Across the country, people are starting to recognize the vulnerability of our electrical infrastructure — whether it be from capacity issues, natural disasters, or other events. Because of this, government regulations are increasingly pressuring utility companies to decrease demand on their systems. By pushing individual consumers to curtail demand and increase efficiency, utility companies are better able to stabilize their existing distribution networks without costly upgrades.
The end result to the consumer is the potential payback for participating in utility company programs aimed at easing stress on the utility distribution system. These programs vary from utility company to utility company, but the two most prevalent are demand response and peak shaving. Demand response provides compensation to the end-user in return for dropping all, or part of, the user’s electrical load off the grid during periods of high demand, or when the reliability of the grid is threatened. Peak shaving allows customers to minimize penalties and recurring demand charges by proactively monitoring their peak demand and shedding load through an on-site generation system.
Many facilities already have on-site generation for emergency power, which leaves owners wondering how they can leverage that asset to increase reliability of their own electrical service and potentially generate reductions in energy costs. For a user who already owns and maintains on-site generation, aren’t these programs too good to be true? Could be. While government programs are encouraging owners to participate in these programs, other government regulations increase equipment costs to a point where they may not be cost effective to the end-user.
Most diesel emergency generators — the preferred choice of many users due to the reliability of an on-site fuel source — are Tier 2 rated. EPA guidelines limit the annual run-time of a Tier 2 generator in non-emergency applications to 100 hours (there is no limit on run time in emergency applications). If the unit is run for more than 100 hours, it is required to be Tier 4 rated. Until recently, utility companies offered demand response programs which guaranteed less than 100 hours per year of run-time, but current EPA regulations require Tier 4 certification for any application used for financial gain.
The increased cost of a Tier 4 engine is significant, currently 1.5x to 2x the cost of a comparable Tier 2 unit. The added expense is related to compliance with stringent Tier 4 emission restrictions. These units have enhanced emissions cleaning systems which require additional infrastructure within the generator and housing to support these systems. This Tier 4 cost premium needs to be weighed against the potential financial benefit of participating in a utility company program.