Mit t Romne y Governo r Kerr y Heale

y Lieutenan t Governe r Bet h Lindstro m Director , Offic e o f

Consume r Affair s an d Bussines s Regulatio n Davi d L . O'Conno r Commissione

r VI A FACSIMIL E Jun e 30 , 200 4 COMMONWEALT H O F MASSACHUSETTS OFFIC E O F CONSUME RAFFAIR S AN D BUSINES S REGULATIO N DIVISIO N O F ENERG Y RESOURCE S 10 0 CAMBRIDG E STREET, SUIT E 102 0 BOSTON , M A 0211 4 Internet : http://www.mass.gov/doe r E-mail : energy@state.ma.us TELEPHON E (617)727-473 2 FACSIMIL

E (617)727-003 0 (617)727-009 3

Rober t T . Donaldso n Massachusett

s Departmen

t o f Environmenta

l Protectio n Burea u o f Wast e Preventio n On e Winter Street, 8 Boston , M A 0210 8 t h floo r Re : Propose

d Amendments to 31 0 CM R7.0 0 an d 31 0 CM R70.0

0 Dea r Mr . Donaldson : Th e Divisio n o f

Energy Resource s (DOER) appreciate s th e opportunit

y t o provide comment s to th e Departmen

t o f Environmenta

l Protectio n (DEP) i n thi s rulemaking . A s yo u know , DOERi s a

n agenc y responsible fo r

stat e energ y polic y i n severa

l area s tha t coul d b e affecte d b y these regulations . First , DOE

Rha s unique an

d exclusiv e jurisdictio n ove r th e implementatio n an

d regulatio n o f

th e Renewable s Portfoli o Standar d (RPS ) (Se

e G.L . C.25A , sectio n 1 I F an d 22 5 CM R 14.0

0 e t seq.) . Th

e developmen

t o f ne w renewabl

e energ y project s i s critica l t o th e implementatio n o f

tha t program . Because certain RPS-eligibl e technologies 1 wil l b e require d to compl y wit h these ne w emission s regulations , i t i s critica l tha

t these standard s d o no t unintentionall y hinde

r thei r development . Suc

h abarrier

ca n hav e tw o consequences : (1 ) aremova l o f th e positiv e impact

o n air emission s a

s compared to emission s fromcentralize d powe r plants , an

d (2 ) increase

d cost s to consumers. 2

1 Technologie s eligibl e fo r certificatio n t

o mee t th e RP S ar e liste d i n G.L . c . 25A , sectio n 1 IF , paragrap h (b) . 2Increasing th

e cost fo r renewabl e technologie s to comply wit h ai r regulation s coul d hav

e adirec t an d significan t

impac t o n th e Commonwealth' s effort s t o encourag

e renewabl

e energ y a t reasonabl

e cos t to2
Second, DOE

Ri s responsible fo r

trackin g th

e reliabilit y o f

th e electri c syste

mi n th e Commonwealt

h (Se e G.L . C.25A, section 1 IE) . DOE Rbelieve s th

e DE P shoul d conside r tha t som e distribute d generation (DG ) wil l reliabl y ru n durin g pea k times , reducing nee

d fo r othe r investments t

o enabl e th e syste mt o mee t pea k demands , thereby decreasin g total syste

mcost s durin g thos e period s a

s wel l a s helpin g reduce th

e incidenc e o f outages . A recentl y release d repor t highlight s th

e importanc e o f

distribute d generation t o reliability, stating : "Massachusett s shoul d explor

e opportunitie s to create , throug h stat e an d regiona l polic y formulatio n an

d implementation , a

s wel l a s syste moversight , amor

e stable , mor

e reliabl e electri c syste

mthrough investments i n conservation , energ y efficienc y an

d distribute d generation . Wher e institutional o

r regulator y barrier s inhibi t suc h investments , Massachusett s shoul d see

k t o eliminat

e thes e barrier s whil e protectin g th e interests o f

th e ratepayers." 3 Third , these technologie s ca n hel p advanc e th e state' s goa

l o f climat e protection . I n th e sprin g o f

thi s year, th

e Commonwealt

h release d Th e Massachusett

s Climat e Protectio n Plan . Tha

t documen t place s ahig h priorit y o n th e identificatio n an

d remova l o f barrier s fo r

clea n an d efficien t

energ y production . I n numerou s place s i t states th e importanc e o f

implementin g policie s tha t wil l not hinde r th e developmen

t o f beneficial on-sit e technologie s use

d to generat

e electricity , naming specificall y renewables , cogeneration , an

d fue l cells . Us e o f

electricit y fromcogeneration i s ofte n mor e efficien t tha n centra l powe r plant s i n terms o f

th e usabl e hea t recovere d fromelectricit

y productio n through distribute d generation wit h lowe r emissions . Finally , DOE

