Renewables Would Be Covered Under FERC's Proposals to Make the Grid More Reliable

"Better late than never" was Commissioner Christie's sentiment when he addressed the Federal Energy Regulatory Commission's ("FERC's") unanimously approved issuances concerning inverter-based resources ("IBRs"). In a series of three issuances, the Commissioners took action to enhance and protect the reliability of the bulk-power system ("BPS") – "FERC's most solemn responsibility," according to Chairman Glick – as IBRs become more common and integral to the operation of the BPS. In these proceedings, FERC defines IBRs to include solar photovoltaic, wind, fuel cell, and battery storage resources powering electronic devices that change direct current power produced by these resources to alternating current power to be transmitted on the BPS.

Reflective of FERC's new-found focus on IBRs, the Commissioners approved: (1) an order directing the North American Electric Reliability Corporation ("NERC") to plan to register entities that own or operate IBRs; (2) an order approving reliability standards related to IBRs proposed by NERC earlier this year; and (3) a notice of proposed rulemaking addressing various reliability concerns related to IBRs.

Here, we address the orders on IBR registration and approving reliability standards related to IBRs. The third issuance – a FERC proposed rule on reliability standards for IBRs – is the subject of a separate post.

RD22-4-000 - Registration of Inverter-Based Resources

Under the current regulatory regime, FERC requires each user, owner, and operator connected to the BPS to be registered with NERC and to comply with applicable reliability standards based on certain thresholds. NERC determines whether to require users, owners, and operators of the BPS to register through either application of its bulk electric system ("BES") definition or its materiality test. NERC's Rules of Procedure provide that "any entity reasonably deemed material to the reliability of the [bulk-power system] will be registered, irrespective of other considerations."[1] Under this new order, FERC has expanded the pool of entities potentially "deemed to be material" and therefore expanded the pool of potential registered IBRs that would be subject to mandatory reliability standards by considering their impact in the aggregate.

FERC directs NERC to submit, within 90 days, a work plan that describes how NERC plans to identify and register owners and operators of BPS-connected IBRs that are not currently required to register with NERC under the BES.[2] To be included under the new registration requirement, which would in turn subject some IBRs to NERC's mandatory reliability standards for the first time, the IBRs must in the aggregate have a "material impact" on the reliable operation of the BPS.[3] The order states that NERC's work plan should explain how it will modify its processes to address unregistered IBRs, whether by working with stakeholders to change the BES definition, to change its registration program, or to adopt another as-yet-undefined approach.

The order also requires the work plan to include the following implementation timeline:

• First, NERC must complete modifications to its registration processes no later than 12 months after FERC approval of the work plan.
• Second, NERC must identify no later than 24 months after FERC approval of the work plan all owners and operators of BPS-connected IBRs that in the aggregate affect the reliable operation of the BPS.
• Third, NERC must register no later than 36 months after FERC approval of the work plan owners and operators of BPS-connected IBRs that in the aggregate have a material impact on the reliable operation of the BPS.

In recognition that currently unregistered IBRs may not present the same reliability concerns as currently registered IBRs, the order also allows NERC, subject to FERC approval, to apply only a subset of its entire reliability standards requirements to these previously unregistered IBRs, rather than subject these smaller facilities to the full set of standards.

FERC action to address the increasing penetration of IBRs, and to better manage the accompanying risk, is long overdue. In the past six years, NERC has documented a dozen large-scale reliability events where unexpected adverse responses from IBRs had a material impact on the BPS.[4] The reports demonstrated that an IBR does not have to be large enough to have been registered under the current scheme to have the potential to have a material impact on the BPS. These unregistered IBRs are not required to comply with NERC reliability standards, which in turn increases the risk of a reliability event. Expanding the registration requirement would expand the number of IBRs subject to NERC's reliability standards. In recognition of the importance of increased oversight of IBRs, each Commissioner spoke in support of the action, and the Commissioners voted unanimously to approve the order, signaling to industry that FERC views this as an important issue.

