The Electric Power Supply Association (EPSA) is again voicing its opposition to allowing diesel generation by “demand response” providers to gain market share at the expense of independent power producers who must comply with strict emission limits set by the U.S. Environmental Protection Agency.
EPSA said May 24 that it has filed comments with EPA opposing the use of on-site “behind-the-meter” generators “to masquerade as DR assets in the context of regional organized power markets,” EPSA said in a news release.
EPA recently issued a Notice of Proposed Rulemaking, or NOPR, to allow “emergency” demand response programs to run for up to 100 hours per year without having to install required emissions control equipment. The current limit is only 15 hours per year.
“The essential design and purpose of demand response is to encourage consumers to reduce their consumption of electricity in response to appropriate market signals, not to simply replace power from the grid with power from an on-site emergency diesel generator not subject to the same air emissions rules,” according to EPSA President and CEO John Shelk.
“The proposed EPA rule would encourage the continued growth of DR as a Diesel Renaissance rather than an environmentally-responsible way to help manage regional electric power needs,” Shelk said. This issue is particularly important with respect to the operation of competitive regional organized power markets, where demand response “is in head-to-head competition with generation for the right to earn market revenues,” Shelk added. “It is hard to fathom why replacing retired generating units or existing units with dirty DR resources is either sound environmental or energy policy.”
PJM recently announced the results of its annual capacity auction and indicated that, over the next three years, approximately 14,000 MW of existing generation in the PJM market is expected to retire, at least partly in response to increasingly stringent environmental regulations. At the same time, close to 15,000 MW of demand response cleared this year’s auction. Some estimates suggest that as much as half of this amount may be based on behind-the-meter generation “rather than legitimate efforts to reduce consumer demand,” Shelk said.
The EPA NOPR addresses the National Emission Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion Engines. Known as the RICE NESHAPs rule, the new rulemaking addresses a proposed settlement between EPA and certain DR providers to resolve pending federal litigation. The new rule would allow DR providers to continue to rely on diesel backup generators as DR resources instead of focusing on actual reductions in demand, EPSA said.