FERC Reverses Course, Returns to Longstanding QF Precedent

In September 2020, the Federal Energy Regulatory Commission (FERC) reversed 40-year old precedent by revoking the qualifying facility (QF) status of the Broadview facility made up of a 160 MW solar array and a 50 MW battery storage resource, as well as inverters that convert the direct current (DC) electricity generated by the solar panels into alternating current (AC) electricity, which (after subtracting parasitic load) physically limit the capacity that can be delivered to the grid to 80 MW, ruling at that time that capacity must be measured based on the DC capabilities. Last week, FERC reversed that decision. With its reversal, FERC again will apply the 80 MW size limit for small power production qualifying facilities to the amount of power that can be delivered to the grid, allowing the QF to take output limitations into account, such as where inverters are necessary for the QF’s ability to convert DC power to AC power in order to put power onto the grid at the interconnection point. However, FERC’s order also finds that mechanical means of limiting output presents a special circumstance for demonstrating QF eligibility. As such, facilities self-certifying to QF status through FERC Form 556 should take care to fully justify such special circumstances. 

In addition, in its September 2020 order, because it rejected Broadview’s QF status based on the DC rating of only the solar array, it did not address whether the associated battery storage system was a separate facility or whether it should be considered in determining the facility’s power production capacity. In its new order, albeit without discussion on this specific issue, FERC treats the battery as part of the Broadview QF facility.

To qualify as a small power production QF, a renewable resource must have a power production capacity of 80 MW or less. Prior to FERC’s September 2020 order, FERC found—and now again finds—that to determine this size criteria, it will focus on the facility’s actual output, and that a facility will still qualify as a QF if it uses artificial or mechanical means of limiting its output to 80 MW or below. FERC has now rejected its prior rationale that a facility cannot rely on the fact that inverters serve as a limiting element in determining its power production capacity for the purpose of QF eligibility because that is a conversion limit not a limit on the facility’s power production capacity. 

The result of FERC’s reversal is that generation resources that are currently in development are again permitted to rely on inverters or other mechanical means of limiting their output in order to qualify for QF status. However, FERC indicated that relying on inverters, and presumably other mechanical means of limiting output, to limit output to 80 MW in order to qualify for QF status is a special circumstance that makes the demonstration of compliance via FERC Form 556 difficult or impossible. Although FERC determined that Broadview sufficiently explained its special circumstances that justified its QF eligibility in other parts of Form 556, FERC noted that Broadview did not take advantage of Line 1m of Form 556 and the Miscellaneous section to explain its special circumstances. As such, future Form 556 filers that utilize inverters or other mechanical means of limiting output should take the FERC’s order as guidance to utilize Line 1m and the Miscellaneous section to explain its special circumstances for demonstrating QF eligibility.