DEMAND RESPONSE PEAK SHAVING

1. Regulation of EMERGENCY ENGINES DEMAND RESPONSE PEAK SHAVING Presented by Richard H. Friedman

2. "RICE" NESHAP RULE (CAA §112): FINAL REVISIONS TO NATIONAL EMISSION STANDARDS FOR HAZARDOUS AIR POLLUTANTS ("NESHAP") FOR RECIPROCATING INTERNAL COMBUSTION ENGINES; 78 FR 6674 (1/30/13), 40 CFR part 63, subpart ZZZZ • STATIONARY ENGINE NSPS RULE (CAA §111): REVISIONS TO NEW SOURCE PERFORMANCE STANDARDS ("NSPS") FOR STATIONARY INTERNAL COMBUSTION ENGINES USED FOR DEMAND RESPONSE (For Rule Consistency); 78 FR 6674 (1/30/13), 40 CFR part 60, subparts IIII and JJJJ • Notice of Reconsideration, 78 FR 54606 (9/5/13)

3. The RULES apply to all stationary spark ignition ("SI") and compression ignition ("CI") engines. • Nonroad (portable or transportable) engines are not subject to the RULES. • RULES allow for expanded use of emergency engines in non-emergency situations. • Ban peak shaving by emergency engines after May 3, 2014 (limited now).

4. AREA SOURCE EMERGENCY ENGINES • Emergency stationary engines at area sources of hazardous air pollutants ("HAP") that are residential, commercial, institutional, or industrial facilities are covered by the rule if the engines operate or are contractually obligated to be available to operate for more than 15 hours per year for emergency demand response, or if they operate to mitigate local transmission and/or distribution limitations. • The rule became effective for existing compression ignition stationary engines at area sources of HAPs on May 3, 2013 and becomes effective for existing spark ignition stationary engines at area sources of HAPs on October 19, 2013.

5. Rule, applicable to all emergency engines: • Allows unlimited emergency use; • Allows up to 100 hours per year combined use, for: • Maintenance and readiness checks (as recommended or required, or otherwise specifically approved by EPA), and • Preventing electrical outages via demand response, specifically, • Energy Emergency Alert Level 2 conditions • Frequency or voltage deviations of 5% or greater (power quality)

6. At major sources of HAPs, up to 50 hours of the 100-hour maximum may be used for non-emergency situations, but not for peak shaving or non-emergency demand response, or to generate income for a facility to supply power to an electric grid or otherwise supply power as part of a financial arrangement with another entity.

7. For area sources of HAPs only, up to 50 hours of the 100-hour maximum may be used to supply power to another entity under a financial arrangement, when, • The engine is dispatched by the ISO • The dispatch is for system reliability (voltage collapse or line overloads) • The dispatch follows reliability protocols and is under a pre-existing plan • Power is provided only for the facility itself or for the local transmission and distribution system, and • The dispatch information is recorded by the owner (or local authority/system operator).

8. Also, until March 3, 2014, for existing stationary emergency engines at area sources, up to 50 hours is allowed (counting toward the 100 hour per year total) • If the engines are operated as part of a peak shaving (load management) program with the local distribution system operator and the power is provided only to the facility itself or to support the local distribution system, of: • Peak shaving • Non-emergency demand response to generate income for a facility, or • To otherwise supply power as part of a financial arrangement with another entity.

9. If an emergency engine exceeds any of these limits, it is forever excluded from qualification as an emergency engine and will need to meet the applicable non-emergency RICE NESHAP or be replaced with a new, low-emissions engine. Older engines losing their emergency status would require major controls to meet the emission limits of a non-emergency engine.

10. Additional technical requirements for emergency engines: • Operate and maintain the stationary RICE according to the manufacturer’s emission-related operation and maintenance instructions or approved custom plan • Must have non-resettable hour meter • Minimize idle time and <30 minutes • General duty to minimize emissions

11. Additional technical requirements for emergency CI RICE engines over 100 HP: • Beginning in 2015, emergency CI RICE engines over 100 horsepower ("HP") operated or committed for more than 15 hours under these demand response programs will be required to – • Use ultra low sulfur diesel (ULSD) fuel (existing fuel may be depleted) • Perform, record and maintain records of periodic maintenance activity, including • Change oil and filter every 500 hours of operation or annually, whichever comes first • Inspect air cleaner every 1,000 hours of operation or annually, whichever comes first, and replace as necessary, and • Inspect all hoses and belts every 500 hours of operation or annually, whichever comes first, and replace as necessary.