Rbelieve s economi

c developmen

t i n th e Commonwealt

h shoul d be accorde d importanc e i n th

e consideratio n o f

thi s rulemaking . Installatio n o f distribute d generatio n ca n provide significan t

cos t saving s to bot

h individua l customer

s who instal l suc h measure

s an d al l electri c customer

s throug h th

e alleviatio n o f

congestion pricin g i n th e wholesal

e electricit

y market . Th

e Commonwealt

h ma y mis s awindo w o f

opportunit

y i n th e developmen

t o f these technologie s i f

we fai l t o adop t policie s no w whic h encourag e thei r installation , particularl y i n highl y congeste d area s suc h a s Boston . Customer s ca n exer t greate r contro l ove

r thes e plant s durin g pea

k period s t o offse t

suppl y cost s whe n electricit

y price s ar

e highest. 4 I n additio n to these cos t saving s an

d thei r indirec t impacts i n terms o f

greate r competitivenes s an

d productivity to local firms , a properl y configure d rul e ca n increas e job-creatin g investments b y D G manufacturer s an d installer s located i n th

e Northeast. 5

consumers . Indeed , certai n technologie s ma y not b e developed du

e to these costs . T o th

e exten t tha t renewabl e technologie s ar

e to o expensiv

e an d therefor e ar e no t developed , th

e suppl y o f renewabl e energ y certificate s (RECs ) wil l b e reduced . Retai l customer s wil l then bea

r th e cos t o f highe r RE C prices , sinc

e retai l suppliers must

stil l demonstrat

e complianc e wit h th

e RP S regulations . 3 Th e Governor' s Tas

k Force o n Electri c Reliability an d Outag e Preparedness : Statu s o f the Electri c Gri d i n Massachusett

s - Statu s o f

th e Electri c Gri d i n Massachusett s Marc h 2004 , pag

e 45 . 4Man y studie s hav

e documente

d these benefits . Recently , i n Septembe r 2003 , th e Congressiona

l Budge t Offic e produced astudy , "Prospect s fo r Distribute d Electricit

y Generation, " documenting these cost advantages . Se

e ftp://ftp.cbo.gov/45xx/doc4552/09-16-ReportWithCover.pdf. 5 "Index o f

th e Massachusett

s Economy, " 2003 , Massachusett s Technolog y Partnershi

p Corporation . http://www.mtpc.org/2003Index/index_2003.pdf T:\Tm-MktDev\DistGen\DEP_DG\DEP_Comments_063004.do c

i3 Fo r th e abov e reasons , DOE

R support s distribute d generation , particularl y whe n tha t distribute d generatio n i s provide d b y renewabl e o r highl y efficien t

technologies . The propose d rule s shoul d b e revise d prio r to adoptio n s

o a s to furthe r

thes e energy , environmenta

l an d economi c objectives . Therefor e DOE R request s th e DE P mak e severa l revision s to th

e proposed rule s befor

e the y becom e final. Combined Hea

t an d Powe r I n th e Backgroun d Informatio n Documen t fo r these proposed regulations , DE P requeste d comment

s identifyin g incentive s fo r Combined Hea

t an d Powe r (CHP ) technologies . DE

P specificall y reference d th e RA P Mode l Rule , explaine d th e agency' s rational e fo r

not includin g th

e schem e tha t rul e set s ou t fo r CHP , an d aske d fo r comment

s providin g alternativ e appropriat e incentives . DE

P ha s state d i t does no t favo r th e RA P Mode l Rul e "credit " approac h to CH P because , b y bein g abl

e t o subtract

th e emission s o f adisplaced therma

l system , th

e emittin g installatio n the n "nets " ou

t o f Best Availabl e Contro l Technology (BACT) . Nettin g out o f BAC T i s alongstandin g stat e an d federa l prohibition . However , wher e al l use d energ y outpu t i s take n int o account, BAC T i s stil l bein g applie d to th

e facility ; th

e emission s ar

e stil l th e sam e fo r th e usefu l energ

y created . I n thi s respec

t CH P technolog y i s unique . Countin g al l usefu l output against th e regulated emission s does not se t th e preceden

t o f futur e unit s nettin g ou

t o f BACT . 6 Furthermore , th

e emission s standard

s i n th e proposed rul e ma

y no t alway s b e BACT . Th e RA P Mode l Rul e material s poin t ou t tha t "th e mode l rul e als o differ s fro mBAC T i n tha t i t se t standards fo r

