2019 Trends: Is the Burden of NERC for Renewable Generation Compliance Overstated?
- January 10, 2019
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Should new renewable generation developers take the NERC reliability standards into consideration when sizing their projects? For some, that answer is an emphatic yes. The threshold for generating resources connected to the high voltage grid in North America to be considered Bulk Electric System (BES) assets is 75 megawatts. Exceeding this threshold means the owner and operator must register with their Regional Entity as a Generator Owner and Generator Operator. Most people who manage project regulatory risk would consider it an easy decision to avoid exposure to the reliability standards if possible. The language about potential sanctions of “…one million dollars per day, per violation” is daunting, in addition to the operational and regulatory burden of preparing for and subjecting oneself to periodic audits by the Regional Entity. Add in the various requirements for quarterly reporting like protection system operations and the more immediate reporting and documented mitigation of actual protection system misoperations, and a decision to avoid all these challenges and simply limit the resource size to below the 75 MW threshold looks appealing.
However, before a developer decides to self-constrain their projects below the threshold, potentially reducing profitability and robbing the Interconnection of additional clean energy, a closer look at the real burden of the reliability standards is in order.
The goals and intent of the NERC Generator Owner and Generator Operator Reliability Standards are perfectly aligned with the goals and intent of the Owner/Operator of the generating facility.
- The resource should always be online and fully producing dependable power
- The resource should protect against a cyber attack that can disable the facility or migrate to the larger interconnected system
- The resource should protect against fault conditions or other system perturbations that could damage or disable the resource’s equipment
- The personnel responsible for the operation and maintenance of the resources should have a basic knowledge of the system to which they are connected, should be prepared to respond to Operating Instructions from the Transmission Operator, and should be able to report cyber or physical threats to their facility as this information could be vital not only to their facility but also to contribute information to determine a potential coordinated attack.
Generator Owners not compelled by regulation to do otherwise are unlikely to throw open the doors of their control system to cyber attacks, ignore maintenance and testing of their protection system components, not follow the operating instructions of their Balancing Authority and Transmission Operator, and ignore the modeling characteristics assigned to them by their Transmission Planner. When closely examined, it turns out the NERC Reliability Standards impose few requirements on a generator that would not be undertaken as a matter of routine, safe, and reliable operation.
Even if the NERC standards are not operationally burdensome, one could argue they are administratively burdensome. The historic and ongoing challenge of compliance for many registered entities lies in producing and archiving evidence of compliance, not in the actual accomplishment of the compliance activities themselves. Again, using the example of maintaining and testing protection system components (PRC-005 remains one of the most violated standards), a Generator Owner mostly likely has some schedule or program in place to assure the components that protect their facility and investment are in good working order. Such activity produces documentation in the form of either completed work orders or vender reports. If the Generator Owner does not dispose of the documents associated with maintenance and testing, then they have evidence, and a key requirement of the standard is satisfied by default.
A final benefit to a new generating facility regarding the NERC Reliability Standards is that much of the development, startup and testing activity also constitutes compliance evidence. A construction cycle easily affords sufficient time to be NERC compliant on day one of operation. But what about the burden of continuous compliance after construction?
As previously explained, a review of the facilities’ existing or anticipated processes and procedures can be compared to the NERC standards requirements to determine how much of the compliance activity is already implemented. Another key factor for renewable generators is the Risk Based Monitoring program employed by NERC to focus resources on the highest risk entities and operations on the BES.
Obviously, large enterprises like vertically integrated utilities, independent system operators, and multi-regional entities have the highest potential risk to the reliability of the BES simply by virtue of their size. Variable generating resources, while extremely important to reliability when considered in aggregate, have a much lower risk profile when considered individually. With a simple Compliance Plan (documentation of what you do) and some internal controls (checking what you do and taking steps to correct gaps), a lower risk entity may never be subjected to an audit, but can simply log any deficiencies that may come up and how they were addressed.
Given the above details about compliance with the NERC standards for Generator Owners and Operators, a developer may ultimately choose to self-constrain their facility. However, one can easily imagine the conversation between developer and investor as follows:
Investor – “So, we’re limiting the output of the facility to less than 75 MW?”
Developer – “Yes. That way we avoid being exposed to the NERC reliability standards.”
Investor – “Won’t we already be accomplishing most of the requirements anyway?”
Develop – “Yes. But our record keeping won’t need to be as accurate.”
Investor – “I see.”
If they compare their anticipated maintenance and operation plans with the reliability standards, they will make a closely considered and well-informed decision in the best interests of profitability and providing clean energy to the grid.
- Self-constraining renewable generation facilities to below 75 MW can deny the BES of valuable clean and reliable energy
- Self-constraining renewable generation facilities can leave stranded capacity for increased production and revenue at an otherwise more capable interconnection location
- In many cases, standards requirements are accomplished through routine operations and logging
- Risk Based Monitoring measures at NERC enable renewables to potentially self-log discovered gaps and avoid compliance audits
- Outsourcing compliance activities is an efficient and cost-effective way to ensure ongoing compliance without undue burden to owner and operator staffs