12. Additional technical requirements for emergency stationary SI RICE engines: • Beginning in 2015: • Change oil and filter every 500 hours of operation or annually, whichever comes first • Inspect spark plugs every 1,000 hours of operation or annually, whichever comes first, and replace as necessary, and • Inspect all hoses and belts every 500 hours of operation or annually, whichever comes first, and replace as necessary.

13. For all emergency engines over 100 HP: • Operating or contractually obligated to be available for more than 15 hours per year, • file electronic annual reports, starting in 2016 for calendar year 2015, documenting all non-emergency operation. • EPA anticipates that the dispatching entity will file these reports on behalf of the facility that owns the engines.

14. RULES SUBJECT TO COURT CHALLENGE • Four Petitions for Review were filed April 1, 2013 in the U.S. Court of Appeals for the District of Columbia Circuit • Filed by: • Delaware Dept. of Natural Resources & Environmental Control • National Rural Electric Cooperative Association • First Energy Solutions Corp. • Conservation Law Foundation • The rule remains in effect during the lawsuits' consideration

15. Compliance Date Extensions • Timing of January 30th Rules and May 3, 2013 compliance date did not allow 120 days • Some intend to use emergency engines for operation >50 hours, but must install controls to do so • EPA will consider granting up to 1 year (40 CFR 63.6)(i)(4)(i)) extension upon request

16. Notice of RULEs Reconsideration • Public comment by 11/4/13 on 3 issues: • For CI emergency engines that operate for emergency demand response, voltage/frequency deviations, or local reliability: • Initial compliance date for use of ultra low sulfur diesel fuel • Initial compliance date and content for information reporting • Conditions allowing up to 50 hour non-emergency operations with financial arrangement with another entity

17. ULSD • Rule requires use after 1/1/15 • Allows fuel purchased before to be used up • EPA accepting comments on immediate implementation

18. Reporting • Beginning for 2015 calendar year March 31, 2016 • Location, date, times of operation • Petitioners concerned about timing and content • EPA accepting comments on timing and content

19. Reporting Required • Company name and address where engine is located • Date of report; beginning & ending dates of the reporting period • Engine site rating and model year • Latitude and longitude of the engine (in degrees reported to the fifth decimal place) • Hours operated for • emergency demand response • deviations of voltage or frequency of 5 percent or greater below standard including: date, start time, and end time

20. Reporting Required (Con't) • Number of hours the engine is contractually obligated to be available for • emergency demand response • deviations of voltage or frequency of 5 percent or greater below standard • Hours spent for operation for local system reliability, including • date, start time and end time • entity that dispatched the engine • situation that necessitated the dispatch of the engine

21. Reporting Required (Con't) • If so, statement that there were no deviations from the fuel requirements during the reporting period. • If there were deviations from the fuel requirements that apply, information on • number, duration, and cause of deviations • corrective action taken.

22. Petitioners • Want to add type, amount and sulfur content of diesel fuel used

23. Local System Reliability • Specified non-emergency 50 hour allowed use as part of financial arrangement with another entity • Petitioners concerned that conditions not clearly defined • EPA accepting comments on conditions to operate for local system reliability

24. Conditions for Local System Reliability • Engine is located at an area source • Dispatched by the local balancing authority or local transmission and distribution system operator • Dispatch to mitigate local transmission /distribution limitations • to avert potential voltage collapse or line overloads that could lead to the interruption of power supply in a local area or region

25. Conditions for Local System Reliability (Con't) • Dispatch follows reliability, emergency operation or similar protocols that follow specific NERC, regional, state, public utility commission or local standards or guidelines • Power is provided only to the facility itself or to support the local transmission and distribution system

26. Conditions for Local System Reliability (Con't) • the owner/operator identifies and records the entity that dispatches the engine and the specific NERC, regional, state, public utility commission or local standards or guidelines that are being followed for dispatching the engine

27. Petitioners • Concerned that conditions are • too indistinct and expansive • difficult to enforce could lead to engines operating when there is no discernible threat to the grid

28. CONTACT INFORMATION • Rick Friedman • Tele: 717.237. 5469, • Email: rfriedman@mwn.com • Fred Osman, • Tele: 717.234.3610 • Email: fredosman@osmanenvironmental.com • Bob Weishaar • 202.898.5700 • Email: bweishaar@mwn.com