FERC Reconsiders QF Power Production Capacity Standard

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On September 1, 2020, the Federal Energy Regulatory Commission (“FERC”) issued an order departing from its longtime standard used to determine a generating facility’s “power production capacity” for purposes of certification as a qualifying facility (“QF”) under the Public Utility Regulatory Policies Act (“PURPA”). The decision comes in response to an application for QF certification filed by Broadview Solar, LLC (“Broadview”) for a combined solar plus battery storage facility in Yellowstone County, Montana. The facility in question consisted of a 160 MW solar array co-located with a 50 MW battery storage system.  However, as asserted in Broadview’s application, the inverters at the facility physically limited the net output of the facility to no more than 80 MW, the power production capacity limit for a QF.  Broadview’s application relied on FERC’s precedent of considering a generating facility’s “send out” capability when analyzing whether it meets the power production capacity requirements of a QF under PURPA.  Because the facility’s net output was limited to 80 MW, Broadview reasoned that 160 MW facility still met FERC’s requirements for QF certification.  

In its decision, FERC stated that a reexamination of if its prior approach to QF certification was necessary in order to properly apply the plain language of PURPA. FERC determined that focusing on the net output or “send out” of a facility would allow generating facilities with gross output capabilities far greater than the 80 MW limit to certify as a QF, which FERC concluded would be inconsistent with PURPA.  Instead, FERC found that the proper approach is to consider a facility’s power production capacity by examining its gross power production capacity reduced only by certain parasitic loads and losses. FERC recognized facilities that occasionally or incidentally cross the 80 MW threshold due to certain components or variances can still meet the QF requirements, but stated that a facility purposefully designed with a gross output well over the threshold should not be considered similarly. By applying this standard for measuring the power production capacity of the Broadview facility, FERC found that Broadview’s reliance on inverters as a limiting element on the facility’s output was not sufficient to meet the 80 MW threshold because its gross power production capacity was 160 MW. Therefore, FERC denied Broadview’s application for QF certification. 

FERC’s decision to revise the standard for considering a facility’s power production capacity will apply prospectively to QF certification applications as of September 1, and previously certified QF’s using the prior standard will maintain grandfathered QF status. Although FERC’s order examined a combined solar plus battery storage facility, FERC did not consider whether the associated battery storage system was a separate facility or whether and how the battery storage system should be considered in determining a facility’s power production capacity. Therefore, it remains unclear how FERC would rule on a facility that exceeds the 80 MW threshold only because of a coupled battery storage system. Additionally, this order did not directly address whether FERC’s updated power production capacity approach applies to the other capacity thresholds governing qualification for exemptions from certain provisions of the Federal Power Act under PURPA, including the 20 MW limit for exemptions from Section 205 of the Federal Power Act. FERC-jurisdictional power producers seeking to qualify for such exemptions should consider the impact of FERC’s updated approach on their projects. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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