MANAGING THE
COSTLY RISKS of
POWER OUTAGES
June 2016
Propane Education & Research Council
Resilience is the key factor for
backup power systems and
the fuels that drive them
W
ith a proverbial inevitability like death and
taxes, the frequency of power outages is
accelerating, and with them, the losses to
businesses. Consequently, more and more
businesses are evaluating their risks and
developing permanent backup solutions
that have both the capacity and the fuel source to protect them
from losses.
While such large blackouts capture national news and trigger
emergency response from local and federal government, they
represent a very small share of all outages. On the level of
data reported by power distribution companies, the total number of events is vastly larger. Blackout Tracker: United States
Annual Report, an annual compilation of all outages, large and
small, found 3,571 total outages in 2015 affected 13.2 million
people. In 2009 there were 2,840 events.
According to the nonprofit collaborative Inside Energy, from
2000 to 2014 the five-year annual average of major outages in
the U.S. doubled every five years. In 2000, the monthly average of large grid outages totaled 2.5; by 2013, the average had
risen six-fold to 14.5 major disruptions per month.
But frequency of outages is only one facet of the business risk;
another is the average duration. The longer power is out, the
larger the costs to business.
A report by the Lawrence Berkeley National Laboratory,
Assessing Changes in the Reliability of the U.S. Electric Power
System, tracked a cross-section of distribution utility data
over 13 years. It found that the average duration of outages
increased 10% each year over that period.
THE CONSENSUS ON THE CAUSES OF OUTAGES
What are the causes of increasingly frequent outages? And
how can businesses control them? The answers to both questions are straightforward and well understood.
An effective plan for backup power needs to consider the size and nature of critical
loads and the generator’s fuel source.
Severe weather and the failures of an elderly national power
grid are the primary causes. Whether one believes that climate
change is manmade or not, the earth is clearly in a long-term
warming trend. Climatologists believe that warmer temperatures drive extreme weather. And while the U.S. power grid
has served well for decades, modernization will require billions
of dollars – even trillions by some estimates – over decades.
Unfortunately, the impacts of weather and infrastructure
2
are entwined because the fragile grid is more susceptible to
weather damage.
Also unfortunate is the fact that weather and grid modernization are outside the control of businesses, which can only manage their risks, not the causes.
the generator’s motor to start when an outage is detected.
Moments later, when the engine is running and the generator
is ready, the switch transfers the facility’s power source from
the utility to the generator.
EVALUATING THE RESILIENCE OF GENERATOR FUELS
RESILIENCE IS THE NEW RELIABILITY
For building owners and FMs who must prepare for an outage
and for consulting engineers who specify their power solutions,
resilient design is the key factor in managing risks.
The nonprofit Resilient Design Institute defines resilience as
“the capacity to adapt to changing conditions and to maintain
or regain functionality and vitality in the face of stress or disturbance. It is the capacity to bounce back after a disturbance
or interruption. From Katrina to Sandy, California drought to
Mississippi flooding. Resilience is both response and action.”
In terms of power, standby generators are the resilient solution,
and more than half of new commercial facilities are installing
them, according to B2B International. Investments in generators
serve the same purpose as investments in insurance policies –
they provide protection against unknowable risks.
Standby power generators are typically located outside a facility.
They incorporate an automatic transfer switch (ATS) that tells
A Growing Element of Resilient Design
Installing permanent backup generators
Decreased
Increased
No change
80%
Resilient design principles extend to the choice of fuel for
the generator’s internal-compression motor. Because diesel
engines are commonly used to drive standby generators,
diesel fuel stored in onsite tanks has been a traditional choice.
But in resilient terms, diesel fuel has shortcomings. It degrades
steadily over time, turning into a jelly-like substance that can
QUANTIFYING THE COSTS TO BUSINESS
Blackouts are caused by factors outside a business’s control –
typically severe weather or the nation’s failing grid infrastructure.
The type and size of outage costs to business vary. For restaurant
and grocery businesses, food spoilage; for manufacturing, lost
production; for service firms, revenue loss and lost productivity
among office workers.
