview 2021].
24. Broadview 2020, 172 FERC ¶ 61,194, at P 25.
25. Id. at 25 n.57.
26. The FERC order on rehearing in Broadview 2021 is consistent with earlier FERC precedent. For decades, FERC evaluated whether facilities satisfied the 80 MW QF threshold based on the “maximum net output of the facility that can be safely and reliably achieved under the most favorable operating conditions likely to occur over a period of several years.” Occidental Geothermal, Inc., 17 FERC ¶ 61,231, ¶ 61,445 (1981).
27. Broadview 2020, 172 FERC ¶ 61,194, at P 2 (Glick, Ch., dissenting).
28. Broadview 2021, 174 FERC ¶ 61,199, at P 32.
29. Motion to Intervene and Protest of Northwestern Corp., Docket No. QF17-454-004, at 8 (filed Oct. 2, 2019) (quoting 18 C.F.R. § 292.204(a)(1)).
30. Broadview 2021, 174 FERC ¶ 61,199, at P 36 (Danly, Comm’r, dissenting).
31. Order Addressing Arguments Raised on Rehearing, Broadview Solar, LLC, 175 FERC ¶ 61,228, at PP 31–34 (2021).