September 8, 2010

Air and Radiation Docket and Information Center U.S. Environmental Protection Agency

Mail Code: 6102T 1200 Pennsylvania Avenue, NW Washington, DC 20460

RE: Docket ID No. EPA-HQ-OAR-2010-0295 Standards of Performance for Stationary Comp ression Ignition and Sp ark Ignition Internal Combustion Engines; Proposed Rule Response to DNREC Comment Letter dated August 5, 2010

Dear Madam/Sir:

CPower, Inc., EnergyConnect, Inc., EnerNOC, Inc., and Innoventive Power, LLC (collectively the “Companies”) are providing these comments in res ponse to the proposed revisions to the standards of performance for new stationa ry compression ignition internal combustion engines under section 111(b) of the Clean Air Act that were proposed by the United States Environmental Protection Agency (“EPA”) in the June 8, 2010 Federal Regi ster. Specifically, this letter addresses the

comment letter to this docket fr om Ali Mirzakhalili, Director of the Division of Air Quality at the Delaware Department of Natural Resources & Environmental Control (“DNREC”) dated August 5,

2010.

The Companies appreciate Delaware’s concern regarding th is issue but firmly believe that their concerns are misguided. Specifical ly, our review of the record a nd conversations with DNREC staff

shows that:

• DNREC Confuses Emergency Demand Re sponse (“DR”) with Economic DR;

• DNREC Confuses Reserve Margin with Emergency Conditions;

• DNREC Grossly Overestimates Emissions from Emergency DR;

• DNREC Misstates the Synapse Study; and

• DNREC’s Argument that Air Emissions Decr ease During a Blackout Is Not a Reason to
Preclude Emergency Demand Response

DNREC Confuses Emergency DR with Economic DR

Emergency DR programs are called in response to grid emergencies only, while economic DR programs are dispatched by utilities or Independe nt System Operators (“ISOs”) in response to high prices or are self-selecte d by end users in response to prices. These are very different types of programs and EPA sh ould treat them differently. DNREC, in their comment letter, demonstrates that they still do not make a distinct ion between emergency DR (DR called as the lastline of defense to avoid blackouts either at the st art of voltage reductions or just before voltage reductions) and economic DR (e.g., peak shaving a nd other forms of non-emergency operation). This is a critical distinction; as discussed throughout this docket , emergency DR is operated under very rigid North American Electric Reliability Council (“NERC”) regulations by the grid operator only in the case of grid emergencies.

The following statements made by DNREC in their comment letter are referring to economic DR not emergency DR:

Some organizations are now employ ing emergency generators c ontrary to their design and purpose. These organizations have created programs that “aggregate” many small emergency generators so that they are able to par ticipate as a group in wholesale demand response programs. ... In fact, th e ability for these units to participate in demand response markets can actually move the economic dispatch curve such that these types of aggregated

units could be available at a lower cost on the dispatch curve displacing somewhat higher cost, but more efficient and clean generation. (see page 2, second paragraph)

For example, in Delaware a local electric provider currently operates a demand response program consisting of about 225 participants w ho have uncontrolled generators (almost all of which are on poultry farms) that were orig inally installed for em ergency use and are all

below 300 kW. These individuals have contracted with the electric provider to achieve lower electric rates in exchange for operating the emergency generators as a block during peak

demand scenarios. ... Delaware believes that the change in the definition of emergency stationary ICE explicitly provid es for this type of use. (see page 3 first full paragraph)

What Delaware describes above is NOT emerge ncy DR. Indeed, the definition of emergency stationary ICE in both National Emissions Standa rds for Hazardous Air Pollutants (“NESHAP”) for Reciprocating Internal Combustion Engines (“RICE”) ZZZZ and the proposed New Source Performance Standards (“NSPS”) IIII specifically excludes peak shaving and other such economic use of emergency generators from the definiti on of emergency stati onary ICE. (see 40 CFR 63.6640(f)(4) of the NESHAP fo r RICE; 40 CFR 63.6640(f)(1)(iii) of the NESHAP for Spark Ignition RICE, and proposed changes to 40 CFR 60.4211(f )(4) of the NSPS) If engines are used for such purposes, they must comply with the non-em ergency provisions in th e NESHAP and NSPS.

