United States: FERC Eliminates Reactive Power Exemption For Wind Generation

On June 16, 2016, the Federal Energy Regulatory Commission (FERC) issued Order No. 827 ("the Final Rule") revising its pro forma generator interconnection agreements to eliminate the exemption that wind generators enjoyed from the requirement to provide reactive power.[1] The Final Rule, including the adopted revisions, becomes effective on September 21, 2016. Transmission providers are directed to make filings with FERC to adopt the new requirements.

Background

Recognizing that reactive power is necessary for a transmission system's efficient and reliable operation, FERC, in Order No. 2003, required that large generators provide reactive power in the range of 0.95 leading to 0.95 lagging at the point of interconnection.[2] However, wishing to "remove unnecessary obstacles to the increased growth of wind generation" FERC, in Order No. 661, continued an exemption first made available in Order No. 2003-A for large wind generators from the reactive power requirements, unless reactive power capacity was required to ensure system safety or reliability.[3] Order No. 2006 expanded this policy to include small wind generators, giving them a complete exemption from any reactive power requirements.[4] In addition to the potentially high costs of installing reactive power equipment that formed the basis of the exemption for large wind generators, FERC believed that small wind generators would have minimal impact on a transmission system and its ability to meet reliability standards.

Two developments have led FERC to reexamine its policy. First, technological advancements have significantly lowered the costs to wind generators of providing reactive power to the point where FERC no longer sees cost as a barrier to further wind development. FERC identifies the Type III and Type IV inverter-based turbines that are capable of producing and controlling reactive power as examples of technology that were not available when the exemption was first conceived. The second development impacting FERC policy is the proliferation of wind generation, particularly in certain concentrated areas.[5] As wind generation has continued to increase in both absolute and relative terms, a continued application of the exemption poses reliability issues. Additionally, the exemption places undue burden on conventional generators to supply a transmission system's reactive power needs at the same time that the percentage of generation coming from conventional generators is decreasing.

The Final Rule

Under Order No. 827, FERC will require new non-synchronous generators to provide dynamic reactive power within the power factor range of 0.95 leading to 0.95 lagging, unless the transmission provider has established a different power factor range that applies to all non-synchronous generators in its control area on a comparable basis. The range is to be measured at the high-side of the generator substation, as opposed to the point of interconnection where reactive power is measured for synchronous generators. FERC explained that, notwithstanding improvements in technology and equipment, differences between non-synchronous and synchronous generators remain. The choice of where to measure the range recognized these differences and was based on a desire to balance the need for reactive power with costs; measuring reactive power at the generating facilities would likely result in too little reactive power available for reliable transmission while measuring reactive power at the point of interconnection could be cost prohibitive. The high-side of the generator substation, FERC reasoned, "represents a middle ground."

FERC will also require non-synchronous generators to meet their proportional reactive power requirements at all levels of real power output, similar to what is required of synchronous generators.[6] Finally, FERC stated that it will maintain its existing compensation policy for reactive power. Currently, a transmission provider must compensate a generator for reactive power service outside of the specified power range or if it is providing compensation to affiliated generator within the specified power range. FERC, however, will convene a workshop on reactive power compensation issues on June 30, 2016.

Impact on Existing Wind Generation and Regional Flexibility

The new rules will apply only to newly interconnecting non-synchronous generators that have not yet executed a facilities study agreement. No changes to already effective generator interconnection agreements will be required. Previously exempt wind generators applying for transmission upgrades will be exempt from the new reactive power requirements, unless the transmission provider's system impact study demonstrates that reactive power is needed as a matter of system reliability or safety. This policy dovetails with the policy that existed prior to Order No. 827 when these generators originally entered service and recognizes that for some older wind generators, a requirement to provide reactive power would necessitate a fundamental change in technology or hardware that could be cost prohibitive.

FERC also provided exemptions for regional flexibility based on regional reliability requirements, variations that are "consistent with or superior to" the Final Rule and RTO/ISO based variations.

Conclusion

Order No. 827 represents one of a number of steps FERC is taking to balance its desire to not only accommodate, but also to encourage, intermittent renewable generation like wind while ensuring transmission system accessibility and reliability. As renewable generation continues to grow in both absolute and relative terms and as potential technologies and facility sizes continue to proliferate, FERC will continue to review its policies to ensure that the transmission system remains accessible, efficient and reliable.

Footnotes

[1] Reactive Power Requirements for Non-Synchronous Generation, Order No. 827, 155 FERC ¶ 61,277 (2016).

[2] Standardization of Generator Interconnection Agreements and Procedures, Order No. 2003, FERC Stats. & Regs. ¶ 31,146 (2003), order on reh'g, Order No. 2003-A, FERC Stats. & Regs. ¶ 31,160, order on reh'g, Order No. 2003-B, FERC Stats. & Regs. ¶ 31,171 (2004), order on reh'g, Order No. 2003-C, FERC Stats. & Regs. ¶ 31,190 (2005), aff'd sub nom. Nat'l Ass'n of Regulatory Util. Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007), cert. denied, 552 U.S. 1230 (2008).

[3] Interconnection for Wind Energy, Order No. 661, FERC Stats. & Regs. ¶ 31,186, order on reh'g, Order No. 661-A, FERC Stats. & Regs. ¶ 31,198 (2005).

[4] Standardization of Small Generator Interconnection Agreements and Procedures, Order No. 2006, FERC Stats. & Regs. ¶ 31,180, order on reh'g, Order No. 2006-A, FERC Stats. & Regs. ¶ 31,196 (2005), order granting clarification, Order No. 2006-B, FERC Stats. & Regs. ¶ 31,221 (2006).

[5] According to the trade group American Wind Energy Association, wind generation capacity has increased from 8,993 MW in 2005 (when Order No. 661 was issued) to 61,327 MW in 2014.

[6] FERC had previously approved a 25-percent nameplate capacity exemption for wind generators in PJM and had considered, but ultimately rejected, a 10-percent nameplate capacity exemption for all wind generators. FERC has stated that it will consider maintaining existing exemptions on a case-by-case basis.

If you have any questions about this Alert, please contact Ilia Levitine, Frederick J. Heinle, any of the attorneys in our Renewable Energy and Sustainability Practice Group, any of the attorneys in our Energy, Environment and Resources Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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