TANGIBL GROUP SECURES FIRST EVER SOLAR REACTIVE SERVICE SUPPLY TARIFF
In August, 2018, the Federal Energy Regulatory Commission (FERC) approved the first ever Reactive Supply Tariff for a solar facility in PJM. The tariff was prepared and secured by Tangibl on behalf of our client and delivered to them a low-cost opportunity to secure a substantial fixed annual revenue stream on their renewable energy project.
Background: Prior to 2014, wind, solar and other asynchronous generation sources in PJM were exempt from the power factor requirements that traditional synchronous generation sources were required to provide. But recent increases in the capabilities of both wind (Type III and later generation turbines) and solar (inverter controls and performance improvements) to provide Reactive Power services, combined with the increased penetration of renewable resources across the United States, prompted FERC, PJM and other system operators such as MISO, to impose power factor and reactive supply requirements on all new wind and solar resources, along with the likelihood of similar requirements on future energy storage resources. The associated capital investment by this asset class having significant reactive power capabilities makes them eligible to file for Reactive Supply Tariffs in the same manner as traditional synchronous resources.
Tangibl Solution: With our combined experience in Rates & Depreciation, Regulatory Affaris and Project Development know-how, Tangibl was successful in preparing the necessary tariff documents and testimony needed to secure this valuable new revenue stream for our client.
If you are a Wind, Solar or Energy Storage owner with assets, either existing or under development, in PJM or MISO, your project could be eligible for hundreds of thousands of dollars in annual fixed revenue depending on its size, configuration and location. Please feel free to contact a Tangibl representative for an initial no-cost consultation to determine if your facility is a candidate for this unique and value-adding opportunity.
Reactive 101: The production of electric power in an alternating current (“AC”) power system includes both Real and Reactive Power. In mathematical terms, electric power is a complex quantity, and thus can be divided into its two constituent parts: Real Power, measured in watts (“W”) and Reactive Power, measured in volt-amperes reactive (“VARs”). Reactive Power is used or “consumed” by the power system to provide a stable voltage profile and is required to establish electric fields in facilities, such as transmission lines and electric motors. In short, Reactive Power is necessary to provide reliable, stable electric power to the end-use customer. Reactive Power is supplied both by generators and by static devices such as inductors and capacitors that are connected to the transmission system.
In the PJM and MISO RTOs, payments to facilities capable of providing Reactive Service come in two forms, much like separate Capacity and Energy Markets. Not only does a facility receive payment if called upon by the RTO to provide the service (similar to energy) but the facility can now receive tariff-based revenues for having installed the capability to provide that service (similar to capacity) and whether the service is called to perform or not.
In Order No. 888 FERC found that Reactive Supply Service from generators was an Ancillary Service, the costs of which should be separately assessed to customers. In PJM for example, PJM accomplishes this by distributing the revenue collected under the Open Access Transmission Tariff (“OATT”) Schedule 2 to generators and other sources with revenue requirements that have been accepted by the Federal Energy Regulatory Commission (“FERC”) through a tariff filing process. Schedule 2 of the PJM OATT provides that
PJM shall pay each generation owner an amount equal to the generation owner’s Commission accepted monthly revenue requirement for Reactive Supply Service. This monthly revenue requirement is calculated using a cost of service-based approach, is set at the time FERC approves the Tariff and lasts throughout the life of the project.