DNREC’s own regulations actually a llow some generators to operate as non-emergency generators in an economic DR program without meeting rigid emission limits 1 . If DNREC is so concerned about non-economic DR programs, which its comment s indicate, they should close this loophole in their own regulations.

1 See Title 7 Natural Resources an d Environmental Control of Dela ware Regulations Sec tion 1144 Control of Stationary Generator Emissions, Subsection 3.2.1.2DNREC Confuses Reserve Margin with Emergency Conditions

DNREC states that they do “not believe thes e ICE are able to play a significant role 2 ” in helping to forestall serious system emergencies. They stat e that “[t]he aggregated smaller local ICEs, not meeting air emissions standards, would not be the difference between reliable service and

blackout. 3 ” DNREC believes there is a buffer in PJM “over and above the required reserve margin. 4 ” This is not true. There is no buffer when the electric need is above the required reserve margin, and the grid operator only calls emergency DR when reserves have been used – or are about to be used to satisfy system load.

ISOs, including PJM, must follow NERC standards when dispatching emergency DR for capacity and energy emergencies. Specifically, System Operators call emergency DR programs at EEA

Alert 2 NERC standards when there is the real potential for blackouts due to insufficient energy supply. When facing an energy shortfall a System Operator must declare EEA Alert 2 and measures can include public appeals, voltage reductions, in terruption of non-firm load, emergency DR, and utility-side load conservation 5 . The final step after EEA Alert 2 is EEA Alert 3 which entails the involuntary shedding of firm customer loads. Th ese are often referred to as “rolling blackouts.” Thus, when an EEA Alert 2 is called, there is no reserve margin availabl e. Regarding DNREC’s contention that emergency DR cannot make a differe nce, the Companies believe PJM is in a much better position to determine that and they have demonstrated th eir belief in the efficacy of emergency DR by calling on it four times this summer.

DNREC Grossly Overestimates Emissions from Emergency DR

Emergency DR, as practiced in PJM, allows cu stomers to meet their DR commitments either by curtailing their usage (shutting off lights, turning off equipment) or running their backup generation. DNREC estimates that th e oxides of nitrogen (“NO

x ”) emissions from the emergency DR event in PJM on July 7, 2010 range from 218 to 272 tons. DNREC erroneously assumes that all emergency DR on July 7 came from emergency engines, which is grossly inaccurate More than 75% of emergency DR on July 7 came from curta ilment (e.g., turning down lights, air conditioning, manufacturing processes, etc.) and, from experi ence (the Companies repr esent the largest DR providers in PJM), less than 25% came from backup generators. Assuming 25% generation 6 , the

NO

x emissions from the July 7 emergency DR even t are estimated to be less than 46 tons over a wide geographic area. Most like ly less than 25% of emergency DR came from emergency engines since Delaware (except some coops), New Jersey, Philadelphia County, and the District of Columbia - all geographic areas that participated in the emer gency DR event - do not currently allow the use of emergency engines in emergency DR unl ess they meet rigid emission limits.

DNREC Misstates the Synapse Study

2 See Page 2, Third Paragraph of DNREC Comment Letter dated August 5, 2010.

3 Ibid

4 See Page 3, Second Line of DNREC Comment Letter dated August 5, 2010

5 Following EEA Alert 2 declaration, the System Operator must report back to NERC on causes, measures taken to address the shortfall, and post-event mitigation.

