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Standby Generation May Be Vital to Your Business

Key Points
  • When evaluating the need for standby generation, consider the cost of a power outage to your business.
  • Leasing programs work well for projects where backup power is not required on a continual basis.
  • Automatic transfer switches are often required on large generators.

emergency generator

From a business standpoint, the decision to specify a standby generator system is based on how much an electrical outage will cost in lost production, lost revenue and dissatisfied customers. If you know the cost of an outage to your business and the capital, operating, and maintenance costs of a standby generator, you can analyze the numbers.

Depending on the type of business, the cost  of downtime can vary greatly. A one-hour power outage could cost a financial services company as much as $7 million; a credit card service company could lose as much as $2 to $3 million and an airline reservation company could suffer up to $100,000 in losses.

For a grocery store, a one-hour outage would mean loss of business, but an outage lasting more than one hour could also result in considerable product loss. A standby generator could save a large grocery store $50,000 to $80,000 per day in food spoilage losses and lost customer revenues.

Hospitals may only require 40 to 50 hours of standby generation in a given year, but hospital personnel must consider the welfare of their patients; access to backup power could be a life saver. When Superstorm Sandy hit the east coast, one hospital remained operational because of a natural gas backup system; other hospitals had to evacuate patients. Over 450,000 businesses in New York and New Jersey were affected by Sandy; costing $30 billion or more in lost revenue.

The technology

Types of standby generators include diesel and natural gas reciprocating engines, natural gas and steam turbines, microturbines and fuel cells. Diesel and natural gas generators currently dominate the standby power market, but microturbines and fuel cells are emerging as viable options. Because of the limited number of hours that a typical standby generator operates, the primary driver in equipment selection is installed capital cost. As microturbine and fuel cell capital costs come down, their share of the market should increase.

Large generators often require automatic transfer switches (ATS), which disconnect the generator from the grid to prevent back feeding of power into utility lines (a safety issue); particularly when a lineman is making repairs during an outage. During a brownout or blackout, an ATS will start the generator and transfer the power automatically. Properly designed systems may also include a coolant block heater, battery charger and plant exerciser.

The total system operates automatically in a matter of seconds, and most are protected for high oil temperature, low coolant level, high engine temperature (liquid cooled), over-crank and over-speed. The plant exerciser automatically starts the generator at preset intervals, charging the starting batteries and bringing the engine up to operating temperature. This helps to ensure that the generator will be in good working condition when needed.


A variety of facilities require standby generators; especially businesses that rely on computers and other sensitive electronics. According to the U.S. Energy Information Administration, about 75 percent of commercial businesses have backup generators with an average size of 18 kW. Existing standby generation capacity is estimated at 40,000 megawatts, or 5 percent of the total installed electric generation in the U.S. This number is expected to increase as facilities continue to realize the importance of continuous power availability.

Selecting a system

In selecting a system, capital costs and operating costs need to be considered. Capital costs for a diesel generator fall in the $400 to $700 per kilowatt range, depending on the size. Natural gas generators are more expensive, but can pay for themselves in lower fuel costs if they operate for a significant period. Leasing programs are available that work well for construction projects and other situations where backup power capability is not required on a continual basis.

You may also want to consider a multiple-generator system. A single, large standby generator might be capable of supplying power to all of a facility's critical loads, but dividing these loads among multiple smaller generators can maximize reliability and increase flexibility. For example, with multiple generators, one unit can be taken offline for maintenance without affecting the availability of standby power.

It is important for you to be familiar with federal, state and local environmental regulations regarding the installation and operation of generators. Many states and localities have restrictions on operating hours and emissions limits for diesel generators. These regulations may impact the cost of different system options.

Cost versus opportunity

When considering a standby power system, calculate all critical electrical loads at your facility. Consider peak power surges, single-phase loads and load imbalance, nonlinear loads such as battery chargers and uninterruptible power supplies, regenerative loads such as elevators and power factor. Lower power factor loads require larger alternators or generator sets to serve the load adequately.

Often, the financial hardship of a power outage is not fully understood until after the fact. Take a hard look at your current business operations and assess what the financial impact of a long-term power loss would be, then compare this cost to the cost of leasing or owning a standby generation system.

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