How to Think About the Value of Resilience

While many companies looking to add on-site energy systems are initially motivated by a desire to save costs or reduce emissions, when considering different options it’s critical to ask – and answer – this question: how much does it cost your business when the grid goes down? Put another way, what is the value of having a resilient electricity supply that can keep your operations powered during a prolonged blackout?

Resilience is even more top of mind than usual this summer. Power grids were under major strain this month as half the U.S. population air conditioned their way through excessive heat warnings, and Hurricane Beryl kicked off a potentially historic hurricane season by knocking out power for over 2 million Texans. Like extreme weather, the risk of extended power outages isn’t easy to forecast precisely, but that doesn’t mean you can afford to ignore it. For many businesses on the east coast, including the future founding team of Scale, Hurricane Sandy was a hugely impactful event that changed how we thought about resilience and the value of microgrids. 

Determining how your business values resilience is a tough question, with answers depending on how you earn revenues, how you use energy, and the likelihood of extended grid outages in your area. There are a growing number of companies who have developed a hard-earned understanding of their value of resilience based on their own costly power outage experiences, but too many companies choose to avoid the question – opting instead to simply buy a diesel generator if they’re worried about resilience, or just rolling the dice without a resilience strategy.  

The truth is, the value of resilience is hard to nail down, but it is most certainly real, and you can save money by adopting state-of-the-art solutions – and potentially lose a lot if you don’t. We can’t tell you what your value of resilience is, but we can provide some facts to help you start thinking about it.

The Value is Not Zero – And It Might Be More Than You Think. 

Losing power means losing revenues, plain and simple. At a minimum, losing your internet, phones, and computer systems can mean hours of missed sales, lost work, or vanished data. For grocery stores, loss of refrigeration can mean spoiled produce, and for food processors the loss of temperature control and pressurization in clean rooms can require entire batches to be thrown out due to FDA rules. And for precise manufacturing processes, such as those required for injection-molded plastics or chemicals, the loss of power in the middle of a production run can mean not only losing product but losing hours of time to clean out sensitive equipment. 

To get a big picture sense of what power outages cost the economy, the Lawrence Berkeley National Laboratory has developed a widely-used “Interruption Cost Estimate” calculator that estimates the cost of power outages for homes and businesses in every state. Because of differences in economic productivity as well as grid reliability from state to state, values for average large businesses can range from $10 to over $100 per lost kilowatt-hour. 

While these statewide averages are necessarily imprecise, they offer a ballpark range to start thinking about your own value of resilience. It also illustrates the data you’ll need for a relatively straightforward calculation: how many kilowatt-hours do you use to generate a given amount of revenues for your company? 

It’s Going Up – Because Outages Are Becoming More Common.

Businesses also face growing risks to their energy resilience. According to the latest data compiled by the Energy Information Administration, the average US electricity customer experienced about five and a half hours of power outages in 2022 – nearly a 50% increase from a decade ago. The frequency of outages and the average duration of each outage have also increased significantly, with an average outage lasting nearly four hours and the average customer experiencing more than one outage every year. You can look up reliability metrics for your state and region here. 

Due to accelerating climate change, the risk of extended outages from severe storms and wildfires is only going up; a recent study by Climate Central found that 80% of power outages since 2000 were caused by severe weather events, and the number of these weather-related outages has doubled over the past decade. And for many coastal areas of the country, new research from the Electric Power Research Institute and the Pacific Northwest National Laboratory projects that the number of power outages due to hurricanes could increase by another 50% or more in the future. 

Diesel Generators Aren’t The Most Economic Solution

Diesel generators offer a simple solution to backup power worries, but “simple” won’t save you money. These generators cost roughly $400 to $700 per kilowatt to install, $3 to $4 per gallon to fuel, and, while you’ll be glad to have them on the handful of days a year when you need them, they won’t do anything for you the rest of the year. In that sense, a diesel generator is like an insurance policy – it’s just an additional cost of doing business. It’s a familiar model that’s traditionally been the choice of industries with a high value of resilience like data centers, food processors, or plastics manufacturers, but today businesses have a better option.

Microgrids that use state-of-the-art on-site technology may be less “simple,” but third-party service providers can optimize the use of solar and battery storage along with dispatchable generation to deliver superior resilience when you need it – and save you money when you don’t. For example, dynamic energy management enabled by advanced controls can reduce demand charges by using the microgrid’s battery during peak load hours, while also taking advantage of opportunities for additional savings from time-of-use rate arbitrage or revenues from participation in demand response programs. 

It’s also important to note that microgrids remain an appealing option even if you’ve already invested in a diesel generator. By integrating your generator into a microgrid with battery storage and solar, you can improve your bottom line with day-to-day cost savings while creating a more robust and resilient system that optimizes the use of your generators, allowing them to run less often and more efficiently during an extended outage – and potentially avoid having to use them at all for shorter outages. Our recent microgrid project for the Santa Margarita Water District does just that. 

As you might expect, conversations about the value of resilience get a lot easier when the resilience can pay for itself. Even if you don’t know your exact value of resilience, the ability to turn an added cost into an opportunity for cost savings is a game-changer. Imagine if your insurance company offered to pay you, instead of the other way around. 

Today’s Value Proposition For Microgrid Resilience

Scale’s founding team emerged from ENER-G Rudox, a long-time provider of resilient, off-grid energy solutions for mission critical business operations and high-profile events such as the 1980 Lake Placid Winter Olympics. In that era, resilient power was viewed exclusively as an added cost. 

Today, advances in solar, battery, and controller technologies mean that microgrids don't just provide (hugely valuable) resilience during blackouts - they can provide cost savings every single day with optimized on-site distributed energy resources. And the $0 down financing offered by companies like Scale enables companies to avoid capital budget impacts and start saving from day one.  “Resilience when you need it, cost savings when you don’t” is hard to beat as a value proposition, and it represents a transformative change for our industry. 

So, if you’re considering adding on-site energy systems, you owe it to your business to consider the full range of benefits that state-of-the-art microgrid solutions can offer, including cost savings and sustainability as well as resilience. If you don’t know what resilience is worth to your business, we can work with you to help you develop a more exact estimate. But regardless of how you calculate it, you know it’s not zero – and if you assume it is, or just avoid the question, you’re leaving money, and maybe a lot of money, on the table.