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Several factors are leading facility executives to look closer at using on-site power systems for more than just emergency power. The expansion of critical loads through the addition of technologies, including computers, has highlighted the dependence of organizations and facilities on reliable power. In the wake of recent blackouts and security scares, some cities are now pressing facility executives to have backup generation for more life safety and security systems, even for low-rise structures.
At the same time, rising demand charges and the advent of demand-response programs, in which generators are run to cut peak load, has led some to consider upgrading or expanding on-site power systems beyond minimum regulatory requirements. This would allow such systems to earn a few bucks. Having abundant on-site power may also make rentable space more desirable and, as a result, worth more. It may be time for facility executives to examine the state of their on-site power capabilities.
Consider the case of a facility executive, Smith, who was getting ready to add a new wing to his building. He knew the existing emergency generator wouldn’t handle the new life safety and other loads required by the building code. He could add another generator or replace the old one with a larger unit. As he reviewed his options, he heard his utility was offering financial incentives to cut electric loads when the utility’s load was peaking. Rumors were circulating that the utility wanted to raise its peak demand rates, and Smith wondered if he could use his existing generator to save money by cutting his facility’s peak demand.
A call to his engineering consultant revealed other issues. The local environmental agency was about to issue restrictions on operating customer-owned diesel generators, except during power outages, unless the generator had special — and expensive — emissions controls. Moreover, in a typical Jekyll-and-Hyde approach, the same utility giving incentives to customers for cutting peak demand was also planning to levy standby service charges on customers who routinely run generators to cut peak loads.
To sort out the detail, Smith wanted to talk to someone who had already gone through this mill. Fortunately, he knew a facility executive, Jones, who had recently confronted many of the same issues at another facility. “Start by taking a step back from all those issues,” Jones said. “Just how important is backup power to your firm?”
The value of business
Part of Smith’s company was involved in importing and exporting products around the world, sometimes on a 24/7 basis. People were working in some part of his building almost all the time. The existing emergency generator had been installed more than 20 years ago, before the Internet, e-mail and global trade became common for medium-sized businesses. The generator had been installed with the thought that it would only need to power emergency lighting, fire safety, phones, security systems and one elevator. Little thought had been given to continuity of the business during an outage. “What happens to your business if the power goes out?” Jones asked Smith. “And what’s it worth to you to ensure that doesn’t happen?”
When Smith asked the accounting staff about the cash flow of the trading desk on the top floor, he was amazed to learn that it brought in more than $10,000 an hour. At that rate, an eight-hour outage could cost almost as much as a new generator serving just that space. And a day-long blackout could cause expensive business disruptions lasting several days after power was restored. Most employees were on salary, and just the value of lost work time was significant. Employees would still get paid for a day power was off.
At present wage rates, Smith calculated that keeping the company running through three or four blackouts during the 20-year life of a generator could pay for a new unit dedicated to that purpose.
“You need a larger generator before that new wing goes up,” Jones said. “You may even need a second unit to back up the first one. Your cost for backup power may be small compared to the cost of lost business.”
Making money, shining lights
But was there any way to generate a cash stream to cover some of the cost of a backup generator before a blackout happened?
The utility offered Smith several options. According to terms in his standard electric tariff, the utility charged for monthly peak demand even if that demand lasted only a half hour. If Smith could track his load as it happened, and run his generator in parallel with the utility, he could trim that peak, saving money every month. On the other hand, an interruptible electric rate would pay him money in advance via a rate cut for that part of his load — roughly equal to the capacity of his generator — that he could cut when the utility called him.
But there was a catch: a hefty penalty would be charged if he failed. The local power pool, however, offered a demand-response program for cutting peak loads when wholesale power prices got too high. It had no penalty, but the power pool was much less likely to call than the utility. A real-time pricing tariff also was available that could save more, but Smith did not feel ready to take on a venture where power prices could vary more than allowed under his present tariff.
The biggest savings would occur if Smith could run a generator for most of the workday, provided he could economically use the generator’s waste heat to save on boiler fuel. This combined heat and power or cogeneration system roughly doubles the efficiency of on-site power generation. To increase efficiency of the cogeneration system, a new chiller that converts hot water into chilled water would be required, an option that couldn’t be cost justified.
