Proposed Energy Project Fails to Qualify Under Federal Regulations

A proposal to build a 100-megawatt (MW) propane-fired energy project in Interior Alaska has had its status as a qualifying facility (QF) revoked by the Federal Energy Regulatory Commission (FERC) because the proposed project failed to meet the requirements for a QF as laid out in federal regulations.

Colorado-based Eco Green Generation (EGG), together with Alaska Environmental Power of Delta Junction, approached Golden Valley Electric Association (GVEA) in February, and under the Federal Public Utility Regulatory Policies Act (PURPA), demanded that GVEA purchase the output from a proposed hybrid power project. The project consisted of a 37.8 MW wind farm that ‘has its power firmed’ by the integration of 100 MW of co-generation power produced by 20 separate 5-MW reciprocating engines that are duel fueled from 3% renewable diesel and 97% propane. EGG had self-certified its proposed project with FERC — meaning that EGG represented to FERC that the project met all of FERC’s regulatory requirements for QF status. Based on this, EGG claimed it was entitled to require GVEA to purchase the project’s output at non-market-based prices.

Because FERC does not independently verify the accuracy of QF self-certifications, like EGG’s, GVEA challenged EGG’s eligibility for QF status. GVEA pointed out that not only did the proposed project not meet FERC’s legal requirements for QF status, there were also many inconsistencies and omissions in EGG’s application. GVEA also had serious concerns regarding the cost and reliability impact of EGG’s proposed project. In response to GVEA’s filing, FERC issued an order agreeing with GVEA on all points and revoking EGG’s QF self-certification.

"We are pleased with the regulators’ decision," said Cory Borgeson, President and Chief Executive Officer of GVEA. "Golden Valley had argued from the beginning that EGG’s project failed to qualify as a QF under FERC regulations. FERC agreed with all of GVEA’s positions, thoroughly rejecting every one of EGG’s points."

EGG promoted its idea as a hybrid power project with wind and cogeneration components, but at times over 85% of its energy output would have come from fossil fuels. The EGG proposal was lacking in project-specific data, such as how the project would be financed or where the propane would come from. EGG is believed to have no experience constructing and operating a utility-scale project like the one it was proposing. With a capacity of 100 MW, the project would have effectively replaced much of GVEA’s existing generation on an average daily basis.

GVEA has also asked that the Regulatory Commission of Alaska (RCA) issue an order requiring EGG to seek formal certification as a QF from FERC before GVEA is required to file a facility-specific tariff for EGG in compliance with Alaska law. By granting GVEA’s request, the burden would be on EGG to prove to FERC that any future project meets the requirements to be eligible for QF status before GVEA is required to spend member resources.

"Responding to this proposal cost the co-op hundreds of hours of staff time and costs resulting in excess of hundreds of thousands of dollars," Borgeson said. "Those costs are borne by our members, so GVEA wants to make sure any future proposals are qualified before incurring additional costs. GVEA’s door is always open for additional efficient renewable generation resources, but the projects must have no long-term negative impact on reliability or rates."

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Links to previous GVEA posts on this topic:

(Posted to GVEA's Blog on June 11, 2019.)

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