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Standby Generation: A New Proposition

A cost/benefit analysis of full interconnection of customer-owned standby generators.
Fortnightly Magazine - June 1 2002

only provides partial reliability assurances. With an open transition transfer system, tests under load conditions are often disruptive to production schedules or occur during non-manufacturing periods. Additional costs include loss of production and/or additional labor overtime expenses to conduct testing during non-production periods.

With a closed transition transfer system, however, tests can be conducted without interruption to operations. When power from the generator becomes available, a seamless transfer is made between the utility and the standby generator. Facilities managers benefit from avoiding plant shutdowns and eliminating increased labor costs to schedule tests during non-production periods.

With a closed transition transfer system, intelligent peak shaving can occur. In this mode, the generator is paralleled with the utility for an indefinite amount of time. The generator output then can be set to meet customer demands in excess of a pre-defined limit. As customer demand fluctuates, the output of the generator continually adjusts to meet the load. Simultaneously, the utility load remains constant as the generator meets demand beyond a predetermined threshold. In contrast, peak shaving in an open transition transfer system scenario often requires a generator to power equipment isolated from the utility load. The generator follows the load on a dedicated circuit, as opposed to following the total customer load. Often this does not match optimal scenarios to achieve the lowest possible energy costs.

Peak shaving is a contentious issue with many utilities, since it reduces their revenue stream. A reduction in peak demand may alter a favorable rate structure and result in penalties from the utility in the form of standby service charges. And as peak demand is lowered, the consumer may be reassigned to a different and more expensive tariff. To understand the total financial impact of peak shaving, adverse changes in utility tariffs should be recognized prior to engaging this application.

Seamless Demand-Side Management, Economic Dispatch, and Power Export

Similar to peak shaving, a utility may offer incentive programs to consumers who are able to reduce consumption during periods when the utility is short of capacity.

Through demand-side management or economic dispatch programs, utilities, energy marketers, and transmission organizations are able to reduce their total loads through voluntary customer energy curtailment. From a consumer's point of view, these offers provide the potential for total energy savings if the utility incentive exceeds the cost of curtailing grid-supplied power.

Power is curtailed when high demand creates potential constraints or when the spot prices on the wholesale market exceed certain thresholds. 2 During curtailment periods, standby generators can be dispatched to meet the reduction in utility supplied energy. As noted previously, to achieve a seamless transition of power between the utility and a standby generator, a closed transition transfer system is required.

Exporting power to the utility grid requires synchronous operations and is not possible with an open transition transfer system. It has been the objective of many standby generator owners to export power during periods when wholesale spot market prices exceed marginal operating costs. Of all the barriers, technical challenges are the easiest to meet. High barriers to exporting power include regulatory