technolog y tha

t hav e no t ye t bee n achieved ; BACT , i n contrast , require s complianc e wit h performanc e standard s tha t hav e alread y bee n demonstrate

d an d i s determined o n acas

e b y cas e basis." 7 . I f DE P i s stil l no t

sufficientl y convince d tha t th e RAP Mode l Rul e approac h to calculatin g emission s fromCH P wil l wor

k fo r Massachusetts , ther

e ar e appropriat

e alternativ e methodologie s tha t accoun t fo r th e ful l energ

y outpu t fo r CHP . W e believ e these methodologie s woul d bot h addres s DEP' s concern , an d leve l th e playin g field b y acknowledging th

e tru e energ

y outpu t o f these facilities . Th

e DEP' s proposed rule s trea t onl y primar

y electrica

l productio n a

s "output " fromth

e installation , regardles s o f whethe r th e facilit y i s designe

d exclusivel y fo r

electrica l production , o

r i s aCH P installation . Therefore , th

e rul e a s proposed i s not

atru e "output-based " rule , an d disadvantage s mor

e efficien t technologies. 8 A t

least tw o regulator

y workin g groups , 9 afedera l agency , 10 an d

6 A s oppose

d to Lowes t

Achievabl e Emissio n Rat e (LAER) , fro mwhic h afacilit y ca n "ne t out " b y shuttin g dow n or curtailin g operatio n o f

anothe r uni t on th e site . 7 Mode l Regulation s fo r

th e Outpu t o f Specifie d Ai r

Emission s fro mSmaller-Scaled Electri c Generation Resources , a

t pag e 8 . 8 A tru e output-base

d rul e woul d als o accoun t fo r th e lin e losse s tha

t occu r betwee n generation a

t th e centra l plan t an d us e a t th e custome r facility . Distribute d generation avoid s bot h th e transmissio n an

d distributio n syste

mlosses tha

t occu r i n th e transpor t o f energ y fro mcentra

l plants . Hence , limitin g th e emission s a

t th e measure

d output o f aD G uni t

i s equivalen

t t o limitin g th

e emission s a

t acentra l plant time s alos s factor . Fo

r example , assumin

g alin e los s facto r

o f 5% , acentra

l plant woul d hav

e t o generat e 10 5 MWh s to delive

r 10 0 MWh s to th

e customer ; aD G uni t

a t th e custome r site , b y contrast , woul d onl y hav e t o generat e 10 0 MWhs . I f

emission s level s ar

e equally applie d t o centra l plant s an

d D G units , the

y unnecessaril

y favo r centra l plant s an

d penalize DG . T:\Tm-MktDev\DistGen\DEP_DG\DEP_Comments_063004.do c4

severa l othe r states 1 1 hav

e issue d guidance o

r ar e i n th e proces s o f

adoptin g rule s tha

t recognize th

e use d proces s hea

t a s wel l a s electricit

y productio n a

s qualifie d outpu

t fro m th e facility , an

d thereby provide amor

e accurat e basi s fo r

a n output-base

d emission s rate . DOE Rurge s th

e DE P to trea t al l energ y producin g technologie s equitably , an d follo w thi s sam e approac h fo r CHP. 1 2 For

thi s reason , DOE

Rals o support

s th e comment

s submitted o n these propose d rule s b y th

e Northeas t

Combined Hea

t an d Powe r Initiative . Renewabl e Technologie s W e encourag

e DE P to adop t aperformance-base

d standar d fo r fue l requirements . Th e proposed amendment

s appea r to mandat

e th e us e o f Ultr aLo w Sulfu r

Diese l (ULSD ) owin g to it s desirable emission s profile , bu t ther e ar e avariet y o f othe r fuel s tha t ca n be fired i n engine s an

d combustion turbines , includin g biodiese l an d bio-oil , tha

t als o hav e favorabl e emission s profiles . I n comparison wit h conventiona l diesel , pur

e biodiesel , fo r example , virtuall y eliminate s sulfu r oxide s an

d sulfate s fro mexhaus

t emissions . Biodiese l als o show s dramatic reduction s i n C O (50 % lowe r tha n conventiona

l diesel) , unburned hydrocarbon s (-40%) , an d particulat

e matte r (-70%) . Bio-diese l require s littl e o r n o engin e modificatio n fo r

use . Bio-fuels , lik e ULSD , hav e favorabl e emission s profile s compared t o conventiona

l diesel , but

bio-fuel s hav

e severa l advantages ove

r ULS D tha

t w e fee l mak

e the mpreferre d fuels . Bio-fuel s ar e domestically produced renewabl e energ y sources tha

