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BLOG > June 2020 > Power Outages Cost US Economy Billions Annually

Power Outages Cost US Economy Billions Annually

Generator Source provides the world a solution by offering consistent, reliable, backup power with new or used industrial generators.

Power Outages & Used Diesel Generators

When grid power fails, most business operations grind to a hault within minutes. The trend towards industrizlization and computerization increases business performance but makes businesses increasing vulnerable to power outages. A recent article by The Engergy Institutate at HASS highlights the varying impacts of electricity outages by industry and dynamics within the new and used backup generator markets.Depositphotos_125304806_xl-2015-(1).jpg

Initial survey results from California suggest long utility-forced power are leading residents and businesses to buy home backup generators rather than installing rooftop solar solutions. Californians are taking preventative measures because of the economic and lifestlye interruptions associated with long blackouts. Using techniques developedd by Laurence Berkeley National Laboratory, experts estimate that 2019 California electrical outages may have cost the economy more than $2 billion.

While some researchers point to the challenge in identifying the true economic cost of power outages the practical impact is obvious - lights off, machines idled, and computers turned off. Experts genrealy use two different methods for valuing the economic cost of an outage: the value of the lost load method and the lost revenue method. The lost load method is best for identifying the amount of electricity (and therefore fees) that the local utility was unable to deliver due to the ouage. The other method, the lost revenue, is directly appliable to a specific business and is designed to measure the cost of being unable to do business or having degreded capacity.

Generator Source understands a power outage is a major problem and we are here to help by providing reliable, consistent backup power to the world. Generator Source has been a leading provider of new and used industrial grade diesel generators for businesses across the globe for nearly 40 years.



Depositphotos_2284180_xl-2015.jpgValue of lost load method: The analysis starts with estimating the quantity of kilowatt hours that customers wanted to use but couldn't due to the outage. The second step is to attribute an economic value to that lost consumption. The US government and electric utilities use this model to understand the economic impact of an outage and to make investment decisions on grid reliability improvements.

A standard rule of thumb for the value of lost load is $10,000 per megawatt-hour (MWh). A typical medium-sized business uses 15,000 - 25,000 kilowatt-hours (kWH) every year. The business or utility can divide those figures by 2080 (52 weeks * 40 hours per week) to get an hourly power consumption. If a medium size business uses 25,000 kWH per year that would equate to 12 kW per hour or a $1,900 loss to the utility for a 16 business hour outage (2 days).

Lost revenue method: For a business owner, impact is felt in the inability (or under-ability) to serve customers and therefore generator revenue. To calculate lost revenue, the business must average it's daily or hourly revenue generation to understand the impact of an hour of downtime. Owners in the manufacturing space must also incorporate additional startup time or ruined work-in-progress inventory due to the outage. To continue the above example, if the busienss generates $10,000 per hour (on avereage), the 16 business hour outage will result in $160,000 of lost revenue. This metric can help business owners and risk managers understand the value of investing in standby industrial diesel generators through Generator Source.

The lost revenue model will be most applicable to an individual business or facility while the lost load method can help utilities understand the impact of outages. When a company analyzes their power outage exposure, the lost revenue will typically be 60-100x the loast load figure.
A separate study from Bloom Energy found that “one in four companies experience a power outage at least once a month...estimated that outages are costing the U.S. economy $150 billion annually.” Further, the US Deparment of Energy study cited by Bloom identified 8 key sectors most affected by outages, including office buildings, health care, manufacturing, and the digital economy (through data centers). Since power outages are so common across businesses it would be wise to invest in a reliable used backup industrial generator from your team at Generator Source!

                                                                     Power Outage Impacts By Sector

Every business model and economic sector is uniquely vulnerable to power outages. Businesses or organizations within each sector must evaluate the risk to their operations and cost to implement reliability improvements (such as industrial generators or UPS).

Data Center

A data center is a location to store and manage data for a wide variety of companies. When a data center’s grid electricity goes down, the many businesses whom rely on  access (e.g. any tech company) to operate their business will suffer. With the advent of cloud computing and artificial intelligence more and more businesses are increadingly leveraging data centers to run their operations. However, the frequency of power outages at data centers continue to increase with more frequent grid outages.

A Data Center Survey found that 31% of the respondents suffered a downtime in 2018 which is a staggering 25% year-over-year increase. That same survey found over the course of the past 3 years almost half of all respondents suffered a downtime. 

The cost of a U.S. data center outage is around $8,851 per minute, which is alarming. If a data center is down for 48 hours that could result in costs exceeding $24 million! These staggering impacts drive data centers to invest in ultra-high quality industrial generators and backup power systems. Additionally, regular generator maintenance and exercises are key parts of running a top-tier data center.

Manufacturing is the lifeblood of the modern economy, producing everytthing from toothbrushes to automobiles. When a power outage occurs, manufacturing business owners fear equipment damage, electrical surges, and inventory loss. An entire supply chain can come grinding to a halt in the event of a local or regional power outage. For these reasons it’s critical to invest in a used diesel generators - the livelihood of your business depends on it. 

A recent survey discovered over a quarter of manufacturing businesses have experienced a power outage a least once a month in 2017, with 58% reporting the power outage exceed 1 hour. For large, established manufacturers a single day of power outage would cost them $5 million. 

When you invest in a used industrial generator for $400,000 that investment will pay for itself within the first hour of a power outage! 

A recent study suggest one in three retailers have lost power at least once a month throughout 2017. Over 40% of those power outages last longer than 1 hour. The disruption to the business and their customers is a big red flag especially when e-commerce is eating away at retail revenue, the importance of investing in reliable, backup power with a new or used industrial generator is critical. 

Larger supermarkets can suffer from hundreds of thousands of perishable food inventory go to waste in a power outage. A supermarket in Pennsylvania was without power for over 24 hours and the owner estimated the outage costed $30,000 in lost merchandise. For larger retailers a power outage can climb even higher to the tun of $5 million in cost.

A critical industry to all people’s wellbeing. Hospitals are required to have backup diesel generators installed at their facility. When Hurricane Irma hit the United States it knocked out the power grid to more than 200 Florida hospitals and nursing homes. 

If you are in the healthcare field, give one of our sales reps a call to discuss your next diesel generator investment for your business.

College campuses are complex operations with many different departments requiring unique energy demands.  As more buildings are developed, the electrical connections become interwoven and complex, creating a high risk when the grid goes down. If campuses failed to invest in a new or used diesel generator, the effects will hurt their brand and long term profitability. 

An outage in 2018 at Stanford University resulted in the power being turn off for one third of the entire campus buildings, leading to cancelled classes, lost lab research and additional safety concerns regarding the ventilation systems.  

Every industry on the planet will benefit from investing in their own microgrid to keep their businesses running in the event of an outages. Please contact Generator Source for all your new and used diesel generator needs!

Power outages.
Energy Insitute at HAAS.


Kyle Smith | 6/2/2020 11:49:39 AM | 0 comments
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