LP Gas

Watts up?

From the onslaught of successive hurricanes in Florida to the debilitating system overload in California and the spectacular failure of the nation’s supposedly fail-safe power line grid, frequent electrical power outages are plugging Americans into the value of standby generators.

Causes of Power Outages

Spikes in propane generator sales were evident during the buildup to Y2K and after the August 2003 blackout, which impacted more than 50 million Americans. Often referred to as gensets, propane generators of various wattages already are on duty as backup power for commercial and residential accounts.

Northern Power Systems custom designed this propane-fueled, combined heat and power system for Green Mountain Coffee Roasters.

As branch manager of Southeast Propane in Valdosta, Ga., Bobby Dasher is active in his local chamber of commerce. When Y2K approached in 1999, he hooked up with fellow chamber member Cowart Electric and Industrial Contracting Inc. of Valdosta. The two have since worked together fulfilling orders for propane generators – especially this summer when two of the four Florida hurricanes led to widespread blackouts throughout Georgia.

Microturbines are another form of distributed generation that can be used in a micro-grid setup.

“When you get massive power outages, business goes way up,” says Brian Seemann, Cowart’s generator project manager. “We don’t solicit business, and I can’t keep up with the demand.”

His sales are evenly split between residential and commercial applications.

“Someone will buy a nice house on 30 acres out at the end of the [utility’s electrical] line, and they’ll have a lot of power outages,” Seemann says as an example of customers shopping for a reliable power source.

An unintrusive, propane-powered generator offers emergency backup power to keep the lights and refrigerator on, run a sump pump or keep an aquarium aerated.

He also cites a more critical demand.

“Every health department in southeast Georgia has a propane generator for their vaccines,” he says. “The medicine must be kept at the correct temperature to avoid spoiling, and during an outage you’ll lose $80,000 in vaccines, when for $8,000 you can have a propane generator.”

Electrical contractors are far more likely to sell the actual generating equipment than propane dealers, a situation that John Keller, owner of U.S. Carburetion in Summersville, W.Va. would like to see reversed.

Equipment like this Marathon Engine Systems ecopower Micro-CHP replaces a home furnace and water heater while providing prime or standby power.

“A lot of these propane companies are missing the boat if they don’t become more involved,” says Keller. “There’s a lot of load to be sold out there, but the propane companies are a tough nut to crack.”

Although Keller moves thousands of propane conversion kits, he detects a distinct lack of marketing zeal among propane providers.

“It’s such an easy way in for a propane company,” he says.

Marathon Engines Minotaur generator provides primary power for both residential and commercial customers off the power grid.

A prospect interested in a standby generator can be readily convinced that their 250-gallon tank that’s not used for five years (pending a power failure) is more efficient with a propane hot water heater or similar money-saving appliance, he observes.

“Almost to a customer they say, ‘That’s awesome; I never thought of that.'”

Honing propane’s edge

Mike Cocking, sales marketing manager for Marathon Engine Systems, is another who would like to see a stronger presence from propane marketers selling generators. To him, it makes good business sense and good business cents.

A 100-kilowatt genset provides backup power for a supermarket in suburban Chicago.

“Most electrical contractors are wiring guys. They don’t have a commodity to sell like the propane folks. If I were a propane guy I’d try to give [generator customers] the best deal because I’d be selling them a lot of propane,” he says. “Let’s give them razors and they’ll buy blades.”

Contrary to its moniker, U.S. Diesel Engines LLC of Brighton, Colo. does market propane-powered gensets.

“Power generator sales are the ultimate value-add for propane vendors,” says co-owner Tami Robertson.

“This is a category that is one of the most rapidly growing product categories ever,” Robertson adds, comparing its fast growth to the excitement that surrounded central air conditioning as it first hit the consumer marketplace. “You’ll sell more propane if you promote the sales of generators in your area.”

During the Y2K period, the 80 percent of her company’s generator sales were natural gas. Propane garnered 30 percent of sales after last year’s hurricanes, however.

“That’s a surprisingly low number to us due to the fact that natural gas supplies may have been knocked out with the hurricanes and should have been anticipated,” she notes.

Propane marketers can do well for themselves by highlighting the need for backup power and propane’s reliability, she says.

“I attribute the increase in sales [of LPG generators] to consumer education, but there’s still not enough education. The public was aware enough of the need for backup power, but not aware enough to be concerned about the possible lack of natural gas supply,” she says.

“Educating the public is the best way to approach your customers. Run a public service ad in your local media with the theme of education and preparation for grid power failure or natural disasters.”

Robertson reports that 2004 sales were up in traditionally strong and slow markets alike. As expected, propane and natural gas generator sales rose in areas directly hit by wicked weather, such as the Eastern Midwest, Ohio, Michigan, the Florida Gulf Coast and the eastern seaboard, especially North Carolina and Virginia.

She argues that propane is a far more suitable fuel than gasoline for standby power.

“You cannot depend on a gasoline-powered emergency backup generator to run during a real emergency,” she says. “When power outages, ice storms, hurricanes, tornadoes, earthquakes and all other disasters hit, the first commodity to be hoarded is gasoline. Long lines and rationing are a common occurrence during many disasters. Plus, if not used often enough, gasoline will gum up the carburetor.”

Natural gas has a key drawback, as well, as extensive infrastructure damage can disrupt the piping network. And, of course, in some areas natural gas is not even available.

It’s a general consensus that diesel fuel is more cost-effective for large generator applications exceeding 200 kilowatts. But for smaller outputs, propane provides a far better value, especially since stored diesel tends to spoil.

Flicking the switch

Even though the propane industry does not track product consumption in this market niche, industry officials are investing in its future.

