When the Power Goes Out, Which Fuel Will Keep Lights On—at the Lowest Cost?

June 19, 2019 — Because access to electricity is essential to powering nearly all aspects of our day-to-day lives, the wide-ranging costs of a power outage—in loss of products, revenue, productivity, and customers—can be substantial. As severe weather events become more frequent and as businesses look to protect themselves in the event of an outage, the cost and reliability of backup system configurations have become a central concern across industries.

In their technical report "A Comparison of Fuel Choice for Backup Generators,” National Renewable Energy Laboratory researchers Sean Ericson and Dan Olis examine the costs and benefits, in the context of reliability and cost effectiveness, of natural gas versus diesel-fueled backup power generation. They also compare grid-connected backup systems that enable financial benefits when the grid is functioning, versus backup-only systems.

By modeling installations of both diesel- and natural gas-powered generators in supermarkets in three cities (Houston, Texas; Camden, New Jersey; and Orlando, Florida), the researchers were able to capture outcomes that mirror likely real-life scenarios.

However, the researchers found that natural gas generators are less likely to fail during a power outage. They also discovered that grid-connected generators used for backup and additional services scored higher in the category of reliability.

The results of the study suggest natural gas-fueled generators provide slightly better reliability in situations of prolonged outages where access to natural gas distribution exists. Out of the three test locations, Florida was most prone to prolonged outages and generator failures, and thus exhibited the greatest divide between diesel and natural gas reliability.

Grid-connected backup generators experienced much lower rates of failure than backup-only generators. Backup generators, which are primarily installed for reliability purposes, fared best when operating for short periods of time. Essentially, these types of generators are appropriate wherever a business owner has a financial risk if the power goes out. Researchers found that in regions where they can also be used to reduce electricity costs or generate revenues, a significant portion of their costs can be covered, i.e., the life cycle costs for backup power can be reduced or even become an income source.

Determining relative economic preference of the two fuel sources was tricky. While natural gas generators’ lower fuel costs per kilowatt-hour of energy generated allowed grid-connected natural gas backup to come out slightly ahead in in revenue generation in two scenarios, on a net present value (NPV) basis, the lower capital costs of diesel generators allowed diesel to come out on top.

Ultimately, the research demonstrated that the reliability and economics of backup generation options are to a large extent situationally dependent—and influenced by a broad array of variables. In addition to the duration of outages and the non-emergency-use versus backup-only questions, the research suggested that other factors, such as availability of natural gas connects, space constraints with regard to fuel tanks, and noise and emissions concerns should guide the decision-making process.

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