DG A Safe Bet for Many Customers

Issue 6 and Volume 106.

By Steve Blankinship,
Associate Editor

Consulting engineering firms routinely offer innovative power solutions to utilities and their customers by employing various distributed generation strategies. Among the hundreds of win-win success stories are a Missouri insurance company and a Minnesota casino. Although the two businesses represent opposite ends of the risk management spectrum, neither chooses to gamble on power quality. Both have opted for DG packages that saved them money while costing them practically nothing.

With 1.8 million policies in force, Shelter Insurance Company’s home office in Columbia, Mo. processes $4 million a day in premiums. Loss of power would delay the mailing of renewals and the processing of premiums. The solution involved installing two 1,250 kW Caterpillar gen-sets to provide standby service and also provide spinning reserve for the Columbia Water and Light Department. Designed by Blakely and Associates Consulting Engineers of Chillicothe, Mo., a contract was devised to provide the insurance company with a standby source of power in exchange for providing a site for the utility owned generation. The utility funded nearly all of the $1.1 million project cost.

As a result, Shelter Insurance got full standby power for a fraction of the cost of installing it on its own. The utility justifies the cost by using the capacity as part of its reserve requirement. The avoided cost is sufficient to amortize the units in seven years. As an added benefit the utility now has a price cap on energy that they can get from this facility. The cost of power production from the units depends only on the price of diesel. They can produce 1,250 kWh with 100 gallons of fuel and can be remotely operated from the utility’s dispatch center. Shelter likes the fact that the generators can be used for peak shedding to benefit the community while helping the company.

The generators were placed on the utility side of the meter and did not require any changes to be made to the customer’s electrical equipment. The units can be remotely placed in zero load transfer mode where they start, parallel with the utility, pick up the customer’s entire load, then isolate from the utility. This provides for scheduled outages without interrupting the customer. Transferring back is without interruption, also by way of controls at the units. The units can also be placed in peak shave mode so the utility can use them to supplement their system if the economics are right.

Treasure Island electrical engineer Brad Johnson and construction superintendent Darrell Breuer with the four gen-sets that provide 8 MW of backup power for the casino. Photo courtesy of Energy Alternatives.
Click here to enlarge image

The units were placed on site so as not to be visually conspicuous and are sound attenuated. They have a special design to contain any fluids that might cause an environmental problem. They are also designed to allow for manual operation if the controls should fail. The contract was written for seven years. The electrical design allows for each unit to be moved to a different location and still be fully operational from both local and remote locations.

Treasure Island Resort and Casino in Red Wing, Minnesota, improved electric reliability and lowered monthly expenses by installing 8 MW of on-site generation at no cost to the casino. In addition to a gaming facility, the half million-square-foot facility has a 250-room hotel, four restaurants and two gift shops. It also has electric and water hookups for 95 campers and a marina on the nearby Mississippi River. The casino has five separate electric service feeds with a total peak demand of 3.8 MW. The business never closes.

Prior to the installation last summer of 8 MW of generation consisting of four Caterpillar 3516 diesel engines rated at 2,000 kW each, backup power had been provided by rented gen-sets. Even so, blackouts were unavoidable due to the switching process, because the rented gen-sets could only perform open transition transfers. That meant that whether testing the generators monthly or starting them during a power outage, the lights and gaming machines went dark until the switchover was made. That inconvenience, combined with the $50,000/month gen-set rental bill, sent Treasure Island hunting for an alternative.

Farmington, Minn.-based Energy Alternatives provided a solution that was right on the money. They ran a cost-benefit analysis taking into account load factor, usage history and siting requirements. The study determined that Treasure Island could save the $600,000 it was spending annually on gen-set rental with the installation of new gen-sets they don’t own, don’t rent, don’t maintain, and don’t buy fuel for. In addition, the sets are equipped with Shallbetter switching gear that eliminates blackouts altogether. And to top it off, the casino locked in a low, stable electric rate for the ten-year contract with Energy Alternatives.

What pays for the $2.6 million installation? The casino pays Energy Alternatives the same amount it had agreed to pay local utility Dakota Electric Association, and Energy Alternatives pays the utility the lower electric rate the utility charges customers with interruptible loads. The difference pays for the installation supplied and installed by Energy Alternatives.

“Often a company will pay the upfront costs of installing the gen-sets and then save money through a lower electric rate provided by the utility to customers with backup generation,” says Energy Alternatives vice president Phil Kairis. And even if the savings on electric bills don’t cover equipment installation costs, Kairis says it still lowers the cost of backup power, allowing the company to decide if backup generation is worth the price.