6 Assumes 65% non tier rated, 25% tier 1 rated, and 10% tier 2 rated.A report prepared by Synapse Energy Economic s, Inc. (“Synapse Study”) for EPA assessed the impacts of DR and energy efficiency program s in New England using an electric system dispatch model and concluded that emer gency DR actually improves air quality. 7 DNREC states that “[h]owever, the re port assumed that the non-emergency generators were gas-fired. 8 ” First, the study shows that even a ssuming all DR is from diesel fired engines, there is a net benefit to air quality. This net benefit increases if one a ssumes some or all of th e engines are gas-fired engines. Second, for non-emergency generation (e.g., the power that is replaced by emergency DR), emission factors for eight different plant types we re used: gas-fired combined cycle, oil-fired combined cycle, gas-fired combustion turbine, oil-fi red combustion turbine, a nd coal-, gas-, oil-, and wood-fired steam plants.

The Synapse Study concluded that “when the DR res ource is used to meet reserve requirements, the result is more efficient unit commitment, reduced operation of oil- and gas-fired steam units and increased operation of combined -cycle units in New England. 9 ” And finally, the report noted that “New England has a small amount of quick-start capacity relative to th e regional peak load compared to most other control areas. Many anal ysts have noted that this requires large power plants to operate more than they would otherwise have to in order to maintain sufficient operating reserves – capacity that can be provided quickly in response to unplanned losses of capacity. A key goal of this work for EPA was to verify that la rge units were indeed being operated more than necessary in New England to meet reserve require ments, to gauge the probable emission impacts of this dynamic, and to estimate potential emission reductions that additional DR could provide if it were used to meet operating reserve requirements. 10 ” The report concluded that when DR is used for reserves there are significant decreases of criteria pollutant em issions, even when it is assumed that the DR is all diesel (NO

x decreased 23 tons, sulfur dioxide decreased 216 tons, carbon dioxide decreased 31,400 tons, particulate matter 2.5 microns or less decr eased 12.5 tons, and particulate

matter decreased 21.2 tons. 11

DNREC Argument that Emissions Decrease dur ing a Blackout is not a Reason to Preclude
Emergency Demand Response

While emissions due to power generation decr eased during the 2003 blacko ut, it’s not realistic
to presume that the eastern US will sacrifice electricity for reduced emissions; as such, analysis
of emission impacts shouldn’t a ssume this as an alternative. Grid failure affects public health
and safety – people die during blackouts. Blackouts can also cause severe environmental damage;
during the August 2003 eastern blackout , many millions of gallons of untreated sewage from New
York City were discharged into rivers as a resu lt of the power failure. La stly, all generators run
during blackouts, regardless of c ondition, age, or permitted status.

7 See Modeling Demand Response and Air Emissions in New England by Geoff Keith, Bruce Biewald, David White, and Mike Drunsic, revised September 4, 2003.

8 See Page 10 of NREC comment letter dated August 5, 2010.

9 Id Page 2

10 Id Page 4

11 Id Page 13The August 2003 was a wholesale blackout caused by an extreme event. Even without the
wholesale failure of the grid such as occurred in 2003, a grid opera tor can be forced to call a NERC
EEA Alert 3, which would be accompanied with rolling blackouts and all power generation
operating in overload conditions. Ma ny of the risks discussed above would also occur during rolling

blackouts.

DNREC claims that during black-outs, emissions actually go down, and cites air quality data from
the August 2003 blackout that affected wide swaths of the country from the Midwest to the border of
New England. Presumably they point this out to argue that therefore emergency DR is a threat to the

environment because it forestalls such black-outs. Such an argument makes no sense. If you shut
down all of the central station power plants from Minnesota to Connecticut of course you are going
to reduce air emissions. But, you also get threats to personal health and safety, billions of dollars of
damage and other environmental problems such as potential loss of fresh wa ter supplies and release
of untreated sewage into wate r ways. Blackouts are not a seri ous way to reduce air pollution.

Thank you for allowing us to provide comments.

Respectfully submitted,

Rick Counihan, EnerNOC, on behalf of

CPower, Inc. EnergyConnect, Inc. EnerNOC, Inc. Innoventive Power, LLC