The Impact of Air Quality Regulations on Distributed ... - NREL

control equipment, apply the requirement
for additional control equipment even if the
generation technology already included
pollution prevention elements that result in
low emissions.
Although some <strong>of</strong> these issues are currently
reported in only a few parts <strong>of</strong> the country,
there is reason to be concerned that this
treatment will spread. As new, more stringent
ambient air quality standards for ground-level
ozone and PM are implemented, more <strong>of</strong> the
United States will be in nonattainment areas in
which small projects receive more scrutiny. In
this case, the permitting principles and
structures established for DG projects in
nonattainment areas today can be expected to
be applied over a wider region in the future.
<strong>The</strong> regulatory treatment <strong>of</strong> DG projects in
nonattainment areas today will thus likely
shape future treatment and the future <strong>of</strong> the DG
industry.
Each <strong>of</strong> the regulatory issues identified for
policy action is discussed below. One or more
illustrative case example is provided for each <strong>of</strong>
the issues.
4.2 No Emissions Credit for CHP
Because CHP is significantly more efficient
than conventional separate generation <strong>of</strong>
electric and thermal energy, it uses significantly
less fuel and creates significantly lower
emissions for the same productive outputs.
Further, new CHP facilities <strong>of</strong>ten replace older,
higher-emitting units. This additional
environmental benefit is not recognized in the
traditional permitting process.
From a permitting perspective, the essential
problem is that CHP systems substitute a single
on-site unit for two or more separate emitting
units, one <strong>of</strong> which (the utility’s power plant) is
<strong>of</strong>f-site and thus not taken into account in the
traditional permitting process. Since the
avoided <strong>of</strong>f-site emissions are not considered in
permitting the CHP facility, the CHP project
29
will <strong>of</strong>ten appear to show an increase in
emissions even though its total emissions are
significantly lower than the total
alternatives.
Alternatively, the project may be permitted
based on requirements for electric
generation without considering the avoided
emissions from thermal generation. Even
when a CHP facility has lower emissions
than the “total” project that it is replacing,
conventional environmental permitting does
not recognize its environmental benefits.
Because the CHP system is cleaner than the
total pre-existing system, the net emission
result is negative. This makes the electricity
from this CHP facility cleaner overall than
the cleanest new central station plant. Most
states, however, do not provide any credit
for the environmental benefits <strong>of</strong> CHP. 32
None <strong>of</strong> the 14 CHP projects identified and
evaluated for this study received credit for
CHP benefits. This structural omission in
conventional environmental permitting thus
unnecessarily complicates and discourages
the permitting <strong>of</strong> environmentally beneficial
CHP projects. <strong>The</strong>re are solutions available,
however, and credit for CHP has recently
been included in the California and Texas
DG regulations discussed in Chapter 3.
32 Another permitting problem related to CHP is
the “source separation” issue. This occurs when
regulators require a separately owned CHP facility
to be regulated by the same air permit as the steam
host facility. This creates a variety <strong>of</strong> commercial
and operational conflicts that can make the third
party CHP project impossible. This problem only
applies to third party CHP projects, <strong>of</strong>ten larger
than the ones discussed here. No specific
examples <strong>of</strong> this issue were identified during the
research for this study, however it is a significant
problem for larger, third party CHP projects.