Rentals – more than emergency power21 August 2000
Electric utilities worldwide are adopting rental power and temperature control equipment as strategic tools during a time of market transition John E. Swanson, Caterpillar Inc, Illinois, USA
An investor-owned electric utility in the Midwestern United States needed a quick boost in peaking capacity to cope with possible summer heat waves at a time when regional power supplies were uncertain. A state-owned utility serving an Indonesian island needed emergency power after a ship's anchor damaged the main undersea electric cable, causing an extensive blackout that affected homes, businesses and critical public services.
In each case, the utility solved its problem quickly and economically by contracting with a local supplier for a turnkey rental power system. Similar solutions are becoming common worldwide as utilities deal with a rapidly escalating demand for power.
Increasingly, utilities are adding rental equipment to their list of tools for meeting a range of business challenges. The flexibility of rental is especially valuable where deregulation and privatisation are opening power markets to competition. Rental lets companies maintain quality service to customers while delaying large investments in permanent generating capacity.
That issue aside, rental power and temperature-control equipment can help enhance return on assets, reduce operating costs, increase workplace productivity, and maximise power production.
The utility industry is one of many that has come to recognise rentals not just as emergency stopgaps but as strategic assets. That recognition is a key reason the rental industry has grown in recent years at an annual rate of 20 per cent or more.
Looking at the year 2000 (Y2K) date-change phenomenon helps illustrate the strength of the market. The engine division of Caterpillar Inc, a major manufacturer of rental generator sets, saw a substantial rise in production in 1999 as customers ordered standby power capacity for the turn of the millennium. After Y2K, industry observers expected a downturn in production as standby units were returned to rental fleets. Instead, growth has continued almost unabated well into 2000, a year that will see Caterpillar and its global dealer organisation expand their rental generator capacity by another 20 per cent. Fast growth is likely to continue as companies steadily realise the advantages of rental for both short-term and seasonal requirements.
In the simplest sense, rental enables a company to supply nearly unlimited power and create a specified environmental condition almost anywhere, with fast setup and tear-down, simple logistics and engineering, and little or no capital investment. Best of all, the company needs no special expertise to undertake rental projects.
A qualified rental supplier can start with an understanding of the customer's desired outcome and quickly deliver a complete, packaged solution, from design through operation, fuelling, maintenance and service. The customer, meanwhile, can stay focused on its own business objectives.
Reasons to rent
Rental provides a wide range of financial, operational and productivity benefits. In the simplest sense, it delivers the benefits of equipment without the long term expense and commitment of ownership. Installations can be funded as straight operating expenses, without capital budget approval and complex depreciation. Furthermore, the lower level of capital equipment ownership means a higher return on assets.
Operationally, rental provides flexibility to deal with seasonal needs and unplanned requirements, including emergencies. One emerging application with broad possibilities is the use of mobile chillers and air conditioners to manage seasonal heat loads and maintain process performance and quality. For example, mobile liquid chillers can supplement installed cooling capacity, keeping a process within the temperature window required to sustain efficiency or maximise the output of a premium-grade and high-margin product.
In the utility industry, mobile air conditioners can provide dense-air injection, enabling gas turbines to maintain full rated load even during hot weather. Mobile cooling equipment can supplement nuclear power plants’ cooling systems for radioactive materials. Rentals also supply comfort cooling and power for essential equipment during plant maintenance shutdowns and other special projects.
Rentals and power reliability
The main application for rentals in the utility industry is to supplement power supplies. Power reliability has been a persistent concern for several years, particularly in the USA. In industrialised countries, economies expanded much faster than projected. Growth in power demand has thus outstripped growth in supply, significantly reducing reserve margins.
Meanwhile, deregulation has begun to break down utility monopolies and open power markets to price-driven competition. Utilities grew cautious about investing in new power plants and transmission lines. Transfers of electricity between utilities became more financially and logistically complex. The net result is the threat of regional power shortages, especially during summer peak-demand periods.