RD22-5-000 - FERC Approves Revised NERC Reliability Standards Addressing Facility Interconnection Requirements

On November 17, FERC also issued an order approving NERC-proposed reliability standards FAC-001-4 and FAC-002-4. These revised reliability standards address Facility Interconnection Requirements and Facility Interconnection Studies, respectively. NERC initially proposed these modified standards in its Inverter-Based Resource Performance Task Force's March 2020 white paper ("IBR White Paper"),[5] which addressed certain ambiguities in terminology that could create confusion between NERC's reliability standards and FERC's interconnection procedures. The IBR White Paper found that both of the reliability standards at issue here imply that the term "materially modified" should be used to:

[D]istinguish between facility changes that are required to be studied and those that need not be studied. However, there is not a requirement for any entity to determine what changes are to be considered materially modifying and [generator owners] are not required to notify potentially affected entities of the changes. This has led to confusion and potential reliability issues within [the] industry.[6]

Any such confusion under the prior versions of these reliability standards is more likely to occur with IBRs because of the higher frequency of the change in components due to rapid advances in the emerging technologies used in wind, solar, or other asynchronous generation resources. And what might be seen as a material change to one entity may not be to another. For example, a transmission planner may consider an IBR control system software change to be materially modifying, but if the generator owner does not, it would not notify the transmission planner of the change.[7] FERC approved the new standards, finding them to be an improvement on the previous standards on the basis that the new FAC reliability standards ensure that changes to existing interconnected facilities that have reliability impacts are properly addressed in interconnection requirements and studies.

Under the former reliability standard FAC-001-003, NERC required transmission owners and certain generator owners to complete coordinated studies for new or "materially modified" existing interconnections. New reliability standard FAC-001-4 revises that requirement by applying it to "qualified changes" instead of "materially modified" interconnections. This revision is intended to prevent confusion with the FERC-defined term "Material Modification" used in the FERC pro forma interconnection procedures and agreements. FERC explains that "Material Modifications" refer only to changes that have a "material impact" on other generators in the interconnection queue, whereas the undefined term "materially modify" was used to refer to any change that could have reliability impacts on the system in the FAC reliability standards. The new term "qualified change" would refer to changes to existing interconnected facilities that can have reliability impacts and would help ensure that they are properly addressed in interconnection requirements and studies.

The order also revises existing reliability standard FAC-002-3 to authorize the planning coordinator to define the term "qualified change" and to require public posting of the definition. Under this new reliability standard, a "qualified change" describes the changes to interconnected facilities that must be addressed in interconnection requirements and studies under the FAC reliability standards. By authorizing this change in language, FERC mirrors the change it approved to FAC-001-4 to address the possibility of confusion with the Commission's defined term "Material Modification" in its pro forma interconnection procedures and agreements. FERC found that by identifying the planning coordinator as the entity responsible for developing a uniform definition of "qualified change," it would avoid potential disputes over changes to facilities that require additional study.[8]

FERC also approved NERC's proposed implementation plan for the new reliability standards. The implementation plan provides that the proposed FAC reliability standards would become effective on the first day of the first calendar quarter that is 12 months after applicable regulatory approval, and that the currently effective versions of the standards would be retired immediately prior to the effective date of the revised FAC reliability standards. FERC provided for an additional 12 months for the proposed reliability standards to become effective under certain circumstances, such as where the planning coordinator's definition of "qualified change" differs from what an entity may have considered a "materially modifying" change in facility interconnection requirements or studies under the current standards.

Implementing reliability standards FAC-001-4 and FAC-002-4 will ensure appropriate coordination and communication regarding the interconnection of facilities. When viewed in combination with the other IBR-related actions from the November Commission Meeting, this order should be seen as representative of the seriousness with which FERC views the potential impact of IBRs on the bulk-power system. Entities with IBRs should be mindful of the coming changes and prepare for a new level of scrutiny by the regulators for compliance with the new reliability standards.