t mitigat e climat e chang e effects , increas e fue l diversit y an d enhanc e energ y security . A s Massachusett

s move s forwar d wit h th

e implementatio n o f

it s Climat

e Protectio n Plan , bio-fuel s ca

n pla y a n importan

t rol e i n reducin g CO

2 emission s whil e meetin g energ y need s an d environmenta

l goals . Regarding othe

r renewabl e technologies , DOE

R support s DEP' s treatmen

t o f landfil l gas , digeste

r gas , an d othe r biogase s whic h permi t

th e proponen

t o f aprojec t tha t woul d us e suc h fuel s to see

k acas e b y cas e revie w a

s a n alternativ e t o certifyin g t o Fo r thi s reason , DOE

R recommends tha

t th e DE P accoun t fo r lin e losse s i n it s formul ai n th e followin g fashion : pollutant

amoun t / MW h * ( 1 + lin e los s factor ) + heat-to-electricit y conversion . Thi s formulatio n wil l properl y accoun

t fo r bot h th e efficiencie s provide d b y hea t recovery , wher

e possible , and th

e efficiencie s provide d b y avoidin g lin e losses . DOE R recommends tha

t astatewid

e line-los s facto r

b e developed t

o accoun t fo r bot h transmission an

d distributio n syste

mlosses . 9 Th e Regulator

y Assistanc e Projec t

(RAP ) "Mode l Regulation s fo r th e Outpu t o f Specifie d Ai r

Emission s fro mSmaller-Scal

e Electri c Generation Resources, " Octobe r 31 , 200 2 Review Draft , an

d Northeas t

States fo r Coordinate d Ai r

Use Managemen

t ("NESCAU M Emissio n Performanc e Standar d (EPS ) Mode l Rule") . 1 0Unite d States Environmenta l Protectio n Agency , "Output-Based Regulations : A Handbook fo r Ai r Regulators " Draf

t Fina l Report , Apri l 22 , 2004 . 1 1 California , Texas , an

d Connecticut . DOE

R generall

y support s aconsisten

t approac h unles s ther

e i s a reaso n fo r adifferenc e i n Massachusetts . 1 2 Inclusio n o f

usefu l stea

moutpu t a s par t o f th e calculatio n i n a

n output-base

d emission s regulatio n i s no t a novelt y to DEP . I n th

e NO x Allowanc e Tradin g Progra ma t 31 0 CM R7.28 , NO x allowance s ar e allocate d on th e basi s o f afacility' s output , includin g usefu l stea mgeneration (31 0 CM R7.2 8 (6 ) Allowanc e Allocation) . 1 3 Se e EP A repor t " A Comprehensiv

e Analysi s o f

Biodiese l Impacts on Exhaust Emissions, " EPA420-P

02-001 , Octobe

r 2002 . Availabl e a

t URL : http://www.epa.gov/otaq/models/analysis/biodsl/p02001.pd f T:\Tm-MktDev\DistGen\DEP_DG\DEP_Comments_063004.do c5

complianc e wit h th

e emission s standard

s i n th e propose d rules . DOERencourage s th e DE P to conside

r th e fac t tha t these fuel s ar

e renewabl

e when processing application s unde r 31 0 CM R7.02 , an

d tha t anumbe r o f socia l an d environmenta

l benefit s wil l accru

e fro mincrease

d relianc e o n renewabl

e fuel s an

d technologies . DOE Runderstands tha

t DE P ha s received acommen

t tha t biomas s installation s should not

hav e t o mee t aC0 2 emission s standard , base d o n th e positio n tha

t biomas s facilitie s ar

e "C0 2 neutral. " Whil e DOE Rgenerall

y agree s wit h thi s positio n on biomas s C0 2 neutrality , th

e divisio n wil l b

e facilitatin g mor

e detaile d polic y discussio n on th e issu e wit h DE

P an d othe r agencies i n th

e comin g year . Therefore , DOERrecommend s tha t DE P defe r th e decisio n regarding C0 2 emission s frombiomas s fuel s i n th e fina l rul e unti l suc h polic y discussion s ar

e completed an

d methodologie s adopted . Than k yo u agai n fo r th e opportunit

y to commen

t o n thi s important

rulemaking . DOE Rstand s read y to wor k wit h th e DE P o n an y question s o

r issue s the agenc

y ma y hav e concerning thi s rulemaking , o r th e technologie s i t

seek s t o regulate .

Cc : Rober

t Golledge , Commissione

r Jame s C . Colman , Assistan

t Commissione

r

T:\Tm-MktDev\DistGen\DEP_DG\DEP_Comment s 063004.doc