file:///C|/Temp/09000064811776a3.txt [8/7/2013 11:29:27 AM] From: Vickie Patton [vpatton@edf.org]

Sent: 10/28/2012 12:42 AM AST To: Joseph Goffman Subject: Demand Response -- FERC Order 745 and Economics of RICE Engines

Hi Joe, I have appended two sets of documents re demand response pertinent to EPA ’s pending RICE NPRM.

Best wishes, Vickie

The first set of documents contain some of the major briefs filed in the pending (fully briefed but not argued) DC Circuit litigation re FERC Order 745 which eliminates barriers to demand response in the wholesale power market by providing for compensation at the locational market price/LMP. I have attached petitioners’ opening brief (names you will recognize) challenging FERC Order 745, FERC’s opening brief in defense of the Order which lays out a helpful summary of the Order, and an amicus brief filed by EDF et al. in which we address the threshold jurisdictional question as well as the considerable environmental benefits of demand response.

EDF’s discussion in its amicus brief of the environmental benefits of FERC’s Order presupposes that poorly controlled diesel engines will not be available DR resources. During Stephen Johnson’s tenure as Administrator, EDF reached a resolution with EPA over EDF’s petition to list diesel as a HAP under 112 in which EPA committed to conduct a rulemaking establishing emission standards for stationary diesel (and gas) engines and did adopt such standards. FERC Order 745 is a major market reform initiative led by Chairman Wellinghoff that EDF strongly supports. See, e.g., Wellinghoff et al. Creating Regulatory Structures for Robust Demand Response Participation in Organized Wholesale Electric Markets, attached here.

In addition, MJ Bradley and Associates, and I want to be transparent about that point, prepared an analysis of the emission control costs for RICE relative to the market revenues available to emergency RICE engines in NYISO and PJM reflected in the final document attached here. The central finding is that in both markets “the capacity and energy revenues would pay for the costs of emission controls in approximately one year, even if the engines were dispatched for only 15 hours.” The findings summarized below are direct excerpts from the attached economic analy sis and are examined in more detail in the attached document. We set out the core findings of this analysis in our written comments to EPA. · The capital cost for diesel oxidation catalyst (DOC) and open crankcase ventilation (OCV) for a 500 hp engine is approximately $14,000. This includes the costs of equipment and installation. · In the PJM RTO, annual capacity market revenue available for a 500 hp engine from 2013-2015 would likely total over $60,000 in the PJM MAAC region and $30,000 in lower priced areas of the PJM RTO. · In NYISO, the capacity revenue available for a 500 hp engine would be in the range of $20,000 per year in the New York City area. · We estimate that the all-in dispatch cost for a 500 hp engine is $0.28/kWh ($280/MWh). · In PJM, emergency energy prices paid to emergency DR resources have historically been in the $1,000/MWh range. Using this assumption, a 500 hpfile:///C|/Temp/09000064811776a3.txt [8/7/2013 11:29:27 AM] engine operating for 15 hours annually would earn approximately $3,600 in net energy revenue and an engine dispatched for the proposed 100 hour maximum would earn more than $24,000 in net energy revenue. · In NYISO, energy prices paid to emergency DR resources typically average $500/MWh. A 500 hp engine dispatched for 15 hours per year would earn approximately $1,100 in net energy revenue and an engine dispatched for the full 100 hours annually would earn more than $7,000 in net energy revenue. · In both ISOs, the capacity and energy revenues would pay for the costs of emission controls in approximately one year, even if the engines were dispatched for only 15 hours.

This e-mail and any attachments may contain confidential and privileged information. If you are not the intended recipient, please notify the sender immediately by return e-mail, delete this e-mail and destroy any copies. Any dissemination or use of this information by a person other than the intended recipient is unauthorized and may be illegal. (See attached file: EPSA-ODEC-APPA-NRECA Initial Brief re

74 5.pdf)(See attached file: FERC Brief re Order 745.pdf)(See attached file: FERC Order 745 Amicus Brief CORRECTED Sept 14 - 2012 _FILED.pdf)(See attached file: Creating Regulatory Structures for Robust Demand Response Participation in Organized Wholesale Electric Markets.pdf)(See attached file: RICE Analysis - Economics - 2012.pdf)