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Participating in demand response with your backup generators can be a great way to increase earnings and reduce operational disruption – but there’s an important catch. To qualify, generators must comply with strict EPA engine emissions regulations implemented in 2016 and reaffirmed with new guidance issued in May 2025. Generators must also comply with state and/or local air regulations

Unfortunately, there is confusion and misinformation around these regulations – and it’s easy to see why, given their complexity. How can you ensure your backup generators are fully compliant, so you can participate in demand response with confidence? In this blog, we break down everything you need to know about generator compliance.

Why backup generators are an attractive solution for demand response

Demand response requires participants to reduce load from the grid. The more kW or MW a facility can shed, the higher the payments for supporting the grid. Success in demand response starts with a practical, well-designed energy reduction plan that defines how the facility will reduce load during a demand response event. And typically, two options are available:

1. Strategically adjust specific assets and processes (e.g., lighting, HVAC, chillers) to temporarily reduce demand without impacting core operations, either manually or via automation
2. Shift a portion of th load to backup generators – for facilities that cannot easily reduce demand or want to maximize participation, this can be an appealing solution.

Many facilities find that the right results come from using one (or a smart mix) of these two strategies. But for many facilities backup generators offer an excellent solution for demand response while adding resilience:

• Higher earning potential: increase demand response capacity and earnings beyond what’s possible by load reduction alone.

• Monetize existing assets: demand response is an excellent way to monetize generators. These are existing on-site assets that are necessary for operational resilience – why not monetize them in available markets?

• Minimize disruption during events: shifting load to a generator enables a facility to maintain normal operations during a demand response event. Many facilities can keep more processes running by shifting that load to another power source, rather than making manual reductions to participate.

• Ensure generators are operating correctly: many businesses must periodically test their generators to meet local regulations and standards. By running backup generators for demand response, they can ensure their generators operate correctly under load while simultaneously complying with mandated testing requirements.

• Protect operations: advance notice of grid emergencies enables more proactive use of generators to protect critical equipment and processes. 

Navigating the complex regulatory maze

But wait. Your facility has a generator (or a fleet of them) – does that mean you can jump right in and participate? Even if you have a backup generator, it doesn’t guarantee you can use it for demand response. Using backup generators in demand response is governed by a complex web of federal, state, and local regulations. This is where things get complicated and confusing – and potentially very costly if the rules are ignored or misinterpreted.

Let’s break it down as easily as we can.

At the federal level, the EPA regulates the “engine” which drives the generator. EPA provisions for demand response participation with generators have evolved over the past two decades. The original EPA regulations allowed emergency generators to operate for up to 100 hours per year for testing and maintenance.

In 2010, the EPA allowed 15 hours per year to be used for demand response. In 2013, the EPA revised the regulations to allow 100 hours for testing/maintenance to also be used for demand response programs called at NERC EEA2 or voltage/frequency reductions. This is called the 100-hour provision. The EPA also changed the regulations to allow 50 of those 100 hours to be used for financial gain in demand response programs that meet 5 specific conditions (we’ll get into these conditions in a moment). This is called the 50-hour provision.

In 2015, following various lawsuits from CLF, DNREC, and other entities, a court mandate removed the 100-hour provision for demand response effective May 4, 2016. What is left now is just the 50-hour provision.

What is the EPA’s 50-hour provision?

The 50-hour provision allows emergency generators to operate up to 50 hours per year in non-emergency demand response programs if five conditions are met:

1. The engine is dispatched by the local balancing authority or local transmission and distribution system operator.
2. The dispatch is intended to mitigate local transmission and/or distribution limitations so as to avert potential voltage collapse or line overloads that could lead to the interruption of power supply in a local area or region.
3. The dispatch follows reliability, emergency operation or similar protocols that follow specific North American Electric Reliability Corporation (NERC), regional, state, public utility commission or local standards or guidelines.
4. The power is provided only to the facility itself or to support the local transmission and distribution system.
5. The owner or operator identifies and records the entity that dispatches the engine and the specific NERC, regional, state, public utility commission or local standards and guidelines that are being followed for dispatching the engine. The local balancing authority or local transmission and distribution system operator may keep these records on behalf of the engine owner or operator. 

These provisions are in the EPA NSPS (New Source Performance Standards) and RICE NESHAP (National Emission Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion Engines). Older engines are subject to the RICE NESHAP, and newer engines meet the NESHAP provisions by operating under the NSPS. 

Regarding items 1 and 2 in the above list, there are two main categories of demand response programs in the U.S., and the category determines how generators can be used: 

1. Emergency programs: typically found in regulated areas of the country and involve local balancing authorities and local transmission and distribution system operations (e.g., Ameren, ConEd, Rocky Mountain Power, Puget Sound Energy, and Duke Energy). Under EPA regulations, emergency generators can participate in these programs. In general, all emergency generators should be eligible for participation in these programs under EPA regulations. State and/or local air regulations must also be met. 
2. Non-emergency programs: typically found in deregulated environments and managed directly by the ISO (e.g., PJM, ERCOT, ISO-NE, NYISO, MISO, and CAISO). In this case, generators do not meet the 50-hour provision and, as a result, must meet non-emergency use standards as defined by the EPA. 

What happens if a backup generator doesn’t meet the 50-hour provision? 

If the 50-hour provision isn’t met, permitting for non-emergency use becomes much more complex. How do you know whether your backup generator is compliant-as-is or eligible for upgrades to make it compliant?

Eligibility varies greatly by fuel type, construction commencement, manufacture date, the EPA tier rating, and more. And you need to look at each generator on-site since these conditions can vary greatly from one engine to another. Some may be eligible right off the manufacturing line, like a Tier 4 model after 2010. Others, depending on various criteria, may need the following upgrades: a Diesel Oxidation Catalyst (DOC) and a Continuous Parametric Monitoring System (CPMS).