Why Small Businesses Are Turning to Backup Gensets for Onsite Solutions
Hurricane Matthew, as it rolled into Florida and North Carolina, provided the owners of gas stations, convenience stores, and grocery stores with yet another reminder that even small businesses today need backup power in the form of onsite gensets.
It’s easy to think of sprawling hospital campuses, around-the-clock data centers, and number-crunching financial institutions when picturing businesses that rely on backup gensets to keep their operations running when the public grid fails. But consumers today increasingly expect even small businesses—everything from the local drug store to the gas station—to remain open when the power is out.
And if these business owners fail to live up to those expectations? Their customers won’t forget that when a big storm hit, their retail space was closed.
Electric grids are evolving rapidly, disrupted by regulatory changes, distributed generation, renewable portfolio standards, and evolving technology. Energy storage is uniquely positioned at the heart of all of this change. Download Greensmith Energy's White Paper
to learn more about improving economics and demystifying energy storage systems.
This is the pitch that the manufacturers and distributors have to make to small business owners to remind them of just how important backup gensets are to their businesses, says Todd Howe, manager of global generator products for Doosan Portable Power.
“Small businesses are definitely an important market for gensets,” says Howe. “You really see this in times like we faced with Hurricane Matthew. There are a lot of essential services that fall into that small business category, places like gas stations and convenience stores, places like CVS and Walgreens, pharmacy chains, businesses that would not have historically been a big market for onsite power generation. But because those types of businesses are such essential services, when something is going on, a natural disaster or a power outage, those businesses are important to making sure things keep moving.”
Melanie Tydrich, senior channel manager with Kohler Generators, says that the benefits to business owners who do invest in backup gensets cannot be measured solely in dollars and cents.
Add Distributed Energy Weekly and Energy Storage Solutions to your Newsletter Preferences and keep up with the latest articles stored and distributed power, battery storage solar microgrids, HVAC options, and smart energy systems and LED lighting retrofits.
It’s hard to put a value, after all, on the good word of mouth that customers might spread regarding the gas station that stayed open during a fierce storm versus the one that sat dark.
“There is that peace of mind of knowing that they will stay open for business when others may not and when their customers need them the most,” says Tydrich.
This is a trend that genset manufacturers and distributors say will only strengthen. That means that anyone selling these backup power sources must not forget to target the owners of small businesses to help move their backup gensets.
A Growing Business
The backup generator market overall has continued to grow. The numbers, in fact, are compelling: Research and Markets, an international research firm, says that the global black-start generator market is expected to grow to $1.50 billion by the year 2021.
Research and Markets defines black-start generators as those backup generators whose main purpose is to restart power during a blackout. The firm points to the growing construction of thermal, nuclear, and hydro power plants, along with the growth of manufacturing industries across the globe, as part of the reason for this growth.
Research and Markets reports that diesel-type generators will continue to dominate the genset market. The reasons? These generators boast quick response times and easy fuel sourcing and storage. Research and Markets reports that some of the leading players in the black-start generator market include in the US GE, Caterpillar, and Cummins Inc.
Mordor Intelligence provides equally positive numbers for the entire global genset market, not just those defined as black-start generators. According to the research firm, the global genset market was estimated at $17.82 billion in 2015 and should be worth $25.57 billion by 2021.
Mordor Intelligence says that the industry will see a compound annual growth rate of 6.21% during this forecast period. The firm points to the lack of a reliable public grid infrastructure and the need for emergency backup power solutions as two of the big factors driving the genset market.
This doesn’t mean that the industry doesn’t face challenges. Mordor Intelligence points, for instance, to the sometimes-high installation and operating costs of generators as scaring away some potential customers. The industry also faces a challenge from potential customers who are seeking alternatives to gensets in the form of environmentally-friendly alternatives such as solar power or fuel cells.
The backup power business, though, is growing for an important reason: Outages cost businesses plenty of money.
The Small Business Administration estimates that 75% of businesses that don’t invest time or money in continuity planning will fail within three years of a natural disaster. The study “Weather-Related Power Outages and Electric System Resiliency,” released by the Congressional Research Service in 2012, estimated that power outages from storm-related events cost the US economy between $20 billion and $55 billion every year.
Reliable backup power can offer businesses a competitive advantage.
Small business owners are not, of course, fueling the growth of the genset market as significantly as are bigger users such as oil and gas companies, data centers, healthcare providers, and manufacturers. But they are playing their own role in growing this industry.
“Business owners weren’t thinking of onsite power generation for convenience stores 50 or even 20 years ago,” says Howe. “Now it’s almost becoming a requirement, especially in areas prone to natural disasters.”
A Necessity for More Small Businesses
What’s behind this trend? Howe points to several factors. First, disasters are a country-wide and year-long phenomenon. Business owners at one time focused primarily on specific seasons, such as hurricane season, and the backup power they’d need to survive it. That has changed as business owners across the country realize that it doesn’t take a massive disaster such as a hurricane to knock out the public grid.
