The Idaho Public Utilities Commission, in a July 13 order, granted Idaho Power’s petition for declaratory relief regarding proper contract terms, conditions, and avoided cost pricing for five battery storage facilities requesting contracts under the Public Utility Regulatory Policies Act of 1978 (PURPA).
As noted in a July 14 statement, the commission has determined that the proposed facilities qualify for contracts under PURPA based on their primary energy source, making them eligible for two-year, negotiated contracts with IDACORP’s (NYSE:IDA) Idaho Power.
Franklin Energy Storage LLC intends to build four battery storage projects in Twin Falls County, while Black Mesa Energy LLC has proposed to build a project in Elmore County, the commission said. Plans call for the batteries to be charged with energy from nearby solar projects capable of generating 2.5 average megawatts, the commission said, adding that the electricity would be dispatched to Idaho Power under the provisions of PURPA.
As noted in the order, PURPA was passed as part of the National Energy Act of 1978, and it requires electric utilities, unless otherwise exempted, to buy electric energy from qualifying facilities (QFs). In Idaho, the purchase rate for a utility’s contract to buy QF energy under PURPA must be approved by the commission, according to the order.
Under PURPA, the purchase rate for PURPA contracts is to not exceed the “incremental” or “avoided cost” to the utility, defined as the cost of energy which, but for the purchase from the QF, such utility would generate or buy from another source, the commission said. However, FERC rules require establishment of “standard rates for purchases from [QFs] with a design capacity of 100 kilowatts or less,” and allow “standard rates for purchases from [QFs] with a design capacity of more than 100 kilowatts.” The commission also said that FERC rules provide that standard rates “[m]ay differentiate among [QFs] using various technologies on the basis of the supply characteristics of the different technologies.”
The commission said that it has established two methods of calculating avoided cost, depending on the size of the QF project: the surrogate avoided resource (SAR) methodology – which the commission uses to establish standard or “published” avoided cost rates; and the integrated resource plan (IRP) methodology.
Currently, the commission said, the eligibility cap for wind and solar QFs to access published avoided cost rates is set at 100 kW. QF projects other than wind and solar are subject to a published rate eligibility cap of 10 average MW, the commission said.
Since PURPA was first implemented in Idaho, the commission has periodically modified the maximum length for PURPA contracts, the commission said, adding that in 2015, it reduced the term for individually negotiated PURPA contracts – those not subject to published rates – in Idaho from 20 years to two years. The contract term for published rate contracts remains at 20 years, the commission said.
In its petition, Idaho Power said that it received requests for PURPA contracts from five battery storage facilities – self-certified as QFs – asserting that they are entitled to published avoided cost rates and 20-year terms. The commission added that the contracts request 148 MW of total combined energy storage. Idaho Power informed Franklin and Black Mesa that it did not believe any of the storage facilities are eligible for published rates and 20-year contracts, the commission said.
The company acknowledged that “QF status is within the exclusive jurisdiction [of] and properly before FERC,” and thus, for purposes of its petition, the company did not challenge the QF status of Franklin and Black Mesa. The commission added that Idaho Power requested a declaratory order that the Franklin and Black Mesa QFs and other battery storage facilities “are subject to the same 100 kW published avoided cost rate eligibility cap applicable to wind and solar facilities.”
The company also requested a ruling that “the proper authorized avoided cost rate for battery storage facilities … that exceed 100 kW nameplate capacity, is [a rate based on] the incremental cost IRP methodology with a maximum contract term of two years.”
The commission added that according to Idaho Power, “the generation source that energizes all of the proposed battery storage facilities is solar generation,” and “the output profile submitted for each of the … facilities matches the shape and timing of the generation profile of a solar generator.”
According to the company, the potential benefits of an economically viable utility-scale energy storage facility cannot be recognized if QFs “are configured in such a manner as to come under published rates,” or structured to “pass[ ] through as many kW hours as possible … to maximize revenue,” as proposed by Franklin and Black Mesa, the commission said.
