Looming less than a year away, on Jan. 1, 2007, tough new standards on emissions from stationary engines outputting above 250 kW or so will take effect in the Los Angeles Basin.

Not long ago, L.A. was a prime DE market. Nice subsidies for power self-generation, combined with the high cost of grid electricity, made the region a good hunting ground for customer-side power. Those times may now be virtually over.

In East Texas—a region with exceptionally prodigious industrial waste heat available to tap for cogeneration—similar restrictions may be phased-in.

Limits in both regions are now, or soon will be, so restrictive of NOx, CO, and hydrocarbons, that the future universe of viable onsite generation projects will likely be severely curtailed. DE becomes “virtually impossible” in East Texas, say industry advocates Audrey Parker and Jeff Trucksess, of Good Company Associates, in Austin TX. The two lobbyists have been pressing state regulators to modify DE restrictions. Unless Austin relents, says Trucksess, “This will effectively kill the market.”

Better tidings: Elsewhere in the nation there's a model emissions standard emerging that—although not nearly as restrictive as those of East Texas and L.A.—demonstrate that times are “a-changing” for DE projects, especially those needing permits in air-quality nonattainment areas (see map).

BACT in the Future?
Texas and California are intent on imposing best available control technology (BACT) on all new DE engines. This means achieving emissions as low as those of central power plants. However, as the following cases and discussions show, such a policy may yield perhaps unintended and undesirable results.

To start with, from the DE industry's perspective, wielding the BACT standard against onsite power with a single, inflexible rule is being done on a technically dubious basis. John Kelly of the Gas Technology Institute (GTI) believes one of the biggest drawbacks to these standards to be their excessive limiting of NOx emissions. Such a policy, he says, “leads to an increase in CO2 emissions—which contribute to global warming.” The two types of emissions, NOx and CO2, have an inverse relationship. “In most cases,” he says, “stringent NOx limits lead to higher CO2.”

Second problem: engine inefficiency. Engine makers and customers are surrendering some energy efficiency in order to meet NOx limits, and/or are forced to use very low-efficiency turbines (around 20%). High-efficiency engines (achieving nearly 40%) are virtually disallowed. In contrast to U.S. policies, Kelly notes, Europe's emissions regulators are focused “on CO2, setting NOx limits that allow use of the new advanced, high-efficiency, lean-burning engines to reduce fossil-fuel consumption and CO2 emissions.”

Third, excessively tight or inflexible emissions standards are also unfair to developers who have invested considerable funds in order to comply—based on assumptions they were led to accept, which are then subsequently changed, arbitrarily, in midstream.

Various other issues and potentially adverse tradeoffs come into play in the policy equation. However, these can become so complicated that regulators are highly challenged to give them their fair due. For example, questions of economic cost benefits, energy supply and load management, demand response, emergency generation, non-emergency onsite generation, and combined heat and power credits, all must be factored into an adequate decision process—but are usually not even secondary concerns to air regulators. Moreover, appropriately assessing each of these issues can require painstaking research.

And finally, the challenge of setting appropriate and attainable emissions standards requires something of a crystal ball, and these are notoriously unreliable. Future emissions goals are based on long-range assumptions regarding what the industry will likely attain in terms of BACT technology arriving two, five, or 10 years hence. What happens if everyone miscalculates? Unfortunately, an inappropriately strict performance level may be imposed prematurely. The following is a case in point.

Corralling NOx in East Texas
Four years ago, the Texas Commission on Environmental Quality (TCEQ) undertook the difficult air-regulatory task and began promulgating an extraordinarily tough emissions rule covering DE of less than 10 MW. An initial phase—allowing 0.5 lb/MWh emissions—went into effect. This was scheduled to be superseded on Jan. 1, 2005, by a far tougher one, lowering the limit to just 0.14 lb/MWh—the standard that Trucksess and Parker describe as “virtually unattainable.” That's not quite true: In 2005, one power project succeeded in meeting the 0.14 standard lb/ MWh goal, that stellar performer being Austin Energy's integrated energy system concept using a solar turbine. Several other projects designed to meet an easier NOx standard now remain on hold.

Particularly troubling in this case, too, is the fact that a commissioned research study by Oak Ridge National Laboratory, assessing DE's environmental impact, concluded that rather than increasing regional emissions, DE in Texas actually displaces dirtier peaking-power central plants. Hence, instead of  harming the air quality, some DE projects in Texas arguably improve it (see sidebar).

Why, then, has TCEQ pushed for a deal-killing standard? One reason, Trucksess and Parker say, may be that a group of influential environmentalists oppose DE because gen sets tend to be sited nearer to population centers, whereas power plants are usually farther away. This argument raises some challenging technical questions, however, which have only recently begun to be studied. (See “Scientific Issues, Research Findings,” including a brief critique.)