“In reality, different things cause problems in different parts of the country all year long,” says Howe. “Snow storms and ice storms cause outages, just like hurricanes do. There is the threat of wildfires, earthquakes, and tornadoes. Every part of the country has its challenges to be mindful of. It is essential, from a disaster management and emergency planning standpoint today, for more business owners to invest in backup gensets, even if their businesses are smaller ones.”
This doesn’t mean that every small business owner needs to invest in backup gensets. And it doesn’t mean that manufacturers and distributors should try to convince every small business owner that these onsite power generators are a necessity.
But those businesses that consumers will seek out in blackouts, such as pharmacies, convenience stores, grocery stores, and gas stations, could realize significant economic benefits from gensets. The ability to remain open and sell gas, groceries, and medication during power outages is an obvious benefit.
Tydrich says that there are other financial benfits to a backup genset too. Small businesses can protect their inventory, she says. When the power is on, convenience stores, gas stations, and grocery stores know that their products won’t be damaged.
“Perishables can spoil quickly during an outage and are expensive to replace,” says Tydrich.
At the same time, when the electricity is flowing, the owners of small businesses can keep their security systems online, Tydrich says. This can help prevent theft and the costly loss of product. Other small businesses might rely on their backup gensets to protect their equipment during long outages. Many businesses operate equipment that might be sensitive to heat and cold. Without a genset powering these facilities, pipes might burst, causing a significant amount of financial damage.
Then there’s the goodwill that being open during emergencies generates among the public. Consumers will remember a store that was open when they needed it. If there’s another outage? These consumers might be more likely to visit that business again.
“One of the bigger challenges for small businesses is to actually come up with a comprehensive emergency management plan,” says Howe. “Large companies invest a tremendous amount of time and energy into these plans. They put a lot of focus on it. Smaller companies don’t always have the resources and skill sets to create a good, comprehensive plan.”
Those small business owners who are struggling with determining their backup power needs can work with power suppliers on a consultant basis, says Howe. Power suppliers can provide consultants who will help business owners decide if investing in a backup genset makes financial sense.
These consultants can also help business owners decide if it makes more sense for them to buy and install a permanent backup genset system that’s always on their property, or if it’s smarter for these owners to enter a rental agreement with a supplier. Under such an agreement, business owners can call their suppliers for portable backup systems whenever a storm or disaster has hit or is on the way without having to pay for a permanent genset. Owners who rent instead of buy also won’t have to worry about the maintenance involved in keeping a backup system running, Howe says.
“The power suppliers can evaluate the businesses and run through potential what-if scenarios,” says Howe. “Do the owners of the business have the need to absolutely ride through the duration of an event? Or can they handle some downtime? That is probably the most important question.”
In some good news for the owners of small businesses, technology in the genset business has continued to evolve. Tydrich says that owners today can choose from a wider variety of sizes for their backup generators. “So you can select a unit that best matches your specific power requirements,” she says.
Sound-reduction technology has improved, too, Tydrich says. This is a result of improvements in both the engines powering these gensets and the enclosures that are built around them. This makes it easier for business owners to locate their gensets—they don’t have to worry as much that the noise from these units will disrupt their employees.
Manufacturers continue to invest their dollars and research into developing a wider variety of backup generators, including portable products that small business owners might rent to cover their buildings during natural disasters.
Generac Mobile Products, for instance, debuted a line of contractor-grade portable generators for the rental market in April 2016. The eight new portable generators are now available for sale through the company.
David Streiff, director of national sales for Generac Mobile Products, says that the demand from the companies that rent these units was high enough to justify the new products.
“We’re seeing increased demand from customers looking to integrate these products into their sales and rental product lines,” says Streiff.
When considering whether a backup genset makes sense for them, small business owners should consider several factors, Tydrich says.
First, and most importantly, owners need to take a long look at the area in which their business operates. Is it prone to outages because of either an unreliable grid or frequent natural disasters? Owners should also look at their businesses, Tydrich says: Can their buildings afford to be closed for a prolonged period of time?
“If the power outage affects the phone, Internet, or cable, can your organization operate without any of them?” asks Tydrich.
And what about your employees? Can they work in your business without heating, venting, air-conditioning, hot water, elevators, or lighting?
Once they decide that they do need backup power, the owners of small businesses have two main choices when it comes to backup gensets. They can buy a backup system that is permanently installed at their business, or they can enter into a rental agreement in which a power-supply company sends them a portable generator when there is a high potential for a power outage, such as when a major storm or natural disaster is forecast to hit.
Both methods come with their pros and cons. Businesses renting portable generators won’t always receive advance warning of a long power outage. They might be out of service for hours, or even days, before their portable units arrive. Businesses that rely on a permanent backup genset always have emergency power available, something that will cover them in case of a surprise outage.
But as Howe says, permanent backup gensets aren’t cheap. Many small business owners can’t afford the high upfront cost of such systems. Then there’s maintenance: Owners who invest in permanent gensets have to make sure that these generators are maintained and will actually fire-up when an outage hits.
“The permanent solution is not for everybody,” says Howe. “It is a fairly significant investment to buy one of these gensets. Then there are the recurring costs involved in keeping the unit maintained and operating at peak performance. Owners need to make sure it is ready to go and operational at the critical points at which they need it. That costs money, too.”
