FERC Issues White Paper on “Hybrid Resources” Seeking Comments
By John Decker and Jacob Silver*
On May 26, 2021, the Staff of the Federal Energy Regulatory Commission (“FERC”) issued a “Hybrid Resources White Paper” (“White Paper”) in what may be a first step by Chairman Richard Glick toward policy initiatives to encourage the development and integration of hybrid resources in organized markets. The White Paper addresses topics raised by FERC Staff and participants in the July 2020 Hybrid Resources Technical Conference.1 The White Paper summarizes the barriers to entry that hybrid resources face in and out of Regional Transmission Organization (“RTO”) and Independent System Operator (“ISO”) markets (“RTO/ISO markets”). The White Paper defines “hybrid resources” as projects that share an interconnection point but incorporate two or more different resource types. The most common hybrid resource is a solar photovoltaic (PV) project combined with battery electric storage. However, the White Paper’s definition is broad and could include combinations of electric storage with solar, wind, or natural gas. FERC is encouraging RTOs and ISOs to address the barriers to integrating hybrid resources, and has set July 19, 2021 as a deadline for each RTO/ISO to submit informational reports on issues specific to their markets.
The White Paper identifies benefits from hybrid resources for both the electric grid and project owners. Adding hybrid capabilities can increase the capacity factor of intermittent or variable resources while reducing transmission congestion and the curtailment of variable generation during periods of peak production. Depending on the individual RTO/ISO market rules, hybrid resources may also be able to provide ancillary services and increased capacity market offerings. The benefits are substantial enough that, despite the issues and barriers identified below, there were 33 GW of hybrid resource capacity added to interconnection queues in 2019.
The White Paper identifies four barriers affecting the integration of hybrid resources that could be addressed in updates to tariffs or business practice manuals: (1) a lack of standard terminology; (2) interconnection; (3) eligibility to participate in energy, capacity, and ancillary service markets; and (4) capacity valuation. Regarding terminology, the White Paper finds that because the various RTO/ISO markets and industry participants do not employ consistent names for different types of hybrid resources there is confusion among stakeholders, particularly when applying market rules. The White Paper defines “co-located hybrid resources” as resources sharing a single point of interconnection but modeled and dispatched as two or more separate resources. Contrastingly, “integrated hybrid resources” are defined as resources sharing a single point of interconnection that are modeled and dispatched as a single integrated resource. The difference between the two is significant both for determining eligibility to offer various market products and for capacity valuation.
The White Paper finds that interconnection poses unique challenges for hybrid resources in part because the process is not handled in a uniform manner inside or outside of RTO/ISO markets. First, the White Paper notes that interconnection customers need flexibility because they are simultaneously permitting two different resources. While all RTO/ISO markets allow hybrid resources to undergo a single interconnection request study, the processes differ greatly by region. Some stakeholders are pushing for top-down uniformity and clarity in this area. Second, if a project is in the interconnection queue and decides to add hybrid capabilities, the addition may be treated like a material modification that forces the project to the back of the queue. Some participants argue that, if an addition does not add output, then it should be treated like a “technological advancement,” allowing the project to keep its place in the queue. Proponents argue that this would give developers flexibility and further incentivize the addition of electric storage. Similarly, if a project in the queue switches from self to grid-charging it may also be treated like a material modification. An issue raised by participants and highlighted in the White Paper is that, when a Load Serving Entity (“LSE”) seeks to make the same modification, the LSE can designate the grid-charging as system load and keep its queue location. This may advantage LSEs over independent generators developing hybrid resources.
Further, the White Paper notes that some interconnection studies currently model hybrid resources with their multiple components operating separately in a way that ignores the economic signals a rational operator would follow when charging and injecting. As a result “unnecessary and costly network upgrades” are common. The White Paper suggests that interconnection modeling assumptions need to be flexible and evolve with project operators, RTO/ISO markets, and other FERC-jurisdictional transmission operators experience managing hybrid resources.
The White Paper finds that RTO/ISO market rules currently limit hybrid resources ability to participate in energy, capacity, and ancillary service markets beyond the technological limitations facing either type of hybrid resource. This limits hybrid resources ability to realize their full value to both project owners and RTO/ISO markets. The White Paper points to deficiencies in dispatch modeling software — similar to the issues with interconnection modeling — as drivers of this barrier. Several RTOs and ISOs are currently engaged in stakeholder processes studying dispatch and other modeling software needs in this area. Finally, the White Paper notes that hybrid resource operators and RTOs/ISOs disagree over who should control generation and dispatch decisions of a hybrid resource’s respective components. RTOs/ISOs assert, for example, that unless they control the dispatch of a hybrid resource they may lack situational awareness of the battery’s state of charge. Some RTOs/ISOs have expressed concern that hybrid resources may use their batteries to engage in “price chasing” rather than benefitting system reliability. Advocates for hybrid resources counter that hybrid level component telemetry can aid RTO/ISO situation awareness and that the hybrid resource owner should maintain control over its resource’s respective components.
Similarly, the White Paper finds that both stakeholders and RTOs/ISOs lack consensus over the appropriate capacity valuation methodology for hybrid resources. Most participants agree that the performance data currently available is insufficient to accurately address capacity accreditation. Some RTOs/ISOs believe that once there is performance data for hybrid resources that the existing methods of capacity valuation may be appropriate but want to wait until that data is available to decide. However, the White Paper reports that the majority of RTOs/ISOs are studying using the “Effective Load-Carrying Capacity” (“ELCC”) method for hybrid resources. The ELCC is a probabilistic modeling exercise that measures a resource’s ability to produce energy during periods when the grid is most likely to face a shortfall. The White Paper notes that the difference between co-located and integrated hybrid resources is likely to be particularly relevant when assessing capacity valuations.
Given the high levels of interest and complexity at issue with hybrid resources, a formal rulemaking process to address barriers to integration is likely. Such a rulemaking may standardize terminology across regions and attempt to normalize some aspects of the interconnection process. However, because of the significant differences among the RTO/ISO markets and other FERC-jurisdictional transmission operators, it is unlikely that such a rulemaking would set uniform requirements for eligibility to participate in energy, capacity, and ancillary service markets or directly address capacity valuation. FERC is accepting comments on the White Paper through August 18, 2021 when the comment window closes for the RTO/ISO hybrid resource reports due on July 19, 2021.2
*Jacob Silver, 2021 Summer Associate, contributed to this article.
1 Hybrid Resources White Paper, Docket No. AD20-9-000 (May 2021), https://www.ferc.gov/media/hybrid-resources-white-paper.
2 Notice Inviting Comments, Docket No. AD20-9-000 (May 26, 2021), https://www.ferc.gov/media/hybrid-resources-white-paper-notice.
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