With one of the nation’s largest natural gas-fired electric generation plant fleets, Calpine Corp. on Friday filed an objection with the federal Environmental Protection Agency (EPA) over its proposed settlement with diesel-powered demand response (DR) operators. The proposed settlement relates to a pending appeal of EPA emissions restrictions.

The settlement could allow DR operators that rely on diesel emergency backup generation to quadruple their allowable operating hours without having to install updated emissions controls, Calpine said. A pending federal court appeal challenges EPA regulations regarding the latest national environmental standards for hazardous air pollutants from reciprocating internal combustion engines used by many DR providers.

Under current standards the reciprocating engines are allowed to operate 15 hours annually without added air emission controls. The proposed settlement would increase the allowable limit to 60 hours for emergencies, but Calpine argued that the change would provide a big economic gain for generators at the cost of added pollution.

“People tend to think of DR as a clean alternative to fossil-fueled generation when, in fact, a significant amount of DR is provided by emergency backup diesel-fueled generators that operate without air emissions controls,” said Calpine COO Thad Hill, executive vice president. “DR resources are typically called on during the hottest days of the year when the air quality is already at its worst.”

According to Hill, DR is increasingly becoming a factor in some of the major regional power markets, and thus it could have an impact on Calpine’s predominantly gas-fired fleet. In PJM and many other regional markets, it is used to cut peak demand pressures on the power grid, and the DR providers are paid to reduce power consumption in those high-demand times.

“Some DR is met by actual reduced consumption, but it appears that about a third of the DR in PJM and adjacent markets is instead based on starting up off-grid emergency backup generators,” Calpine said in its filing. “In short, buildings and businesses are getting paid to turn on their emergency backup generators for economic gain rather than to respond to emergency conditions.”

Calpine calculated that by 2014 there will be 14,000 MW of DR operating in PJM. Longer term, Calpine warned that investment in cleaner and more reliable generation could be displaced by the heavier reliance of diesel-powered generation. “The irony is that we may end up seeing the replacement of a meaningful portion of retired coal-fired capacity with diesel generation with no air emissions controls,” Hill said.

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