News

Vice President Paul Hibbard and an Analysis Group team have released a report examining the potential environmental and power-system impacts of proposed changes to U.S. Environmental Protection Agency (EPA) rules related to reciprocating internal combustion engines (RICE) that back “demand response” resources in wholesale electricity markets. The study “Reliability and Emission Impacts of Stationary Engine-Backed Demand Response in Regional Power Markets” (August 2012) was conducted on behalf of Calpine Corporation for submission to the EPA.

In the report, Mr. Hibbard highlights the potential benefits of demand response to the efficiency and diversity of wholesale electricity markets, and he reviews EPA’s proposal to waive otherwise applicable emissions-control requirements for RICE units that back demand response. EPA’s proposal is based in part on expectations that these units are needed to protect power grid reliability and that the emission impacts would be insignificant due to limited operation of the units.

Mr. Hibbard’s study findings suggest the opposite, noting that it “…is not appropriate to conclude that [RICE-backed demand response] resources are uniquely needed for reliability or have enhanced reliability attributes. Rather, they simply provide a reliability service that could and would be equally met by alternative resources.” Additionally, a power-system dispatch analysis conducted for the report finds higher emissions of carbon dioxide, nitrogen oxides, sulfur dioxide, and mercury with RICE-backed demand response “relative to the same capacity needs being met by alternative market resources.”

According to the report, “EPA’s proposed amendment puts a thumb on the scale of market competition – ultimately to the detriment of electricity consumers – in favor of RICE-backed demand response at the expense of competing alternatives. This analysis shows that there is neither an environmental- nor reliability-based justification for doing so.”

Read the report