Energy & Infrastructure Alert | July.18.2016
On June 16, 2016, the Federal Energy Regulatory Commission issued Order No. 827, a final rule that eliminates exemptions for wind generators from the requirement to provide reactive power services as a condition of taking interconnection service. The final rule will become effective on September 21, 2016. As a result of FERC's order, new wind projects – i.e., projects seeking to interconnect to the transmission system that have not yet executed a "Facilities Study Agreement" before September 21, 2016 – will be required to install inverters or similar equipment in order to absorb and provide reactive power. Existing wind projects – i.e., projects that have executed a Facilities Study Agreement before September 21, 2016 – will continue to be exempt from the reactive power requirements.
Reactive power is an ancillary service that is provided by generators and used by transmission operators to control voltage levels on their systems. Since FERC first adopted pro forma interconnection procedures and agreements in 2003, it has required synchronous generators, including traditional gas and coal-fired power plants, to provide reactive power at the resource's point of interconnection with the transmission grid. However, in 2005, FERC exempted wind generators from the requirement, finding that the high costs associated with designing and building a wind generator capable of providing reactive power would represent an inappropriate barrier to entry for new wind generation. Solar and other non-synchronous generators did not receive the same exemption. Based on improvements in technology and associated declining costs, FERC has since determined that is no longer necessary or appropriate to exempt wind generators from the reactive power requirements that apply to other generators.
Although FERC is requiring new wind projects to provide reactive power, its rule recognizes technological differences between synchronous and non-synchronous generators. Reactive power can be measured at three points: generator terminals, generator substations, and the point of interconnection. Transmission providers measure reactive power from synchronous generators at the point of interconnection. However, unlike synchronous generators, non-synchronous generators do not produce a constant and controllable amount of energy. In addition, non-synchronous generators are often sited many miles from their point of interconnection, resulting in line and station losses that inhibit their ability to provide reactive power at the point of interconnection on a comparable basis with respect to line losses or cost, as compared to synchronous generators.
Accordingly, FERC is requiring transmission providers to measure reactive power from non-synchronous generators at the high side of the generator's substations. FERC states that measuring reactive power at the high-side of the generator substation will be less expensive for non-synchronous generators because there is a greater amount of reactive power associated with the inverters located at the high-side of the generator substation. At that point, the nonsynchronous generator must provide reactive power within the power factor range of 0.95 leading to 0.95 lagging, as measured on the high side of the generator's substation, unless the transmission provider establishes a different range. This is the same power factor range that is applicable to synchronous generators.
FERC's model interconnection procedures and agreements require a transmission provider to compensate generators for reactive power services when those generators must operate outside of their power factor requirements. FERC's order clarifies that non-synchronous generators are eligible for the same compensation for reactive power as synchronous generators. FERC notes, however, that the current methodology for calculating reactive power compensation for synchronous generators "does not translate" for non-synchronous generation. Accordingly, non-synchronous generators must propose a method for calculating their compensation, which must be filed with FERC.
FERC's move to eliminate the wind generator exemption from reactive power requirements is not unprecedented. In May 2015, FERC approved a proposal by PJM to amend its interconnection procedures and pro forma agreement to require wind generators to use "enhanced inverters" with the capability to provide reactive power. FERC agreed with PJM that technology permitting wind generators to provide reactive power has changed both in availability and cost to an extent that its mandatory use no longer presents a barrier to entry for non-synchronous generators. Six months later, FERC issued a notice of proposed rulemaking seeking comments on its proposal to eliminate the reactive power exemption for wind generators.