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FERC Proceeding Questions the Treatment of Battery Storage Under PURPA

A pending petition before the Federal Energy Regulatory Commission (“FERC”) tees-up whether battery storage facilities co-located with renewable generation projects should be included in the output measurement for purposes of determining Qualifying Facility (“QF”) status under the Public Utility Regulatory Policies Act of 1978 (“PURPA”).  Depending on FERC’s response, the addition of battery storage facilities to certain renewable projects could affect the QF status of the entire project.  FERC is under no deadline to resolve this dispute, but FERC may choose to act in the coming months both to decide QF status in the current dispute as well as provide added policy guidance to address the broader scenario of battery storage-plus-renewable projects seeking QF status.

SETTING AND FERC PROCEEDING

In Montana, four wind projects (“Beaver Creek Projects” or “Projects”) are certified as small power production QFs pursuant to PURPA.[1]  FERC’s regulations require an electric utility to interconnect and purchase or transmit the output made available by a QF unless the utility is separately relieved of this obligation by FERC.[2]  For renewable projects, only facilities with a net capacity of 80 MW or less are eligible for QF status under PURPA.[3]  In the case of the Beaver Creek Projects, the owners intend to interconnect and put the facilities’ output to NorthWestern Energy (“NorthWestern”), the local utility, under PURPA’s must-purchase obligation.  Each of the Beaver Creek Projects has a reported net capacity at or just below the 80 MW statutory maximum to remain eligible for QF status. The ability of each Beaver Creek Project to sell its output to NorthWestern depends on retaining its QF status and a net capacity of 80 MW or less. 

In April of 2018, the developers of the Projects amended the description of each QF in the dockets where each QF certification was filed to reflect the planned addition of 40 MW of battery storage to the Projects (approximately 10 MW for each Project), and in August of 2018 one of the owners formally requested FERC to issue an order recertifying the Project as a QF in light of the planned battery additions to the existing QF Project.[4]  The Projects’ developers describe battery storage as a “time shifting measure” for the wind facilities that does not increase the net capacity of the Projects and does not affect the regulatory status of the Projects.[5]  The utility disputes the regulatory consequences of co-locating battery storage with the Projects and has petitioned FERC to revoke the QF status of the Beaver Creek Projects, arguing that “the battery storage facilities causes the Beaver Creek Projects … to exceed the statutory small power production limit set by PURPA, thereby disqualifying them from QF status.”[6]  

FERC’S APPROACH COULD AFFECT OTHER PROJECTS

If FERC directly addresses the principal issues in this dispute, this case could have implications for other developers and utilities where battery storage might be integrated into renewable QF projects.  In particular, the following questions are raised and could affect other QF projects:

Are co-located battery storage systems considered separate QFs or part of the renewable QF? 

Both parties cite to FERC’s leading case Luz that addresses battery storage under PURPA, which dates from 1990 and indicates that a stand-alone battery storage facility could be eligible for QF status in its own right if the facility is otherwise eligible and conforms to PURPA’s energy input requirements.[7]  However, as the parties to the current dispute illustrate, FERC has not clarified the question of whether a battery storage facility must be considered as a separate small power production QF when it otherwise qualifies and is co-located and charged exclusively with power from an existing QF.

The owners of the Beaver Creek Projects argue that under Luz, the battery storage facilities take on the renewable power source characteristics of the associated wind QF and are not required to obtain separate QF status.  QF Recertification Application at 6.  The owners assert that because the battery facilities do not independently generate power and are not prime movers that generate electric energy, they cannot be considered separate small power production facilities and their capacity should not be included in determining whether the 80 MW threshold is exceeded.  QF Answer at 13-14.

The utility argues that the battery storage facilities involved in this dispute could separately qualify as small power production QFs under the Luz precedent, and as such FERC must account for the characteristics of the battery facilities separately from the existing QF.  Namely, according to the utility, the battery facilities that are charged with wind power from a separate QF should not be deemed as having zero capacity simply because the developers chose not to seek separate QF certification for the battery facilities.  Petition Opposing QF Status at 11-12.

Should the capacity of co-located battery storage facilities be combined with the capacity of the renewable project to determine QF status? 

