Surviving New EPA Rules and the Emergency Generator Regulatory Maze

Is your organization one of the thousands of commercial/industrial energy customers that use back-up generators (BUGs)?  Are they used as emergency generators (a.k.a., EGs or gensets) in demand response (DR) programs? If so, 2016 may have felt like an episode of the “Survivor” reality show, except instead of the usual cast of GenX characters and challenges you were unfortunately tasked with surviving a maze of ever-changing genset regulations.

Bad News, Good News:  The past year saw important changes regarding the use of stationary reciprocating internal combustion engines (RICE) that continue to evolve at the federal level as administered by the U.S. Environmental Protection Agency (EPA), which itself is in now in the midst of changes with newly-confirmed administrator Scott Pruitt at the helm. EPA rules provide that BUGs that are intended for emergency use when blackouts occur are exempt from reporting requirements and most emissions regulations.  The bad news is that EPA changes significantly restricted the circumstances where such generators can be compensated for operations while the grid is still up.  The good news is many such generators can achieve “non-emergency” status without equipment upgrades by meeting specific permitting and reporting requirements.

Bit of History – 50-hour Rule No Longer Applies: In early 2016, it was determined that EGs could potentially participate in DR programs under a different rule (referred to as the “50-hour rule”).  A coalition of DR providers including CPower took specific steps to clarify the applicability of the 50-hour rule with EPA as well as explore avenues to address concerns with the prior 100-hour rule as related to EG use for DR:

1. We funded an extensive legal review on the 50-hour rule which outlined the case for allowing EGs to continue DR participation with this rule as a basis.
2. We shared our well-documented analysis with EPA, who responded that they were not in agreement.
3. While we believe the EPA’s interpretation is not aligned with the actual language in the regulation nor the structure of the electricity market, federal agencies such as EPA enjoy the latitude to interpret their regulations in any manner they deem appropriate.
4. While CPower will continue to try to convince EPA that our well-documented position bears merit, all DR service providers clearly need to comply with EPA’s current interpretation.

Further confounding the situation is that a generator classified as “nonemergency” under federal regulations could be deemed “emergency” under state and/or local regulations. Recent examples include the Rule 222 that applies to permitting in New York; while California is moving from the traditional environmental permitting approach towards utility-based restrictions.

What This Means to You: As a DR participant with EGs, you should always be aware of the nuances defining EG assets that do not meet EPA’s interpretations of local requirements as well as the Federal Non-Emergency standard for DR curtailments. This applies even if your current DR service provider may advise you otherwise (especially regarding the use of EGs via the 50-hour rule). Any reputable vendor certainly should not expose you to any potential EPA violations or penalties. And if you indeed find out that EGs are not permitted for use in DR programs, make sure your service provider has an experienced engineering team who is willing to work with you to achieve the best possible alternative curtailment strategies.

On the Positive Side: Again, the good news is that in many instances, you can still use EGs to participate in DR programs and support grid reliability. A good curtailment service provider or DR aggregator should be able to assist clients with specific steps for permitting and retrofits so their engines can still participate wherever possible. At CPower, we have helped several clients with permitting so their engines can now effectively participate in emergency DR events to support the grid. Some of these services include:

• Helping clients evaluate generation assets for permitting compliance at both the federal and state/local levels
• Upgrading engines with aftermarket controls and/or automated DR (ADR) controls
• Developing recommendations for adding load to optimize use of generators
• Facilitating engine and generator upgrades (either working with a carefully vetted partner or customer-preferred vendor)

Bottom Line: As capacity costs increase, active DR participation becomes even more compelling and relevant. Changes in EPA regulations have impacted the ability of DR customers like you to use stationary emergency generators as part of your load reduction strategies.  Luckily, you can look to DR service providers to offer valuable “survival tips” that can bring this episode to a stable ending.

“Thanks to accurate guidance from CPower’s engineering team, our engines were successfully permitted for use in demand response by the state’s Department of Environment. Their in-depth knowledge and tenacity throughout the process clearly contributed to enabling our facilities’ continued participation in the 2017 DR performance season.” – Facilities Director at a large New England based manufacturing firm.

CPower takes a leadership role and shaping market transformation while advocating for our customers to help you navigate the regulatory maze and maximize DR program benefits. The result? Increased energy savings and earnings not just from optimized participation in Emergency DR, but also in non-emergency voluntary programs (like price based Economic DR). In some cases, you can also use your engines for peak-shaving to reduce capacity costs while maintaining compliance with environmental regulations.

Do you have a generator? Does it meet State and EPA guidelines? Are you leveraging it as a demand response revenue resource? Check out our Emergency Generator Decision Tree today to ensure you make the right EG permitting and compliance choices moving forward.