Howe says that Doosan is more focused on providing the portable backup gensets that a growing number of small business owners rent out to cover them in case of emergencies. Under such arrangements, businesses pay a monthly or annual fee to a power rental company, Howe says.
The agreement will spell out when the rental company is required to provide a backup generator to its client and how long the rental company has to get that unit to its customers in case of an outage. This way, both business owners and the rental companies with which they work know what is expected of them.
“For what is a monthly expense, the business gets peace of mind,” says Howe. “They know that a solution is in place in case their business is hit by what could be a long power outage. They know that a capable provider will take care of them.”
Business owners do have to prepare their locations for backup power, though, even if they are only renting gensets, Howe says. This basically means that businesses need to invest in a method that allows them to disconnect utility power and connect to portable generation.
This is a fairly easy and inexpensive process. Howe says that transfer switches allow this switchover to happen seamlessly.
“It’s about as close to a plug-and-play affair as is possible,” he says. “Instead of a tremendous investment in infrastructure, as businesses would have to take on when buying a permanent backup genset, they are now making a far smaller investment. And they have the flexibility of making a monthly or annual payment to a service provider instead of having to worry about maintenance and repairs to a permanent system.”
Investing in backup gensets isn’t inexpensive, even for business owners that go the rental route. So why do it? The makers of this equipment say that there are plenty of reasons.
First, backup power keeps businesses open, and that can lead to plenty of sales when customers have fewer options for their medications, gas, and food. This is a prime selling point that the distributors of gensets can use when promoting these backup engines to small business owners.
Then there is a benefit that is more difficult to quantify but might be even more powerful: Businesses that make an investment that allows them to stay open during heavy storms and widespread power outages, might inspire more loyalty from their customers, Howe says.
“Take a pharmacy chain, for example. A pharmacy is pretty much the one-stop shop for everything you need during an event like that,” says Howe. “You can get medicine, first-aid supplies, batteries, food—everything that you need. Their ability to remain open is pretty critical. A pharmacy chain might have 20 to 30 locations in a metro area. Having those locations open can make a big difference to a community. You hope that people remember that after the emergency passes.”
When hurricanes and natural disasters are in the news, it’s easier for the suppliers of gensets to spread the word about how important backup power is.
The problem? Once the natural disaster passes, the potential customer base for backup gensets tends to forget about the need for backup power generation.
“That is always the challenge,” says Howe. “There is heightened awareness any time there is a big weather event. But that awareness decays pretty quickly. Immediately following Hurricane Matthew, you’ll see a strong increase in activity around disaster planning. That will drive the industry and sales opportunities. But that is fairly short-lived. In six months from now, everything will be back at normal business levels.”
Howe says he saw the same thing with Hurricanes Sandy and Katrina. Business owners ordered backup gensets in greater numbers. But six to nine months after those storms, interest in gensets—both permanent and portable—waned.
“That makes it more challenging for those in the industry who understand the risks and the need to carry that message and make it resonate with customers,” says Howe.
A portable power solution from Doosan
Why don’t more small business owners invest in backup gensets? The manufacturers of this equipment pointed to several reasons.
The general reliability of the public power grid in the US is a big one. Business owners take the power quality in the US for granted, and don’t expect the public grid to fail. This holds true even with the regular discussions in the media about the aging power infrastructure around the country. Many business owners don’t even flinch when major power outages make headlines.
Then there is money. It’s not easy running a profitable small business. The owners of these companies need to spend their dollars wisely. Some might decide that they’d rather suffer the occasional outage than spend the dollars needed to buy a permanent genset or enter into a rental agreement for a portable generator.
“I can sympathize with the small business owner,” says Howe. “It can be hard for them to manage their dollars.”
Maintaining a genset does take time, but it’s far from an onerous task. Howe says that the biggest concern for small business owners who own a permanent genset will be fuel.
Those business owners who are maintaining a permanent backup genset powered by diesel will have to manage their unit’s fuel. Even when backup gensets are sitting in standby mode awaiting the next outage, owners have to make sure that their machines have enough fuel and that there hasn’t been any condensation and water build-up in this fuel. If there has been, the genset might not operate properly when it is needed.
Howe recommends that owners schedule a technician visit at least once a year. These pros can run quick tests of business owners’ gensets to make sure that the backup units are in good condition and that they will work properly when called upon in emergencies.
Finally, Howe recommends that owners start their backup gensets at least once a month, a good way to determine if the unit’s battery is still alive.
“The reality is, the biggest thing that prevents standby generators from providing power in emergencies is dead batteries,” says Howe. “Periodical start-ups and good battery chargers to keep those batteries up and running is probably the most important thing a business owner can do.”
Tydrich says that she expects to see even more small business owners investing in backup gensets. The reason is simple: It gives these business owners an advantage over their competitors.
At the same time, the wider variety of sizes of backup gensets makes these machines more affordable for even smaller companies, Tydrich says.
“It’s a competitive advantage for many businesses,” says Tydrich. “Plus, in today’s plugged-in society, we need power. It’s not a luxury, it’s a necessity.”