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New EPA Standards: What They Mean for Your Generator

Feb. 5, 2016


Are you considering emissions upgrades to your generator to meet the coming EPA standards? Did you miss the deadline to submit your Emergency Response Service (ERS) offer to ERCOT in early January? Are you concerned that you may lose your ability to participate as a Load Resource (LR)?

While current demand response (DR) participation is not in violation of EPA rules—unless we receive further guidance from the EPA beforehand—May 1, 2016 marks the end for emergency-permitted generators to legally participate in DR in Texas and across the country. While the EPA may release new rules to address how emergency-permitted generators can continue participation in DR, the timing of if and when those rules are released—and whether they will be written in such a way that allows for participation in the most popular demand response programs—remains in question.

At MP2 Energy, we’re counseling our customers to consider their options:

Option 1: Wait for regulatory certainty.

This is the simplest option, but involves forgoing DR revenues until new rules are released and accepted, whenever that may be. Environmental regulations are often complicated and rarely agreed upon by all sides, so it could be quite some time before new rules are even released. Due to the technical nature of the environmental rules and their applicability to a national standard, it is quite possible that the EPA’s criteria to allow emergency generation participation won’t match requirements for local electric markets. Foregoing DR revenues for an undetermined amount of time may be a very costly proposition for many DR participants.

Option 2: Begin the analysis of whether generator emissions upgrades are a financially viable option for you.

By meeting the cleaner emissions requirements that we know will allow continued DR participation under current rules, not only will customers protect current DR revenues, but they will also unlock capabilities to further monetize the available generation capacity. MP2 Energy is able to assist here, as many variables may come into play, such as: make and model of your generator, your generator’s installation date, your location and other variables. MP2 has developed and built more than 44MW of our own backup diesel generator projects in ERCOT over the last two years, so we have developed expertise in this specific field. We have found multiple vendors who can provide competitive quotes for necessary upgrades, and MP2 can provide DR revenue projections, based on your current DR participation, to calculate payback and ROI analysis. In some cases, we may also consider financing or partnering to upgrade equipment to enable our clients’ continued participation in DR.

MP2 recommends that our customers pursue option two, and begin the process quickly. Upon providing the specific generator information required, we will gather quotes from our vendors and provide you our analysis to help determine the financial viability of the project.

We recognize that your company may not be staffed with environmental law experts, and that the coming changes may be difficult to fully understand. We are always open to discussing the meaning and implications of any regulatory changes with you and your team, and helping you find the best option.