Use of Emergency Engines for Emergency DR Is Good Policy June 24, 2013

2 Outline Emergency demand response (DR) versus non-emergency EPA found no correlation between emergency DR and high ozone NESCAUM analysis not representative Compliance costs for strict limits are prohibitive Strict limits will cost MD consumers much more

3 Use of engines in demand response 3 Emergency Demand Response (DR) Used as measure of last resort Only PJM can call event and must follow NERC EEA Level 2 Procedures Program called by PJM just prior to voltage reductions when no other options are available PJM – Emergency Load Response Program (ELRP) Non-Emergency DR or Peak Shaving Dispatched for non-emergency (e.g., economic) reasons and site can decide when to operate

4 Ozone exceedances do not correlate with emergency DR Analysis of Emergency DR events and measured ozone concentrations 2005 – 2011 PJM, ISO NE, NYISO, and ERCOT No correlation between emergency DR and high ozone concentrations Although some emergency DR events are called during high ozone days, many DR events occur on non-exceedance ozone days and many more have high ozone alerts but no DR events Data does not show that use of emergency engines during DR events causes high ozone In many instances the ozone concentrations are high or higher on the days preceding an event

5 Emergency DR events do not correlate with high ozone days See Analysis of Emergency DR and Ozone Concentrations; February, 2012 DateGeographic ExtentDuration (Hours)High O 3 Day? Notes May 26, 2011 Norfolk portion of Dominion 2Yes in MD, No in DE Only 1 out of 17 monitors in MD showed a slight exceedance (76 ppb) May 31, 2011 Mid Atlantic and Dominion 2Yes in MD, No in DE July 22, 2011Mid Atlantic (subset) 6 (BGE, PECO, DPL, DLCO); 5 (JCPL, METED) Yes Highest observed O3 for July was on July 2 which was not a DR event September 24, 2010Mid Atlantic (subset)6Yes Three MD monitors only exceeded std by 2 ppb September 23, 2010Mid Atlantic (subset) depending on zone Yes in MD, No in DE One MD monitor only exceeded std by 1 ppb August 11, 2010DC portion of Pepco6Yes Ozone concentrations higher previous day July 7, 2010Mid Atlantic (subset) depending on zone Yes July 5-6 recorded higher concentrations June 11, 2010Pepco Only4.2No May 26, 2010 Pepco Only (DC Only) 2.7No August 8, 2007Mid Atlantic 4-5 depending on zone No August 6 and 7 had exceedances August 2, 2006Mid Atlantic4No in MD, Yes in DE August 3, 2006Mid Atlantic5No in MD, Yes in DE July 27, 2005 Mid Atlantic and Dominion 4Yes July recorded higher concentrations August 4, 2005Mid Atlantic3Yes

6 Monitored ozone concentrations in MD Need to examine days prior to ELRP events July 7, 2010; ERLP Event in Mid Atlantic (subset); 4 to 5.5 hours depending on zone August 11, 2010; ELRP Event in DC Portion of Pepco; 6 hours July 27, 2005; ELRP Event in Mid Atlantic and Dominion; 4 Hours

7 EPA found no correlation between emergency DR and high O 3 EPA Response to Comments; January 14, 2013 NESHAP Docket Memo “This robust and comprehensive study concluded that there is no correlation between emergency DR and high ozone concentration.” “While EPA acknowledges that emergency DR may be called during HEDD in the summer when days are especially warm and ozone is problematic, the use of emergency DR at such times cannot be directly correlated as causing or contributing to the ozone exceedances.” “The EPA does not agree that emissions of diesel exhaust are likely to go up significantly compared to the estimates used in the original rule, given the very limited usage of such engines in emergency DR. It is worth noting that the circumstances during which these engines will be permitted to run under the rule are in circumstances that would prevent blackouts, which, if not prevented, would mean the use of all emergency engines in the affected area, which would create substantially greater emissions from diesel engines than if these limited emergency DR engines are used for a short period of time.” “Further, in the event of blackouts, people’s health and safety are jeopardized. During a blackout, there are human health effects that can result from extreme weather temperatures, hot or cold, that become uncontrollable during the loss of electricity. …. in a study published by NIH, it was found that during the blackout of 2003 New York City put people in greater health peril.”

8 Use of generators on High Electric Demand Days (HEDD) As noted by EPA in the Federal Register Notice (January 30, 2013) “While the EPA is sensitive to these concerns, the availability of these engines for a more tailored response to emergencies may be preferable in terms of air quality impacts than relying on other generation, including coal-fired spinning reserve generation.” “While EPA acknowledges that emergency DR may be called during HEDD in the summer when days are especially warm and ozone is problematic, the use of emergency DR at such times cannot be directly correlated as causing or contributing to the ozone exceedances. Also, the fact is that many DR events occur on days when ozone standards were not exceeded and in many cases ozone levels are high or higher on days before a DR event, according to available data.”

9 NESCAUM analysis is not representative From EPA’s Response to Comments “The EPA finds that analysis to be limited based on a very brief analysis period (2 days) and may not be representative and justified in supporting a conclusion that emergency generators clearly contribute to HEDD events and the EPA does not know what those estimates are based on from that study. “ “The EPA does not believe NESCAUM can conclude without a doubt that emergency DR correlates with high ozone days. Again, the analysis was only over 2 days.” “Also, in the alternative, the EPA does not know what those backup engines would have been replaced with. The results of the analysis conducted for the report are only applicable for areas with capacity market and may be dependent upon fuel price assumptions. Further, other studies spanning for a longer time looking at many events over many years in different areas of the United States shows a different result.”

10 Compliance costs for strict limits are prohibitive Caterpillar Quote to upgrade non-tier rated 2 MW diesel engine to Tier 4 emission limits: Parts (including SCR and DPF): $261,772 Labor: $101,000 Total: $362,772 plus additional annual operating costs Best Available Control Technology (BACT) is typically $10,000/ton or less DR Operation Hours NOx Removed ($/ton) 100$221,200 60$368, (Avg of ) $2,513,664

11 Engines will be withdrawn which will cost consumers 99%+ generators participating in emergency DR in MD will drop out of the ELRP if MDE imposes stricter limits Companies participate in DR because they do not need to do anything to their engines Not a single engine in non-emergency DR programs in EnerNOC’s portfolio is planning to upgrade for non-emergency NESHAP compliance and the costs are much lower ($60K per engine) Very few engines participate in ELRP in NJ and DE due to high costs of controls Without generators participating in MD in ELRP, electricity costs will increase by over $200M per year

Don DiCristofaro ; Air Quality Meteorologist Consultant