Gensets in Demand Response Programs Generate Revenue, Decrease Outages

October 26, 2015 By Jennifer Hermes

gensets white paper coverThis article is sponsored by ConEdison Solutions.

Utilizing distributed generation (DG) assets such as standby generators (gensets) can be one of the most effective and easy ways for building owners and operators to curb electricity load during demand response events, whether using existing gensets or other equipment. Distributed generation offers building owners a number of unique advantages, including resiliency and greater economic flexibility to participate in demand response programs. At the same time, if generators are powered by fossil fuels, building owners/operators need to understand regulatory and permitting compliance requirements to ensure they take full advantage of their standby generators while remaining in compliance with applicable regulations.

The opportunity to use a facility’s standby generators for demand response remains substantial, but building owners and operators must understand how to comply with the various and complex regulatory issues surrounding air permitting, fuel choice, generator size, and classification as a new or an existing source.

Brief Summary of Some Regulatory Issues

Under the Clean Air Act of 1970, the EPA was granted the authority to set national ambient air quality standards (NAAQS), which states are required to achieve through the development and implementation of EPA-approved state implementation plans (SIPs). The Clean Air Act also sets minimum control requirements for emissions levels from new air pollution sources – both stationary and mobile. These New Source Performance Standards (NSPS) set emissions limits but do not require specific control technologies. Additionally, under the National Emissions Standards for Hazardous Air Pollutants (NESHAP), the EPA began introducing emissions standards in 1996 for non-emergency stationary generators, from Tier 1 through Tier 3. The standards have been gradually phased in over the past two decades, requiring increasingly strict emissions controls. In 2006, the EPA issued Tier 4 standards – Tier 4i (interim), Tier 4i Flexibility, and Tier 4 Final, which have been incrementally adopted since 2008, based on engine size. By the end of 2015, Tier 4 standards will be entirely phased in.

Previously, manufacturers had been able to meet the increasing requirements of Tiers 2 and 3 by modifications to existing engines, such as in-engine modifications or internal design changes. Tier 4 requirements, however, require the installation of additional devices by building owners/operators on their genset(s) to lower emissions levels; for existing Tier 2 or Tier 3 generators, building owners/operators must research the several technologies that are available for retrofitting/upgrading to meet the new emissions standards to reduce NOx and PM emissions.

Despite these regulations, installing new genset systems can generate significant revenues while also potentially satisfying eligibility requirements for valuable incentive programs.

Hypothetical Case Study

As a hypothetical example, imagine that a property manager at a Class B office facility in lower Manhattan had been investigating affordable, reliable backup power solutions to avoid future power outages such as those suffered in the aftermath of Superstorm Sandy. With the building already receiving natural gas service for its HVAC equipment, the property manager is considering a 300 kW natural gas generator to provide reliable backup power in emergencies, while also enabling the site owner/operator to participate in DR programs. But with the proposed installation of a 300 kW unit, the property manager must navigate a daunting variety of permit applications, registrations based on the unit’s application, compliance for the work permit/certificate to operate to federal air quality standards overseen by the NYCDEP, and additional registration requirements based on usage and engine size.

By working with a developer experienced in generator installations and demand response program requirements, the property manager will be able to ensure that the equipment will be in full compliance with all permitting requirements, including specific guidance on installing standby generation in buildings by their local Department of Buildings (DOB), while also remaining eligible to benefit from revenue opportunities.

Results: Significant Savings and Payback in 3 to 4.3 Years

In this scenario, at a cost of $450,000 for the installation of a new 300 kW genset system, the property manager elects to enroll 250 kW of its capacity into NYISO’s Special Case Resources (SCR) DR program, Con Edison’s Commercial System Relief Program (CSRP), and Con Edison’s Distribution Load Relief Program (DLRP).

Combined, all three DR programs generate approximately $58,000 in annual DR revenues. The genset is also eligible for incentives under the joint Con Edison-NYSERDA Demand Management Program, with an $800/kW incentive for DR-enablement, reducing the install cost by $200,000. With these three DR revenue streams plus the applicable incentive, the genset has a simple payback in the range of 3 to 4.3 years.

Participating in utility and ISO/RTO demand response programs is an excellent way for building owner/operators to earn money while helping to minimize power outages, provide a better building for their tenants and employees, and improve the system-wide health of the regional electric grid.

ConEdison Solutions has published a white paper offering specific and comprehensive details on what building owners and operators need to know about enrolling standby generators in coordinated demand response programs. The white paper, “Permitting Gensets for DR: What Building Owners/Operators Need to Know About Enrolling Standby Generators in Commercial Demand Response Programs,” includes two hypothetical case studies on how, specifically, to navigate the enrollment process, the challenges companies will face, available solutions, and savings opportunities. Download the white paper here.

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