In developing nations, demand for power is rising dramatically as businesses expand, populations increase and people demand higher standards of living. At the same time, many countries are moving to privatise state-owned utilities.
In the long run, private companies promise greater investment capital and higher operating efficiencies. However, privatisation is often politically sensitive. During deliberations, state-owned utilities hesitate to invest in infrastructure and power supply problems can intensify.
In industrialised and developing nations alike, expanding the power infrastructure will take time and enormous investments. In this environment, rental power systems become essential tools. The global availability of large, mobile generators enables fast deployment of capacity for a wide range of uses. Common applications include:
Seasonal peaking. Rentals provide fast-track power for summer or winter peak loads, delaying investment in permanent peaking stations that stand idle for as much as nine months of the year.
Commonwealth Edison, the investor-owned utility serving the City of Chicago and surroundings, installed rental peaking systems to protect reliability for its 3.4 million customers in summers from 1998 to 2000. Growth in demand had thinned power reserves, and unscheduled outages at nuclear and coal-fired power plants in the region increased the concern.
In 1998, ComEd installed 50 sound-attenuated 1750 kWe rental power modules to supply 80 MWe of peaking capacity under a turnkey contract. In 1999, the utility boosted the rental contract to 96 units supplying 154MWe of capacity, enough for 385 000 households. In 2000, the contract expanded to 300 MWe.
Each year, ComEd charged the rental dealer with delivering the power modules to strategic substations in the Chicago suburbs, then handle setup, commissioning, operation, monitoring and teardown. Each unit was connected to a 2500 kVA transformer, paralleled with the grid and tied into the utility distribution system.
Interim power. Rentals can provide a temporary boost in base-load or peaking capacity while permanent generating plants are being constructed. In 1999, rentals helped CMS Energy maintain power supplies on Margarita Island, Venezuela, with its population of 90 000 permanent residents some 300 000 tourists.
CMS contracted with a supplier in Colombia for 34 mobile power modules totalling 44 MWe of capacity to meet peak demand during the tourist season and to supplement supplies during upgrades to the island's power system. The supply situation became critical when a submarine power cable from the mainland failed.
The rental dealer needed less than 30 days to mobilise the 34 generating units. The equipment was brought on line in two phases during July and August 1999 and operated continuously at full load through to March 2000. The added capacity helped maintain reliability while CMS upgraded seven diesel-fuelled generators on the island and planned permanent capacity additions.
Regional service. Temporary power can provide strategic capacity additions to areas where power supplies face unusual stresses. Eletronorte, one of Brazil's largest public utilities, rented mobile power to supply three cities where power supplies were threatened after a drought lowered water levels in hydroelectric power reservoirs.
During 1998 and 1999, the utility entered several turnkey contracts with a local dealer, supplying a total of 56 mobile power modules with 80 MWe capacity to serve the cities of Boa Vista, Rio Branco and Puerto Velho, all located in the Amazon region. All the rental units operated continuously in parallel with the grid. The contracts included supply of all power modules, cable, transformers, fuel treatment, fuel supply piping, installation, and availability guarantees.
Emergency power. Madura Island, Indonesia, suffered an extensive power blackout after the anchor of a cargo vessel damaged a submarine cable in Madura Strait. The state-owned utility, PLN Distribution, East Java, contracted for rental power to restore service until the cable was repaired.
Working with a local dealer, the utility rented eleven mobile generator sets totalling 10 MWe of capacity, plus all necessary transformers, control panels, switchgear, fuel, cable and equipment shelters. The units were installed and commissioned at Sumenep City within 12 days, slightly ahead of schedule. The equipment provided continuous power for 3.5 months, during which the dealer handled comprehensive maintenance and operation.
Utility observers expect power supply concerns to persist for years as demand for power expands and electric power markets evolve. Rental equipment, rental power and temperature control are experiencing substantial growth in the global utility industry and in other sectors. That growth will continue as companies come to appreciate the many and diverse bottom-line benefits of short-term solutions.