Rising energy prices as well as heightened environmental and power reliability concerns have an increased number of facility executives using on-site power equipment to satisfy their facilities' energy appetite.
It's getting easier to see why.
On-site power systems give facility executives nearly unlimited capability to manage their energy supplies as they see fit. Systems can be used to produce electricity to meet a facility's baseload demand, to shave peak demand and to meet electrical needs when a utility feed fails.
Having those capabilities opens a world of possibilities to facility executives who are trying to reduce how much they pay for energy. Many facilities have systems configured to come online when the amount of utility-supplied energy a building uses is getting close to breaking a previously set demand level, typically during equipment start-up times.
As any facility executive who has been in that position knows, setting a new demand level incurs utility charges that can stay on a bill for months. But while controlling demand charges is important, the systems also give facility executives flexibility to define energy management strategies and control supply costs. Even in cases where setting a new demand level is not a concern, producing power on site at peak-use times can be financially advantageous.
Facilities that are on a real-time energy rate, for instance, can pay up to four times as much for energy during peak-demand times as they pay during off-peak hours. Rare is the instance where the cost of producing power on site would surpass the cost of buying power from the grid during those times.
What's more, buildings with power systems in place can more easily take advantage of favorable interruptible and curtailable electricity rates. If the utility ever makes the call for those facilities to cut demand, an on-site generator can make up the difference.
In deregulated markets, generators can be used to flatten a building's load profile. From an electricity supplier's perspective, that's an important aspect of its ability to offer an attractive rate.
In regulated markets, an on-site system might result in better rates not only through peak-shaving applications, but also because it helps the utility avoid building new generation plants, the cost of which is passed on to ratepayers. For every megawatt of power produced through on-site power systems, the utility has to build one less megawatt into its generation capabilities.
"It makes a lot of sense from the utility perspective," says the maker of an on-site power system. "It's a lot less expensive to encourage a customer to construct an on-site power system that can feed into the utility grid, or separate from it when needed, than to have to build an entire generating station or add onto an existing power plant."
Blackouts such as the one that hit the Northeast and Midwest in August, as well as continued talk about the nation's aging electrical infrastructure, only help to convince facility executives that on-site power systems make sense. Depending on the amount of output, an on-site system can be used to replace utility power for an entire facility or to power critical systems during outages.
What facility executives need to remember, however, is that if they want to parallel their on-site power systems with the utility, they'll have to negotiate and meet a utility's interconnection standards. The utility wants absolute assurances that the output from a facility's systems will not harm the existing electrical grid and associated equipment.
Sometimes, that's not an easy task, especially if the utility has enough generation capacity to serve its territory in every circumstance. Utility representatives will often use the interconnection standards as a way to block on-site power projects and preserve its rate base.
"If a utility is charging a high peak-demand rate, it may not want to give up that revenue because a customer wants to produce its own power at a cost savings," says the maker of an on-site power system. " A business might think generating their own electricity is a good idea, but then they find out the costs of the interconnection are going to kill the economics on the project, not to mention the cost of fuel itself that comes into play on longer runtime scenarios."
A viable alternative is to consider the use of a standby power system in conjunction with an interruptible rate rider of curtailable rate. With these options, the cost of sophisticated relay protection is usually not an issue because the generators are transferred to and from the utility grid within less than a second. Typically all that's needed is reverse power protection, which can be put in place cost effectively.