Finally—and what is perhaps most critical to appreciate—is the fact that the actual number of DE projects likely to be commissioned in the coming years is relatively “negligible” anyway (“Only a few dozen units,” says Parker). Emissions from DE, compared with the region's total energy production and auto emissions, are minuscule. Nevertheless, regulators seem inclined, rather inexplicably, to overlook the considerable advantages, such as cogeneration efficiencies, energy source diversification, and electrical transmission benefits—all for the sake of curtailing trace emissions.

And again, says Parker, what's most troubling isn't so much the emissions goal per se, but its timing. In order to achieve the initial phase (0.5 lb/MWhr), the DE industry worked very hard and invested large sums—only to see this effort wasted because the lower standard arrived too soon and rendered the engines un-permitable. The DE industry isn't resisting air-quality goals, she says. Rather, it is only taking a bit longer to meet the goals “than what TCEQ had forecast back in 2001, when they wrote the initial standard … Right now,” she adds, “this is just basically premature. It's too low, and something more reasonable should replace it” while the industry strives to finish its preparations.

“Virtually Unattainable”
Equally troubling is the plan by the California Air Resources Board (CARB) to curtail NOx even lower, to less than half of what is already unattainable in Texas—that is, to 0.07 lb/MWh. Again, this essentially knocks out of the marketplace any economically viable DE, under current pricing conditions. GTI's Kelly amplifies. “These new limits could not have come at a worse time,” he says. “Just as the three major US engine manufacturers [Caterpillar, Cummins and Waukesha] are ready to implement new, high, 40%-plus efficiency ARES lean-burning engines—a 25% increase in efficiency, with NOx of 1.5 lb/MWh, 50% reduction—the new NOx limits will ban their use.” Engine manufacturers, he adds, “are now scrambling and spending millions on new research to try and keep up with ever-changing standards.”

GTI supports a radically different approach to standard-setting. In its thinking, appropriate emissions goals would be geared specifically to each type of generation technology, as opposed to being subject to a single BACT, one-size-fits-all criterion ignoring critical differences in project purpose, siting, and application technology. “Engines,” Kelly stresses, “should be allowed to have higher NOx” emission, “due to the benefit of lowering the CO2.” GTI proposes easing limits for lean-burning engine to 3.0 lbs NOx, dropping this to 1.5 lbs in 2008 and 0.5 in 2012. This schedule, he says, will enable engine manufactures to complete their all-important R&D work (which is affecting global energy markets) “while allowing advanced lean-burn engines to be deployed to reduce CO2now.” This strategy makes the most sense, he believers, especially when one realizes that DE “contributes something less than 2% to overall NOx emissions locally, even under a worst-case scenario.”

Taking the other side, though, a regulatory official in California explains that when you're regulating a region with “the worst air quality in the country” something has to give. And in EPA non-attainment areas in California that “something” is probably going to be the internal combustion (IC) engine as a power generator, says Mohsen Nazemi. He is assistant deputy executive officer for engineering and compliance at the South Coast Air Quality Management District (SCAQMD). Stationary engines of all kinds, says Nazemi, not just power generators, are being severely restricted these days because “all of the low-hanging fruit,” so to speak, or easy-to-fix big-pollution sources, have already been reined in. For example, SCAQMD has been requiring new central power plants to meet the impending 0.07-lb/MWh NOx standard for about five years already. Soon, therefore, DE permit applicants must attain the same limit—one-seventh of the current standard.

SCAQMD oversees about 1,000 permitted engines, of which 40% are for generating electricity. SCAQMD's purview covers only engine sizes yielding about 250 kW or more; smaller DE units fall under CARB's equally tough limits, which are imposed via an engine precertification program. Regarding regional engines, says Nazemi, “It didn't make sense that they should be allowed to have higher permissions or lower standards than other [power generation] counterparts.”

Another black eye for smaller ICs is that many lack the critically useful continuous emissions monitoring (CEM) systems. SCAQMD's Martin Kay explains, “If big power plants have an emissions problem, we know about it right away because of [CEMs].” Smaller engines (typically in the 1- to 5-MW range) can easily fall out of compliance, yet their pollution can remain undetectable without CEMs. Kay is program supervisor for technology advancement and is responsible for rule development.

Moreover, this lack of CEMs is far from being merely a theoretical problem: During 2004 to 2005, SCAQMD undertook an extensive inspection and enforcement program and found, rather alarmingly, that more than half of the engines exceeded the permitted limit. Some were spewing hundreds of parts per million, compared with permitted levels in the low double digits. Many engines were found with malfunctioning controls or other maintenance issues. “Even though their megawatts are small,” says Kay, “their amount of emissions are orders of magnitude higher” than those of much larger central power plants.