The commission noted that the company asserted that the Franklin and Black Mesa QFs are “nothing more than a pass through of the solar generation [that will energize their batteries], in what appears to be a blatant attempt to manipulate the 100 kW published rate eligibility cap and two-year contract limitation for solar generators.”
The commission said that the company argued that it is appropriate and necessary for the commission to grant its requested declaratory relief “extend[ing] the 100 kW published rate eligibility cap to battery storage projects … to protect customers from this manipulation of the rules.”
The commission noted that Franklin opposed Idaho Power’s petition, asserting that there is no “legal controversy” because the commission’s orders and policy rulings are “clear [and] unequivocal” in supporting Franklin’s entitlement to published avoided cost rates for up to 20 years. Franklin quoted a commission order that provides, “We find that a 10 aMW eligibility cap for access to published avoided cost rates for resources other than wind and solar is appropriate to continue to encourage renewable development while maintaining ratepayer indifference.”
The commission added that Franklin also quoted the commission’s decision to “maintain the eligibility cap at 10 aMW for QF projects other than wind and solar (including but not limited to biomass, small hydro, cogeneration, geothermal, and waste-to-energy).”
Franklin also asked the commission to disregard a number of factual assertions in Idaho Power’s petition, contending that contrary to the company’s claims, the Franklin QFs “contemplated” energy sources in addition to solar; have offered to be dispatchable; and will have the ability – “to varying degrees” – to provide ancillary grid services, firming of variable generation, and time-shifting generation to match load.
The commission added that Franklin disputed that its QFs will merely “pass through” solar power, arguing that they would instead “utilize renewable energy as input into the battery storage system … [that would then be] used to provide a non-intermittent, dispatchable product.”
Redwood Energy, LLC, which owns the Black Mesa QF, asserted that it qualifies for published rates ‘because it is a QF [with] output of less than 10 [aMW] but is not a wind or solar QF that would be restricted to 100 kW.”
The commission added that Redwood contended that the Black Mesa QF “has fundamentally different characteristics than a wind or solar project without energy storage,” and said that battery storage “makes output both more predictable and more coincident with system load, thus [resulting in] a higher net qualifying capacity.”
Redwood asserted that “[e]nergy storage will reduce Idaho Power’s requirements for resource flexibility, thus avoiding a cost that would be borne but for” the Black Mesa QF project. The commission added that Redwood further asserted, “This is a dispatchable system that will offer ancillary grid services such as voltage support, load shifting, reserve capacity, load-balancing, [and] firming of variable generation or time-shifting to match load.”
The commission noted that since electric input is required to produce electric output from a storage facility, in order to qualify as a PURPA resource, the primary energy source behind the battery storage must be considered.
The commission said that it must, then, look to Franklin’s and Black Mesa’s primary energy sources in order to determine their eligibility under PURPA. The primary energy source for Franklin and Black Mesa is solar generation, and the energy generation output profiles for the battery storage facilities are a direct reflection of the solar generation that operates as the primary energy source for the battery storage facilities.
Accordingly, the commission said, it finds it appropriate to base Franklin’s and Black Mesa’s eligibility under PURPA on its primary energy source – solar.
Solar resources larger than 100 kW are entitled to negotiate two-year PURPA contracts through the use of Idaho’s IRP methodology, the commission said, adding that Franklin’s argument that the commission’s prior decisions clearly and unequivocally allow it entitlement to published rates ignore FERC’s pronouncement that energy storage facilities are not per se renewable resources/small hydro power production facilities under PURPA.
Franklin has failed to prove that Idaho Power impeded Franklin’s ability to enter into PURPA contracts, the commission said, adding that to the contrary, Idaho Power notified the battery storage facilities that the utility did not believe the projects were entitled to 20-year, published rate contracts and requested the projects “supplement your applications with additional information that verifies eligibility for the requested rates and terms, or modify your applications to request rates and terms that your proposed projects may qualify for.”
The commission said, “We find that, as storage facilities with design capacities that will exceed 100 kW each and with solar as their primary energy source, the projects are eligible for two-year, negotiated (IRP methodology) contracts.”