Two FERC decisions pose problems for renewable energy generation

Energize Weekly, September 16, 2020

In a pair of September rulings, the Federal Energy Regulatory Commission (FERC) has undercut the development of clean energy projects, according to environmentalists and a dissenting commissioner.

A Sept. 1, FERC decision limited the flexibility of small, renewable energy projects to get certification that assures their electricity will be bought at favorable rates under the Public Utility Regulatory Policies Act (PURPA).

Three days later, the commission rejected a plan by the New York state grid operator to open its capacity market to renewable energy generation and storage. Both rulings were backed by the three Republican commissioners and opposed by the lone Democrat.

Commissioner Richard Glick, the Democrat, called the PURPA decision “misguided,” and Chris Casey, a senior attorney at the Natural Resources Defense Council (NRDC), called the New York ruling “a power grab” blocking state officials trying to meet mandated clean energy goals.

The PURPA case centered on a Broadview Solar LLC solar-storage facility in Yellowstone County, Mont., owned by Broad Reach Power. The facility is connected to the NorthWestern Energy Corp. transmission lines.

The project is composed of a 160-megawatt (MW) solar array and a 50-MW, four-hour storage battery for a total rated capacity of 210 MW.

A goal of PURPA, which was enacted in 1978, is to promote local, small-scale renewable energy projects, and to that end, the projects have to generate no more than 80 MW.

These projects are guaranteed that their electricity will be purchased by utilities at the same rate it cost the utilities to generate an equal amount of electricity.

A series of inverters connected to the Broadview solar panels and battery, converting direct current into alternating current for transmission, limited the actual production of the facility to 80 MW, the company said.

The Edison Electric Institute (EEI) filed a challenge with FERC contending the determination of whether a project was a “qualifying facility” under PURPA should be based on the rated capacity of the entire facility and that Broadview was artificially suppressing its output.

The commission majority agreed and in doing so, overturned a 40-year-old precedent that focused on output not component capacity, adding that the ruling would only apply prospectively.

“I cannot help but express my concern that so casually upending settled precedent creates unnecessary uncertainty, making it hard for developers to know which precedents they can count on and which they cannot,” Glick wrote in a dissent.

“The commission attempted to dodge the question that the industry was actually awaiting,” Jennifer Key, an attorney with Steptoe & Johnson, wrote in a note – the role of storage in determining qualifying capacity.

On that issue, the commission said it “did not need 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.”

Glick, in his dissent, did take on the issue saying that a battery does not produce power and just increases the reliability of the facility producing its 80 MW of electricity.

FERC and the New York Independent System Operation (NYISO) have been wrangling for months over the grid operator’s efforts to open its capacity market to renewable energy generation and storage.

In February, FERC rejected NYISO’s first plan to accommodate renewable energy generation and storage in the capacity market, a move in response to the state’s Climate Leadership and Community Protection Act, passed in 2019.

NYISO went back to the drawing board, but fossil-fuel power producers argued the plan remained discriminatory. On Sept. 4, FERC rejected the revised plan saying making public policy resources a priority over non-public policy resources was unduly discriminatory.

The Climate Leadership and Community Protection Act has a goal of achieving 70 percent renewable electricity by 2030 and 100 percent zero-carbon emissions by 2050. It tasked all state agencies to participate in reaching the goals.

The capacity market pays generators to ensure there will be enough generating capacity on the system to meet peak demand. The market has focused on baseload generation, primarily fossil-fuel and nuclear.

Bringing renewable generation and storage into the market would provide an extra revenue stream and make raising financing easier, but FERC blocked the “public policy” initiative.

In defending the ruling FERC Chairman Neil Chatterjee at a conference in New York, Sept. 9, said the decision ensured market rules are resource neutral and create a level playing field for all sources, according to GTM Daily.

But NRDC’s Casey said the commission is “erecting barriers and making it harder for states to achieve their energy goals.”

In his dissent, Glick called the decision “the latest in the Commission’s ever-growing compendium of attempts to block the effects of state resource decision making.”

Glick said that commission ruling “perverted” the NYISO rules “into a mind-boggling series of unnecessary and unreasoned obstacles aimed at stalling New York’s efforts to transition the state toward its clean energy future.”

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