A more lucrative option would be to promote that part of the new wing that would be rented to tenants as having power guaranteed to run even during an outage. Doing so would attract tenants for whom such a perk had significant value. Such tenants typically want backup generation beyond emergency needs. Offering and maintaining the power systems could bring higher rent and greater tenant retention.
But none of this would come without a price tag. To make any of these scenarios actually happen, Smith’s engineering firm came up with a list of changes needed in his facility. To meet tightening environmental codes and have equipment that could run many hours a year, his diesel emergency generator would need to be overhauled — or replaced — to emit fewer pollutants. New, clean-burning natural gas-fired generators were needed to serve non-emergency loads and for routine peak shaving. Using his existing generator, which needed an oil change every 100 hours, would not be a reliable way to trim daily peaks that could each last several hours.
To make the resulting system manageable and efficient, Smith’s consultant added many other items to the list, including: automatic transfer switches, controls and switchgear; real-time demand metering and monitoring upgrades to his building management system; new power panels, feeders and wiring, all of which would parallel existing systems; expanded diesel fuel storage tanks and leak monitoring; additional fire safety equipment related to fuel storage; expanded natural gas service and monitoring; and noise abatement enclosures and vibration suppression systems, in addition to various infrastructure elements.
By the time the rough budget was done, Smith was looking at more than $1,000 per installed kilowatt, more than double the cost of new generators.
But his task wouldn’t stop at engineering. He had to navigate a sea of regulatory issues, including: demonstrating compliance with the utility’s interconnection process; expanded fire code requirements when adding emergency loads to a generator; additional fire code compliance and inspections when expanding fuel storage; emissions monitoring and permitting, possibly including Title V permit changes; compliance with city noise rules and community board acceptance; and possible permitting for use of high-pressure natural gas, which is required by some generators.
But the issue that confused Smith the most was the possibility of paying new utility standby service charges. Why would a utility supporting peak shaving to minimize load on its system discourage such activity by charging more to do so? The answer: One part of the utility tariff is designed to reduce peak load when it costs the utility extra to serve customers while another part seeks to collect for any unused investment in power distribution the utility must keep available when peak-shaving systems fail, requiring full use of the utility’s distribution capacity.
But wait, there’s more
Locating new generators may also prove crucial. If outdoor space is not available, quite a common situation in urban areas, location may be one of the biggest problems. Placing generators indoors may involve loss of rentable space, either directly or in adjacent areas where tenants would not tolerate vibration or noise. Getting combustion air in and exhaust gases out might also present problems.
Placing generators outdoors, such as on a rooftop or property setback, may require structural and noise abatement efforts. In addition, the visual impact on existing occupants should be considered. When locating at ground level, security and insurance issues deserve attention. Appearance, noise levels and weather protection should also be carefully considered.
Many facility executives also consider use of emergency generation for any purpose outside of an outage risky because such usage reduces the generator’s life. In reality, emergency generators should be run every month to ensure they are in operating order. The 2003 blackout revealed a variety of problems when emergency generators were forced to run for several consecutive hours.
So what did smith do?
Every situation is a little different, so there’s no universal solution. Smith’s consultant developed several scenarios. Smith offered these to his management team in a presentation that focused on backing up critical business loads with new high-quality generators. He proposed segregating emergency loads on new diesel generators that exceeded existing emissions standards, which he knew were likely to get tighter over time. He suggested enrolling the non-emergency generators in a demand-response program and placing their capacity under an interruptible load tariff.
In doing so, Smith expanded his facility’s backup power so it could avoid business losses, kept his emergency generation for emergencies and applied his non-emergency power toward low-risk options that could make a few bucks.
Lindsay Audin is president of EnergyWiz, an energy consulting firm based in Croton, N.Y. He is a contributing editor to Building Operating Management.
On-site power information readily available
On-site power, also known as distributed generation, has been the Holy Grail of energy-efficiency advocates for many years. As a result, a considerable amount of information is available.
• The Consumer Energy Council of America sponsors a site to help customers learn more and find equipment and vendors.
• The Distributed Power Coalition of America is supported by many on-site power vendors and practitioners.
• The Department of Energy maintains two useful Web sites related to on-site power. On distributed energy resources and on its Distributed Energy Program. Californians may also wish to check out the California Alliance for Distributed Energy Resources.