Generator demand-response programs may disappear

The EPA is changing the rules for demand-response programs; electrical engineers should be aware of these changes to emergency stationary generators.
By Tom Divine, PE, Smith Seckman Reid, Houston April 28, 2016

Figure 1: A 2000 kW diesel emergency generator is installed at a hospital facility. Courtesy: Smith Seckman ReidEditor’s note: This article isn’t intended to give legal advice. For legal advice, the reader should consult legal counsel.

Changes to U.S. Environmental Protection Agency (EPA) regulations will very soon restrict or eliminate owners of standby generators’ ability to participate in utility "demand-response programs." The court’s order abrogates the so-called, "100-hour rule," which allowed emergency stationary generators to operate and take on load without extensive emission controls in response to a utility request to reduce demand.

Standby generators are generally qualified as "emergency stationary generators." Emissions requirements for emergency gensets are much less restrictive than those for nonemergency units, and consequently, emergency generators are less expensive and easier to maintain. To maintain classification as emergency generators, the units must run only when utility power is unavailable, and for up to 100 hours while utility power is available for testing and maintenance and specific other purposes allowed by the regulations.

Since 2010, regulations allowed emergency generators to operate and carry load in response to a request from the local utility. The intent is to relieve pressure on the grid in emergency or near-emergency conditions by reducing demand, as generator systems assume a portion of the utility’s load. Customers agree to reduce demand by a specific minimum amount on request, and are compensated by their utilities based on their demand-reduction commitments and on how much they actually reduce demand during demand-response periods. The 2010 rule allowed units to run in demand-response for up to 15 hours. In 2013, the rule was amended to allow emergency units to operate for any portion of the allotted 100 hours. The 2010 rule is called the "15-hour rule," and the 2013 rule is called the "100-hour rule."

In 2014, the state of Delaware brought suit against the EPA to eliminate or reduce the amount of time that emergency generators could operate while utility power was available. Delaware claimed that it was harmed by operation of generators without emission controls in neighboring states, because emissions from those generators were wafting across state lines into Delaware. Interveners argued that inexpensive standby generation would supplant investment in online generation, leading to more frequent and prolonged emergency conditions under which standby units would be called on to operate.

The court determined that the EPA action in establishing the 100-hour exemption had been arbitrary and capricious, and decided to, in the court’s words, "reverse the challenged rule." The EPA asked for time to prepare a new rule, and in response, the court extended the life of the 100-hour rule until May 1, 2016. It appears that the EPA will not establish a new rule by that deadline.

It is not entirely clear what rule will be in place on May 1. The 100-hour rule is "reversed," but it isn’t certain whether the previous 15-hour rule will be reinstated or whether the 100-hour rule will vanish with nothing in its place, leaving no allowable demand-response participation—a "zero-hour rule."

Looking forward

Electrical engineers should be aware that future participation in demand-response programs is uncertain and fraught with peril. They should be cautious with any advice that they offer their clients in this matter. The issues involved are complex, and their interpretation requires a degree of legal erudition that most engineers don’t have. Any discussions of these matters should include a recommendation that the owner consults with counsel before moving forward.

Some owners will want to explore avenues for continued participation, such as replacing or upgrading generators. The emissions requirements for nonemergency generators are very restrictive, and compliant units are expensive and large. It is unlikely that replacement will be an economically reasonable course. Upgrading existing units is equally expensive as well as risky, in that there’s some chance that a unit will still be noncompliant after costly additions have been completed.

For new projects, engineers should be aware that compliant nonemergency generators are generally considerably larger than their emergency-qualified counterparts, and will require considerably more space. Nonemergency generators are less likely to be able to come to speed and voltage in the code-required 10 seconds for emergency and health care systems. Some manufacturers have only limited offerings of units that can meet both EPA requirements for nonemergency operation and NFPA 70: National Electrical Code (NEC) requirements for emergency systems. In nearly all cases, economic realities will drive genset selection to emergency units—the same kind of units that are typically installed for standby service today.

Most of the time, an electrical engineer will be called on to address limited questions about participation in demand response. If a client wishes to pursue it further, then an engineer will generally collect information about costs, space requirements, and NEC compliance, and advise the client to consult with counsel regarding the requirements for operating a nonemergency unit and the risks of making a substantial investment in complying with regulations. Nearly every time, the design will proceed with emergency generators.

For more information, read Code of Federal Regulations, Title 40, Part 63, Subpart ZZZZ, §63.6640, covering the operation of stationary generators.

Tom Divine is senior electrical engineer with Smith Seckman Reid. He is a member of the Consulting-Specifying Engineer editorial advisory board.