Expert Report on Proposed Environmental Protection Agency Rules Limiting Use of Diesel Engines for Emergency Electric System Response

The Situation

In June 2012, the US Environmental Protection Agency (EPA) proposed new rules regulating reciprocating internal combustion engines under the National Emission Standards for Hazardous Air Pollutants. These rules would, among other things, have limited diesel engines providing emergency electrical backup response to the electric grid to operate no more than 15 hours per year. This provision was immediately controversial -- it would greatly limit the ability of demand responders (i.e., those willing to provide such backup capacity), as many electric markets require the engines to be available more than 15 hours a year before allowing them to sign up to provide backup service.

NERA's Role

In the comment period, EnerNOC, an aggregator of demand responders, engaged NERA to respond to a report prepared by Analysis Group, which argued that allowing these engines to provide demand response would greatly increase emissions by displacing clean resources at the margin. NERA Vice President Jonathan Falk wrote NERA's report.

The Result

On 14 January 2013, the EPA issued its final rulemaking, which increased its initially proposed limitation to 100 hours per year, allowing demand resources to participate in emergency response and other peak shaving programs while still limiting their emissions. The NERA report disputing the methodology and assumptions employed by Analysis Group was cited both directly and indirectly in the rulemaking. Citing NERA's analysis, the rulemaking noted that "the EPA does not agree with the commenters that the final rule will encourage the use of backup generators in lieu of cleaner alternatives of energy."