This question is central to the dispute.  In the case of each of the Beaver Creek Projects, combining the capacity of the battery storage facilities with the wind capacity could disqualify each entire Project as a QF because the aggregated amount of each Project would surpass the 80 MW statutory maximum.[8]

The developers of the Beaver Creek Projects present several reasons to support their decision not to include the addition of the battery storage facilities in the net capacity figures of the existing QFs.  For one thing, they argue, battery storage does not provide any additional independent power generation and instead allows time shifting the wind output to allow scheduled and dispatchable electricity.  QF Recertification Application at 3.  They also argue that determining a battery system’s capacity rating is not as simple as referencing a name plate capacity figure because battery storage is rated on a MWh basis rather than a MW basis.  QF Answer at 12-13. 

The utility requests that FERC disqualify each Project as a QF based on the view that the capacity of the battery storage must be combined with the existing QF capacity, which will exceed the statutory limits for QF status.  NorthWestern argues that because the Beaver Creek Projects will use the battery storage facilities as power production resources that actually deliver and “put” QF energy to the utility for purchase, such characteristics cannot be ignored when calculating the capacity of the combined wind-plus-battery facilities.  Petition Opposing QF Status at 10-12.  According to the utility, combining the additional capacity of the battery storage facilities to the wind QF Projects results in a statutory violation of the 80 MW threshold for renewable QFs.  Id.

Can a technological intervention be used to limit output below 80 MW such that the renewable facility retains QF status?

The owners of the Projects argue that, in any event, the Projects will implement a SCADA system that will ensure that the injections to the grid from each wind-plus-battery facility will never exceed the 80 MW net capacity threshold required to maintain QF status.  QF Recertification Application at 5-6; QF Answer at 7-8.  However, the utility argues that any proposed “cap” to operate at 80 MW or less using a SCADA system is ineffective and will not cure the 80 MW statutory violation because PURPA restricts QF status from any renewable facility with a rated capacity or design that exceeds a net capacity calculation of 80 MW, regardless of the output targets or operating standards actually achieved.  Petition Opposing QF Status at 12-13.

POTENTIAL FERC ACTION

On November 9, 2018, FERC issued an order tolling the requirement to act on the QF Recertification Application within the ordinary 90-day timeframe for such applications.[9]  As a result, FERC is currently subject to no deadline to address this dispute.  Notwithstanding the timing uncertainty, this dispute offers FERC the opportunity to clarify how, if at all, battery storage facilities that are co-located with renewable generation projects should be included in the capacity calculation of the renewable project for determining QF status pursuant to PURPA.


[1]               See Docket Nos. QF 17-672, QF17-673, QF17-674 and QF17-675.

[2]               18 C.F.R. § 292.303.

[3]               See 16 U.S.C. § 796(17)(A)(ii).

[4]               See Beaver Creek Wind II, LLC, Application for Certification of Qualifying Small Power Production Facility Status, Docket No. QF17-673 (Aug. 14, 2018) (“QF Recertification Application”).  Only one of the four Projects filed a QF Recertification Application with FERC for determination of QF status.  A determination by FERC on one QF Recertification Application will likely apply to the other Projects because they are similarly situated.

[5]               See, e.g., QF Recertification Application at 2 (stating that “the Facility continues to satisfy all of the requirements for QF status”).

[6]               See NorthWestern Corporation, Motion for Revocation of Qualifying Facility Status, Docket Nos. EL18-195 et al. (Aug. 31, 2018) (“Petition Opposing QF Status”) at 1.  The QF owners filed an answer in response to the Petition Opposing QF Status.  See NorthWestern Corporation et al., Motion to Intervene and Answer of the Beaver Creek Wind Projects to the Motion for Revocation, Docket Nos. EL18-195 et al. (Sept. 25, 2018)) (“QF Answer”).

[7]               See Luz Development and Finance Corp., 51 FERC ¶ 61,078 (1990) (“Luz”).

[8]               See 18 C.F.R 292.204(a).  The requirements of these regulations to combine the capacity figures of all small power production facilities that are owned by the same entity, are located within one mile of each other and use the same energy resource are known as FERC’s “One-Mile Rule.”

[9]               Beaver Creek Wind II, LLC, 165 FERC ¶ 61,087 (2018).

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Seth Lucia Energy Attorney Bracewell Law Firm
Counsel

Seth Lucia counsels clients on a wide range of energy regulation and policy matters before the Federal Energy Regulatory Commission (FERC). He advises on all areas of electric utility, power and transmission regulation, including issues arising under both Parts I and II of the Federal Power Act. Seth assists clients in obtaining FERC authorizations for major energy transactions such as utility mergers and the purchase or sale of utility assets. He also advises companies on wholesale power and transmission matters, Independent System Operator (ISO) and Regional...

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