Bill Hoffman is busier than ever these days.
The entrepreneur customizes and sells power generators to businesses and homeowners. And as the power crunch in California shows no signs of ending soon, many Orange County companies are looking to generators as a quick fix.
“Normally we have more business from out of state,” said Hoffman, owner of House of Generators in Huntington Beach. “The past month or so we have been getting a lot more calls from companies in California.”
But setting up a generator isn’t as easy a way out of the power crunch as it might sound.
Companies that have large power needs may have to get city zoning approval to add generators,and that can take months, even years. And, depending on the generator, companies also may have to get an OK from the South Coast Air Quality Management District.
“It is not like going to a hardware store and buying a generator,” Hoffman said.
Some OC companies desperate for a power fix already have looked into generators and ruled them out.
“Even if we decide to set up our own power generator, it would take almost two years before it’s up and running,” said a spokeswoman at an OC chip company who asked not to be named.
Many big OC companies, from drug makers to computer companies, already have diesel generators. They’ve been firing them up in recent weeks in a bid to help conserve electricity. But company officials,many of whom are reluctant to talk officially about power issues,say generators have drawbacks.
For one, fuel needs to be stored on site for diesel units, they say. Air quality rules limit how often they can run. And they’re noisy.
“It sounds like a diesel truck going by,” said one executive.
Still, large factories are inquiring about generators, according to Hoffman. He said he has a client looking at a one-megawatt generator,enough to power about 1,000 homes.
“We are seeing every kind of inquiry coming our way,” said Rick Cole, sales manager at Industry-based Valley Detroit Diesel Allison, which has a Costa Mesa office. The company is a distributor of MicroTurbine generators from Chatsworth-based Capstone Turbine Co.
“People are asking us to put a MicroTurbine in their condominiums,” he said.
Valley Detroit has even installed a MicroTurbine at its headquarters, Cole said. But the alternative power comes at a cost, he said.
“Right now it has not proved to be cost efficient,” he said.
Valley Detroit installed the MicroTurbine when the cost of natural gas was a third of its current price, he said.
“Our cost has gone up to 18 cents to 19 cents a kilowatt hour,” he said. “Even if gas price drops by half, we will be at grid cost.”
Capstone Micro-Turbines produce electricity at about 3.5 cents a kilowatt hour. That includes only the fixed costs such as capital and depreciation. Add to that the price of natural gas, and the cost of generating power could exceed 15 cents a kilowatt hour.
Under normal circumstances, diesel generators also are more expensive than power from utility companies. And, for air quality reasons, businesses that have diesel generators as back-up units are restricted in their use.
“Emergency back-up generators can operate for no more than 200 hours in a year,” said Sam Atwood, a spokesman for the South Coast Air Quality Management District in Diamond Bar.
The restrictions mean diesel generators can’t be put to optimum use. And lower utilization means higher fixed costs per unit of power generated.
Atwood said that besides smog, diesel generators emit diesel soot, which the state believes to be cancer-causing.
Capstone officials, whose generators don’t require city or regulatory approval, say their phone is ringing off the hook.
“The activity level has never been higher,” said Jeff Watts, the company’s chief financial officer. “People are working harder than ever before at Capstone” to cope with demand, he said. “I don’t get time to put my kids to bed anymore.”
For many companies, the higher cost of generator power is worth it if it keeps them running during a blackout or an interruptible period. Customers who have signed interruptible power agreements with Southern California Edison get a reduction in rates in exchange for being the first to have power reduced or cut during shortages,a daily occurrence lately. Interruptible customers that don’t curtail usage pay massive fines ranging from $7.20 to $9.30 per kilowatt hour,well above the cost of generator power.
“We are getting lots of inquiries from (interruptible) customers,” said Valley Detroit’s Cole. “A lot of them are talking about getting rid of Edison altogether and putting in MicroTurbines.”
Most companies are looking at power generators as a short-term solution to a long-term problem, Hoffman said.
“Last year, there were mainly individuals buying small generators,” he said. “There were very few industrials that were looking for generators.”
That’s changed, he said, with inquiries from industrial customers in California up almost 100% this year.
Reliable power is essential for OC technology companies, including chip makers and data center operators, he noted.
“Power is very critical for running servers and computers,” Hoffman said. n