SCAQMD inspectors also found faulty IC generators, says Nazemi, like the one “in the middle of a high school, with shorts tacks and poor dispersion. So the impact is a lot worse.” Engines were also found with failed catalysts that had not been replaced. SCAQMD ordered corrective steps; non-compliance rates are down below 30%.

Another factor in CARB's deliberations: Reportedly, innovative DE technologies are on the near horizon that indeed can meet the CARB 0.07 limits after all. For example, in November 2005 CARB certified Ingersoll Rand's 250-kW microturbine at this level. Kay notes he was “quite surprised that a microturbine could achieve those standards.” Source-test data on the turbine showed its output of NOx, CO, and hydrocarbons came to just “one ppm or less—which is what it really takes to be equivalent to large central power stations,” he says, although the latter are considerably more efficient. Larger turbines are also attaining 2.5-ppm levels of NOx, which should make them nearly equivalent to a large, combined-cycle power plant, and capable of being permitted, he says.

Air in other States:
RAP Helping Regulators Regulate
Apart from the exceptional markets in Texas and California, a budding movement is under way to promulgate a new, streamlined, model consensus standard for DE emissions regulation. Its reach could potentially extend nationwide, and as it gets adopted, it will radically change air permitting.

Efforts to get to this point began five years ago, when the US Department of Energy helped launch the nonprofit Regulatory Assistance Project (www.raponline.org) as a policy-making consultancy. Soon thereafter, RAP began issuing position papers and sponsoring seminars on the complexities of air-emissions standard-writing.

In 2002, after two years in development, RAP's model standard emerged. Although based on conditions typical of New England, its provisions are potentially applicable almost anywhere. RAP's model is now being praised by proponents and stakeholders as a win-win for regulators, environmentalists, and the industry alike—all of whom were involved in it from its inception, together with health and environmental scientists and state policymakers, notes RAP's Rick Weston. Its permissible limits, he says, are stern but “should be easy to meet.” Its streamlining aspects promise to bring consistency to DE regulations, and, via standardization, should ease project-permitting and benefit the industry in assorted ways. Last, it will provide much-needed technical assistance and a guiding framework for regulators. They'll be able to appreciate and understand DE matters in a broader perspective. Local regulators can use RAP to grapple with the complex interaction of environmental science, ever-changing technology, and uncertain energy markets to devise policies that make sense environmentally and economically.

RAP's standard mainly covers four pollutants—NOx, CO, PM 2.5, and CO2—and deals with SO2 by mandating ultra-low-sulfur fuel specified in grains per hundred cubic feet of gas or diesel.

Despite quite diverse stakeholder views on all of these scheduled pollutants, a consensus on them was reached—in part, says Weston, because the model's implementation process allows for sensible phasing-in. Standards begin with a reasonable, attainable starting point. This is then tightened up to “stretch goals,” which can be reevaluated to ensure that technology actually can achieve the target (0.15 lb./MWh in 2012).

Rather than mandating engine efficiency levels, RAP incorporates a four-fold reward system: first, by being output-based in expressing emissions in terms of per-MWh of production; second, by being technology-neutral; third, by recognizing manufacturer-level certification of emissions characteristics, thus negating the need for field inspections; and fourth, by crediting CHP thermal efficiency.

RAP's recommended targets for attainment areas closely match those of GTI, notes Kelly. (See “NOx-ious Air From Electricity Generation: Comparative Output.”)

Apparent flexibility is one of the RAP model's more beneficial virtues for DE developers, Kelly adds. Emissions goals can be tailored or customized for regional needs. For example, he says, if a region cares more about CO2 and has relatively less concern about smog (compared to sunbelt areas, for instance, where smog is being formed), the region can adopt appropriate goals allowing higher NOx—in order to limit a greenhouse gas.

Ultimately, says Weston, the RAP model provides regulators with a tool “to help them think about what kinds of generation they want” and, “to cope with the potential proliferation of customer-sited generation, to make sure that it's not going to cause air-quality problems.”

In 2003, RAP took its model code on the road. Seminars for utility commissioners and air-quality regulators were set up, starting in New England and the Mid-Atlantic states. Within a year, Maine had become the first to adopt a portion of the plan, followed by Connecticut. As of late 2005, Rhode Island, Massachusetts, Delaware, New Jersey, and Maryland were in various stages of discussion. Despite their regulatory “instincts” and urge to fiddle with parts of it or make wholesale revisions, Weston says, all of the regulatory bodies “tend to understand that you don't want to have wildly different rules,” and are trying to keep it intact so far.

For up-to-date information on local and state emissions regulations, Weston recommends visiting a database available at www.eea-inc.com and clicking on Regulatory Requirements for Small Power Generators.

Based in La Mesa, CA, writer DAVID ENGLE specializes in construction-related topics.

DE - March/April 2006