“We see a lot of potential growth, not only with standby power but also remote prime power. With the state of our electrical generating system [the frailty of the nation’s power line grid], it’s certainly a natural fit for us,” says Greg Kerr, director of research and development for the Propane Education and Research Council.

Living off the grid is a lifestyle option that’s charging ahead, no longer confined to hippies residing in isolated yurts.

“More and more people are looking to onsite generation as a solution to poles and wire,” says PERC consultant Larry Osgood. Over the last five years, PERC has invested more than $600,000 in distributed energy development projects.

The technology is also proving to be a logical choice to power equipment at remote locations such as telecomm equipment sites.

“With cellular phones and all these towers they’re putting up, it’s getting bigger and bigger,” says Southeast Propane’s Dasher. Already the company has supplied gensets for 150 cell phone towers.

Telecomm demand shows no signs of dropping anytime soon. In 1993 there were 16 million cell phone subscribers and 13,000 antenna sites nationwide. Today there are more than 160 million phones with 163,000 antennas dotting the landscape, according to the Cellular Telecommunications & Internet Association.

Dasher, in conjunction with an electrical contractor, supplies numerous other generator applications in Southeast’s service area. His generator market is evenly split between commercial and residential accounts.

“Sometimes it’s one or two [generator/tank installations for a given client], but those one’s and two’s add up,” Dasher points out.

“We’ve set up a lot of generators and we’ve set up a lot of tanks,” he reports. “It’s like setting up any other tank, but we use flex lines to line it up properly.”

Because distributed energy is environmentally friendly, numerous financial incentives are being proffered through state, federal and utility-based energy saving programs. PERC is available to assist propane marketers in navigating the complex nature of these “green law” initiatives, Osgood notes.

“In the old days, a farmer or homeowner would let a utility chop through the trees [to install a power line] and not give it a second thought,” says Osgood. Today, much more consideration is being given to aesthetic concerns.

Also, the fees to run a new electrical line can cost a property owner some $40,000 per mile, thus pushing distributed energy’s attraction to residential and commercial developers wishing to set up “micro grids” that are more cost effective.

Moving off the grid

A row of smaller propane generators sits poised to be brought online in sync with power demands in commercial applications – a process that is far more efficient than putting out a hefty load of unneeded juice.

“A new trend is a modular power system,” says Derwin Pepper, product manager for Generac Power Systems. “It provides a customer the ability to run on propane.”

Since 1999, Generac has experienced double-digit growth each year serving a $100 million industry split evenly between propane and natural gas.

“The outage of 2003 was a huge spike,” he says, referring also to the goodwill served up to propane’s reputation as people took to their outdoor grills. At the same time, the notion of enjoyable “indoor camping” during power failures lost a lot of flavor as the widespread incident progressed.

“The novelty wears off in a hurry,” says Pepper. “That event may have been the turning point. It flicked the switch for a lot of people. With each event a standby generator gets more exposure, and the winter storms increased demand.”

In June, Generac plans to roll out a new line of commercial generators with lower price points than what the industry offers now. Executives foresee a powerful market within the backup generator realm.

“We still see the arrow pointing upward for years to come,” Pepper predicts.

“It’s definitely an item that an LP gas seller would like to offer,” says Mike Carr, Generac’s director of marketing communications. “If you hook up with an electrical contractor you can do a package deal.”

The company is seeking dealers, and Pepper suggests that propane marketers become familiar with the various equipment offerings and applications that can best serve their customer base.

“It would be a good idea to bring people on staff or educate their workforce about the product lines,” he says.

Marathon Engine Systems has received $280,000 in PERC grants toward propane’s role in this type of equipment, including a unit that heats water while generating electricity. Its 5-horsepower engine is designed to run for 4,000 hours before needing an oil change. Called the ecopower Micro-CHP (for combination heat and power), it replaces the home’s furnace and water heater while providing prime or standby power.

The technology is in place at a remote Minnesota canoe livery and at a Wisconsin truck dealership that uses the hot water to wash the vehicles. The most typical use is likely to come at high-end houses in isolated locations.

The device, which sells well in Europe, is due to hit the U.S. market in June priced at $12,500 with an installation cost of $2,000 to $3,000.

“It’s energy produced at the local level, and you can’t get more local than your own home,” says Cocking.

Grounds for LPG sales

In New England, Northern Power Systems is utilizing the Waukesha brand Enginator as it develops a first-of-its-kind micro grid to serve a dozen homes and several businesses in Vermont’s Mad River Industrial Park. The 350-kilowatt project is expected to debut this summer. Propane will participate in conjunction with solar panels and other alternative energy forms.

“Propane is certainly a clean fuel, and propane is the normal fuel of choice here; we don’t have natural gas in this area,” reports Jonathan Lynch, Northern’s chief technology officer. “We’re using [the Mad River project] to demonstrate the technology.”

The Enginator/Northern concept is already perking interest as it heats water, warms the building in winter and backs up critical equipment at Green Mountain Coffee Roasters in Waterbury, Vt. If roasting is interrupted, it will ruin the beans, plus a machinery shutdown creates a fire hazard. Two engines crank out a combined 375 kilowatts of outage-proof power.

“The first generator carried the company through numerous power outages and power quality incidents, preventing considerable product loss and process downtime,” says Paul Comey, Green Mountain’s executive director and vice president of facilities.

“The second generator is expected to do more of the same for our expanded roaster line.”

Propane’s role in these types of power-generating technologies will bring benefits for years to come, says Osgood.

“The pace of the development has pretty well matched the pace of the market,” he explains. “This has so much potential for the propane industry.”