FERC Reverses Course on QF Power Production Capacity Standard

On March 19, 2021, the Federal Energy Regulatory Commission (“FERC”) issued an order returning to 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 marks the culmination of FERC’s review of an application for QF certification filed by Broadview Solar, LLC (“Broadview”) for a combined solar plus battery storage facility and results in broad implications for QF certifications across the country. 

On September 1, 2020, FERC issued an order denying Broadview’s QF certification application because the applicable facility’s nameplate capacity of 160 MW DC exceeded the 80 MW limitation for QF certification. Broadview’s application had relied on FERC’s longstanding “send out” test in determining that the facility satisfied the 80 MW upper threshold for QF certification.The “send out” test provided that the proper measure of a QF’s power production capacity is based on the capacity that can be delivered to the interconnection point at any one point time. While Broadview’s facility did have a nameplate capacity of 160 MW DC, the facility’s net output at the interconnection point was limited by inverters to a maximum net output of 80 MW AC at the point of interconnection.  In the September 1, 2020 order, FERC found that the nameplate capacity of the facility is the proper measure of power production capacity, altering its approach to QF certification and denying Broadview’s application.

Following rehearing requests (and an appeal to the D.C. Circuit Court of Appeals), the March 19, 2021 order, by a vote of 3-2, reverses FERC’s earlier order and reestablishes the “send out” test as the proper means for determining a QF’s power production capacity.  FERC reasoned that power sent from solar panels to other internal components of the facility (e.g., inverters), rather than to the grid, cannot properly be considered in the power production capacity of a facility as a whole.  FERC found that reliance on the nameplate capacity of a facility may not take into account the entire facility in question by ignoring integral components such as inverters that limit the amount of power that can be delivered to the interconnection point. Therefore, FERC determined that the proper application of PURPA’s power production capacity limitation necessitates the use of the “send out” test, which determines the maximum net output of the facility at the interconnection point at any time. As applied to the Broadview facility, FERC determined that the 80 MW AC limitation on the facility at the interconnection point satisfied the PURPA threshold requirements for a QF and granted certification.

FERC’s return to the “send out” determination for power production capacity will allow solar developers to certify facilities with “overbuilt” solar arrays and nameplate capacities in excess of 80 MW DC behind the interconnection point as QFs where the net output is limited to 80 MW AC via inverters. FERC’s decision acknowledges that this practice does allow facilities to maintain a higher capacity factor without increasing its power production capacity for purposes of QF certification.  Additionally, FERC’s reversal provided the opportunity for FERC to consider how battery storage impacts the power production capacity determination.  The Broadview facility included a 50-MW (200 MWh) battery energy storage system in addition to the 160 MW DC solar array (all limited to 80 MW AC output at the point of interconnection). In its September 1, 2020 order, FERC did not address how the presence of battery storage at the facility would impact the power production capacity determination.  Without much discussion on the point in the March 19, 2021 order, FERC’s certification of the Broadview facility as a QF clarifies that battery storage at a facility will be treated as a part of the overall facility under the “send out” test when determining power production capacity. Therefore, as applied in the Broadview order, battery storage will be viewed similarly to an “overbuilt” solar array that is limited by inverters so long as the battery storage does not increase the maximum net output of the facility at the point of interconnection at any one point in time.