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14 September 2020
In the long-awaited Broadview Order, FERC reinforced PURPA's statutory limit for small power production qualifying facilities (SPP QFs) to a "power production capacity" of not more than 80 MW. SPP QFs can not evade this statutory limit by restraining the ability of much large facilities to actually "send out" more than 80 MW through the use of limited inverters. The Commission attempted to dodge the question that the industry was actually awaiting, regarding how storage charged from an SPP QF should be counted with regard to the 80 MW limit, stating that 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." Instead, the ruling was based on the 160 MW of solar capacity at the site. But, the ruling provided no indication that if the facility had consisted of 80 MW of solar and 80 MW of battery storage that the outcome would not have been identical.
The order is prospective and does not affect SPP QFs that have self-certified or have been granted Commission certification prior to September 1, 2020. Until December 31, 2020, the effective date of Order No. 872, any challenge to a Form 556 filing for an over 80 MW SPP QF would have to be through a Petition for Declaratory Order, rather than a protest.
The case arose after Broadview Solar re-self-certified its combined solar photovoltaic and battery storage facility with a gross capacity 160 MW of solar and 50 MW of storage (charged on-site by the solar resource), with its net capacity remaining at about 80 MW in light of the use of limiting inverters. In opposition, Northwestern argued that the Broadview should be considered as two distinct small power production facilities in one location, with the solar and battery net outputs calculated individually and then aggregated to determine if the combined system was within the 80 MW limit. EEI argued that Broadview was artificially limiting the output from its facilities in order to stay under the 80 MW limit. EEI asked FERC to reconsider whether it is appropriate to measure SPP QF power production capacity based on net capacity versus rated capacity.
FERC denied Broadview's self-certification request and revoked its SPP QF status, finding that "there is a significant difference between (i) design capabilities that may incidentally or occasionally cross PURPA's 80 MW threshold due to certain components or variances, such as fuel or ambient temperature and (ii) a facility purposefully designed with a 160 MW solar array" and that the SPP QF "cannot meet the statutory limit by relying on inverters as a limiting element on a QF's output." FERC viewed the inverters as capable of converting only 80 MW into AC power, but found that such limit was "a conversion limit, not a limit on the facility's power production capacity."
In so ruling, the Commission overturned its statement in Occidental that the power production capacity of a facility is the maximum net output of the facility which is sent out, finding that this 40-year old precedent was not consistent with the 80 MW "power production capacity" limit expressly specified by the statute and regulations. The Commission clarified that the maximum gross power production capacity will still be reduced for load and line losses to calculate the "maximum net power production capacity."
As noted, the Commission found that it could rule on the self-certification without addressing the additional 50 MW of battery storage, but it would be difficult to see how the outcome would have been any different had the request been for an 80 MW solar facility coupled with a 50 MW battery with the limiting inverters. Although the dissent is correct that a battery or storage device produces no energy, if presented with the fact scenario of an 80 MW solar facility and 50 MW battery, with all the energy in such fact scenario produced by the 80 MW solar facility, the facility as a whole could send out more than 80 MW. The battery could be charged during one period and the entire facility at a later period could send out well more than 80 MW, but for the inverters. The battery in such scenario is allowing the solar facility to send out more than 80 MW of its production at a given moment in time, but for the inverters. This scenario appears to be the same as having 160 MW of solar and the restricting inverters.
Commissioner Glick vigorously dissented, arguing that SPP QF status should turn on the actual power production capacity of the resource as a whole, not the capacity of its largest individual component part. It is his view that "Broadview's inverters prevent the facility from ever providing more than 80 MW of electricity to the grid and focusing on that figure – i.e., the potential output of the facility as a whole, not its sub-components – is far more consistent with the PURPA's text, purpose, and legislative history." Much of his dissent is focused on the battery storage aspect of the proposal. Because the electricity discharged by the battery would be produced exclusively by the solar array, in Glick's view the facility's actual power production capacity was not being increased by the battery. This point is not addressed by the majority and until it is, the true impact of the case is not crystal clear. His "bottom line is that while Broadview's configuration may allow it to more predictably produce electricity, that configuration does not give it a power production capacity greater than 80 MW." As to legal matters, Glick also was disturbed by the overturning of long-standing precedent.
What does this decision mean for the future of hybrid resources seeking to be SPP QFs? For now, they may have be limited to 80 MW (or 20 MW in RTO regions) in combined capacity to obtain PURPA contracts. But, Commissioner Glick quite correctly points out that the larger than 80 MW solar array and the 50 MW of storage both enhance the facility's capacity factor, while ensuring the 80 MW threshold at any given moment is retained. A future Commission may well agree such a configuration satisfies PURPA. This decision is not the last word, but it is unclear who will have the last word – that depends on the election, the courts, and Congress.
The most interesting aspect of this entire case actually may not be the issues raised about the use of limiting devices such as inverters or whether SPP QFs should be able to include storage that drives their total capacity (power production and storage) above 80 MW. Rather, the case fundamentally is about whether Congress needs to re-visit PURPA. The notion that 210 MW of resources should be limited to never send out more than 80 MW in order to obtain a PURPA contract raises the question of why are PURPA contracts viewed as so much more desirable than contracts available in the market? PURPA was not intended to harm ratepayers, but if developers are willing to constrain their output in such fashion to obtain a PURPA contract, the implication is that such contracts are more lucrative to developers than market-based contracts. With the scramble to decarbonization, a 160 MW solar facility with 50 MW of storage should be financeable without PURPA.
For further information on this topic please contact Jennifer L Key at Steptoe & Johnson LLP by telephone (+1 202 429 3000) or email (email@example.com). The Steptoe & Johnson LLP website can be accessed at www.steptoe.com.
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