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The Large Costs of Even the Smallest Power Outages…And Tools to Prevent Them

November 10, 2017

For many businesses, power outages are more than an inconvenience. Sometimes even a momentary flicker can mean big economic losses. Outages are particularly costly for data centers, averaging $740,357 per incident, according to the Ponemon Institute. And any business dependent on cooling or refrigeration—from grocery stores to ice rinks–drip dollars when the ice melts. Power outages sap some $27 billion annually from eight key sectors, according to research firm E Source. These include both batch and continuous manufacturing, financial and digital services, offices, healthcare, government, food and retail. Offices alone contend with annual outage-related costs that add up to more than $7.5 billion.

What Causes Power Outages?

Storms are the biggest culprit. One of the most notorious was Superstorm Sandy in 2012 that knocked out power to more than 8 million electric customers. It took two weeks to restore service to everyone.

Businesses, at least, can plan for storms. In contrast, utility equipment failure comes without warning. And anyone—even the highest reaches of government—are vulnerable. This became apparent in April 2015 when key federal agencies, including the White House and the Department of Energy, lost power because of a substation failure that occurred miles away in southern Maryland.

Even more dramatic, a mere tree branch brushing a wire can bring about catastrophic results. One such event caused an electric failure in 2003 that cascaded across the Midwest, Northeast and into Canada, leaving 50 million without electricity for up to two days. (A four-hour-long outage can cost anywhere between $10,000 to $20,000).

Although most outages are less dramatic their influence is not small. Last year 3,879 outages that lasted over 48 minutes affected nearly 18 million people in the U.S., according to the Eaton Annual Blackout Tracker.

Clearly power outages aren’t always easy to predict or avert. So how can businesses protect themselves?

Protecting Your Business

There are two basic ways to ensure a reliable flow of power: make more or use less.

Emergency generators fall into the ‘make more’ category. Installed on your premises, they offer a conventional, tried-and-true form of backup power. Their value was apparent on the small New Jersey barrier island of Seaside Heights Borough during Superstorm Sandy.

Huricane Damage - Seaside Heights, New Jersey

The storm crushed the island’s electrical infrastructure. But three diesel generators supplied enough electricity to keep the water running and accommodations electrified for rescue workers, so that they could press on and help those in need. More recently, when flood waters from Hurricane Harvey overwhelmed Houston, several convenience stores and gas stations stayed open thanks to on-site, natural gas-fired generators. The stores were able to provide food, water and fuel for the provision-strapped city. Even the National Guard benefited, setting up base at one of the stores.

In the ‘use less’ category is demand response. These programs vary by utility, but generally they provide customers with a financial incentive in return for reducing their power consumption when asked.

How does demand response work? First, it’s important to understand the nature of electric supply. The grid produces power in a just-in-time fashion because it’s difficult and costly to store large amounts of electricity. If it looks like demand could exceed supply at any given time, prices spike. If demand actually exceeds supply, brownouts and blackouts occur. To avoid this situation, grid operators carefully monitor and balance resources. Demand response is one way they do this.

Air conditioner on the wall covered with ivy creeper

Imagine it’s a hot summer day and the grid is already taxed because many air conditioners are running. Then a power plant fails and costs the grid hundreds of megawatts of electricity. To prevent an imbalance in demand and supply, the local utility activates its demand response program, asking customers to reduce their energy use before it’s too late. When customers comply, and demand eases, the grid falls into a more normal supply-demand balance and electricity prices normalize.

The Importance of Understanding Your Energy Usage

Whether you rely on backup generators, participate in demand response, or do both, it’s crucial that you understand how your facility uses power. What pieces of equipment create the most demand? Are they critical to your operation? What equipment can be turned off without consequence? With this information in hand, you can decide where you can reduce energy use during a demand response event or what parts of your facility would benefit most from backup generation. Expert advisory services exist that can provide in-depth analysis of your facility’s energy profile. Some of these services also will help you undertake the steps to participate in a demand response program.

It makes good business sense to avoid power outages.They can be expensive—not just to you but to society as a whole. When you curb your energy use at just the right time, the grid benefits, along with the customers it serves. Power remains available for all, and prices remain in expected ranges. Everyone wins when each of us manages our electric supply intelligently.

NRG Energy | NRG Energy