In June 2000, a single day of rolling blackouts cost the 200 members of the Silicon Valley Manufacturing Group an estimated $100 million. The high-tech nature of the Silicon Valley companies' business made them unusually vulnerable to power interruptions. But as the economy has come to rely on computers for all aspects of business, it likewise is developing a tremendous craving for quality power (electricity that does not surge or sag) and reliable power (electricity that does not quit).
Digital equipment for Internet host sites, telecommunications hardware and even manufacturing controls require clean, reliable power. And U.S. companies are looking for ways to insulate themselves from the caprices of an aging electrical grid in the throes of piecemeal, state-by-state restructuring and deregulation.
The companies seeking relief from erratic power supply come in all shapes, sizes and product lines. In March, Pokka USA hired Northern Power Systems Inc., Waitsfield, Vt., to design, build and install a $1.9-million, 1-Mw power system for its bottling line in American Canyon, Calif., about 50 miles from San Francisco. Pokka, a contract bottler of American soft drinks and other beverages, has experienced 24 power outages and disruptions in the last two years, including a six-hour power failure in March.
The outages resulted in lost output, product spoilage, supply chain scheduling disruptions and employee safety concerns. "While we want to believe that the energy situation of the past two years was an aberration, we cannot run our business on such hope," says Dan Hancock, Pokka USA's operations vice president.
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The natural-gas-fired reciprocating engine system will protect the bottling lines from power outages and provide 70% of Pokka's electricity and 30% of its hot water needs for pasteurization processes, cutting its energy bill by $800,000 a year. The system is expected to pay for itself in two years.
On June 21, the project was approved to receive a $576,000 incentive rebate from the California Public Utility Commission's Self-Generation Incentive Program, established in 2001 to encourage onsite generation to reduce peak demand and avoid rolling blackouts. This is only the first or second project in the state to receive the incentive, says Patrick Tobin, project manager for Northern Power, a specialist in uninterrupted and alternative power systems. In order to receive it, approvals also were needed from the Bay Area Air Quality District and Pacific Gas and Electric Co.
Telecom also is highly susceptible to power interruption, and DG installations have found a ready reception in that industry. Detail design work is about 60% done for what is expected to be the world's largest fuel-cell installation when it goes on line in September 2004 (ENR 4/8 p. 17). Verizon Communications needs the seven-unit, 1.4-Mw natural-gas-powered cluster to ensure 99.997% reliability at a call-routing center in Garden City, N.Y. It also will serve as a full-scale test bed for improving the economics of the technology.
The fuel cells will operate as part of a 4.4-Mw hybrid system that will also include four gas-fired turbine generators as backup, says Jon Chestnut, Verizon project manager. The usable heat by-product is expected to meet 100% of the heat requirements and 50% of the cooling needs of the 330,000-sq-ft facility.
Following the huge losses by San Jose, Calif.-based Silicon Valley Manufacturing Group members in the June 2000 rolling blackouts, "the amount of interest in distributed generation skyrocketed here," says Justin Bradley, SVMG energy programs director. But interest quickly turned to frustration. The state's disastrous dalliance with deregulation, culminating in the early termination of the experiment, has congealed into "an ugly hybrid," says Bradley. Neither political nor regulatory leaders have acted decisively to move the situation forward, leaving manufacturers uncertain what kind of investment in equipment to meet their power needs will ultimately win state approval, he says.
Although the cost of a power failure can be huge for Silicon Valley's software makers, "energy as a percentage of their product costs is very small," says Jeff Byron, principal of energy consultant Byron Consulting, Los Altos, Calif. As a result, many businesses are reluctant to generate their own power, regarding it as a distraction from their core business. "You don't want to own a fleet of garbage trucks just because it's gotten expensive to pick up your garbage," says Byron.
Cold Storage The dire financial straits of California's two largest electric utilities forced the state to become the central buyer of power on their behalf, and it negotiated costly long-term power purchase agreements. Now to pay for them, the Public Utility Commission is considering whether to levy an "exit tax" on companies that take themselves off the grid with DG, Bradley says. He expects a decision by October. But until the picture is clear, no significant DG will happen. "It's in absolute cold storage right now," he says.
But New York State is aggressively promoting DG as a way to avoid new transmission and distribution construction and to improve power quality and reliability. On June 20, Gov. George E. Pataki (R) announced that the New York State Energy Research and Development Authority was committing $20 million toward the installation of 35 Mw of new electric generation in 45 combined heat and power systems (CHP) in the state.
The announcement was made at a national conference on CHP in New York City. Addressing the conference, Eugene W. Zeltmann, president and COO of the New York Power Authority, professed himself "a genuine enthusiast of distributed generation and combined heat and power projects." NYPA's CHP program focuses on fuel cells and microturbines because of their environmental friendliness, Zeltmann noted. But reciprocating engine technology still commands a substantial share of the DG market .
Noting that Thomas Edison originally envisioned small powerplants sited near their load, Zeltmann calls DG "an idea whose time has come–again."