Nevertheless, there are some common concerns and patterns
of loss. A survey of 354 commercial organizations by B2B
International found that loss of revenue and customers was the
top concern with outages, followed by lost productivity and data/
records. Most large businesses (65%) were also concerned about
the cost of overtime labor, which can be incurred in outages as
brief as 1 minute to 4 hours. The highest cost to large businesses
is damage to IT equipment; small businesses are more likely to
incur damage to their buildings. The median cost of an outage to
a business is $9,500.
70%
60%
Ironically, an outage can also lead to higher electricity bills for up
to 12 months after an event. If idled equipment draws a start-up
surge when power is restored, the peak demand results in ratchet
charges from the electric utility.
63%
50%
40%
30%
29%
20%
10%
0%
8%
One loss cited in the B2B research involved a pharmaceutical
manufacturing plant in New Mexico owned by Albany Molecular
Research. The company suffered a power outage that led to loss of
finished drug product and structural damage. The outage contributed
to the company’s $8.6 million loss in the following quarter.
Nearly two-thirds of respondents said that their organizations had increased their
use of permanent backup generators over the previous three years as a result of
power outages.
Source: Power Outage Impact Research, PERC 2015
3
clog motors when the moment of need arrives. Strict maintenance and additives are necessary to ensure that this fuel
performs in an emergency. The same instability occurs with
gasoline; however, the latter is rare in commercial generator
applications because its flammability is greater than that of
diesel fuel, creating an unwanted hazard around storage tanks.
Motors that operate on stored propane are untouched by the
stability problem of liquid diesel fuel. Natural gas supplied
by utility lines is also stable – but there’s a catch. The supply
of natural gas is outside the control of the building owner.
If a storm or other obstacles disrupt the utility’s lines at the
same time as a power outage, a natural gas-driven generator
cannot come to the rescue.
Propane is an alternate source that delivers when natural
disasters disrupt utilities or price spikes drive up the cost of
natural gas.
CONFIGURATION OPTIONS FOR PROPANE GENERATORS
Propane generators can be configured to maintain either a
facility’s critical loads or its full operation. They can also operate in peak-shaving and demand-response programs that
decrease electricity costs for owners. Commercial units range
from 5 kW to 400 kW, and are available in single-phase and
three-phase power and in 120, 240 and 480 voltages.
For many facilities, propane is the resilient choice that is
portable, reliable and able to be stored indefinitely without
risk of degradation. Propane tanks can be located above or
below ground. In either location, propane is nontoxic and
does not risk contamination of nearby water or soil, unlike
leaking diesel tanks.
THE PLUSES OF PROPANE
•Portable
•Reliable
• Can be stored in tanks above or below ground
• Indefinite storage time without requiring fuel maintenance
• Less greenhouse pollution than diesel and gasoline fuels
• Stable source and price
• Nontoxic; cannot contaminate soil or water
• Unaffected by utility disruption
Propane is an excellent option for any facilities without access
to natural gas. Generators can be driven by propane exclusively
or by dual-fuel engines that operate on natural gas or propane,
allowing engines to switch to propane when the natural gas
supply fails.
Propane is also clean-burning, creating a fraction of the greenhouse pollutants of diesel fuel. Diesel combustion emits far
larger concentrations of nitrous oxides, sulfur oxides, particulate
matter and carbon dioxide. Increasingly stringent regulations
for air quality are one reason for the high price of diesel – which
now exceeds the price of gasoline – as the U.S. transitions to
less polluting, lower-sulfur diesel fuels. Air quality regulations
will likely continue to increase first costs for diesel generators
and shift more demand to propane generators.
Like an insurance policy, you need to know that your standby
power adequately covers your assets and vulnerabilities. Be
sure that your engineer considers all the system and fuel
options when creating your emergency power plan for new
construction, existing buildings and standby replacements.
PLANNING RESOURCES FOR PROPANE
BACKUP POWER
Codes & Standards:
• National Electric Code / NFPA 70 – Articles 700,701,702, 708
•NFPA 110 – Standard for Emergency and Standby | Power Systems
• ANSI / IEEE Standard 146 – Emergency and Standby | Power Systems
• UL 1008 – Automatic Transfer Switches
• NFPA 99 – Health Care Facilities
• NFPA 101 – Life Safety Code
www.BuildWithPropane.com
Manufacturer Resources:
• Generac Power Systems – generac.com
• Kohler Power Systems – kohlerpower.com
4