The power generation rental market is one of the equipment rental industry’s fastest growing niches.
Witness the fast growth of power generation specialty segments of the leading national rental companies, such as United Rentals, Sunbelt Rentals and Hertz Equipment Rental Corp., as well as the power divisions of Caterpillar dealerships. Read some of the studies that predict the worldwide growth of the power generation market to be well into the double digits throughout this decade. Consider the aging electrical grid in much of the United States at a time when exploding technology is creating constant demand for more power for computers, data centers, mobile phones and technology that is being invented faster than people can keep up with it. Consider the increasing unpredictability of weather patterns, the escalating intensity of storms, and expanding exploration and extraction of resources in remote regions. And consider the urgent needs of developing countries that need power for their economies to grow and their people to be fed and clothed and housed. It all adds up to power generation and rental is, increasingly, the preferred and most practical way to get it.
“One reason for the growth, speaking about up here in the New England/New York area, is utilities are dealing with aging infrastructure, and the electrical loads continue to get higher with the increase in computers and data centers, and the infrastructure is definitely aging,” says Brian Kerins, president of ElecComm Power Services, Hyde Park, Mass. “Another big reason is we are having more storms. In the last five years, bigger snowstorms than I’ve ever seen in my life, with tornadoes and three hurricanes.
And the Department of Public Utilities does not tolerate outages anymore; it has levied millions of dollars in fines on utilities for their performance. So a lot of the utilities now are using temporary power as a solution to keep reliability scores [at acceptable levels.] So between electrical loads increasing, the aging infrastructure, more storms, and more awareness of the risks of losing power, people realize the costs associated with losing power.”
“The boom in shale gas drilling throughout the world is also a factor,” says Marcello LoCicero, former director for Latin America and rental at Worldwide Power Products, based in Houston. “These locations are typically remote and do not have access to utilities so the use of power generation equipment is welcome there.”
Increasing demand for electricity will drive the continuing growth of the global power rental market, with revenue expected to increase from $4 billion in 2012 to $8.5 billion in 2020, according to research and consulting firm GlobalData. Although some in the industry consider GlobalData’s predictions inflated, the consensus is that strong growth is likely.
“The power generating infrastructure across the world is aging fast,” power generation pacesetter Aggreko wrote in its annual report. “1,000 GW of capacity will be over 40 years old by 2015 and demand continues to outstrip supply.” Aggreko expects the market to grow at 10 to 15 percent annually. Aggreko’s report says factors that will influence demand include the rate at which capacity is added, the rate of breakdown of power plants, the rate of economic growth, increasing intolerance of power outages and the affordability of temporary power. The global shortfall in power supply is increasing as demand continues to grow at a faster rate than supply. The demand for electricity is growing faster than GDP in developing countries.
Whatever the size of the market, rental companies can’t benefit from it without proper performance, and the key is in the preparation. Whether it’s a disaster, a special event, the powering of a construction site, an industrial shutdown or an oil-and-gas exploration site, the preparatory steps are similar.
Every day customers call a rental center and ask for a 19-foot scissor lift, a skid-steer loader, a pressure washer. Often these items are signed for and delivered without a lot of questions asked.
Customers call for generators too. But more often than not, customers call because the power went out on a building, or the power might go out because a storm is coming. Or they need to power a factory, or a rock concert. Or a hospital might require standby power to keep running. And while complex applications are common with many equipment categories, few require as much in-depth preparation and, often, engineering as power generation. “Don’t call on Friday night and say ‘We’re shutting the switch off tomorrow, can you get me fixed up?’ says Bob Kendall, CEO of Seattle-based Star Rentals “It’s much more sophisticated than that, planning is everything.”
Phil Wessels, managing director CAT Entertainment Services and vice president Ring Power Corp., says a good contingency plan is key. “We want our customers to understand the opportunity cost, the lost revenue for their business if they don’t have power to continue operations,” Wessels says. “The first step is for them to determine their facility’s electrical load. Before customers rent temporary power, they need to know how much they need. If it’s full power to keep an entire facility operating as it would be with utility-supplied power, they need to determine their aggregate load. If it’s priority power for critical functions in a facility, then they need to prioritize those individual loads such as lighting, the HVAC systems, computers, and process equipment. Prioritizing will help decide which loads require power immediately during emergencies.”
There are a lot of questions that need to be worked out in advance.
“Who will provide transportation to the site, logistics are critical,” Wesson continues. “Where should the equipment be placed on site, how much cable, what size or quantities are needed, how many amps are they going to pull from the generator set? How often and where will the fueling and refueling occur and where will it be stored?”
“In places that are most affected by storms, many customers have hurricane plans, not just for power but for everything that they do,” says Asterios Satrazemis, president, Aggreko Americas. “Part of our job over the years has been to spend time with the customers and be part of that plan. So they’re not caught in a situation where they haven’t thought ahead for the emergency and they’re scrambling at the time of the emergency for products that they need. For many customers that contingency planning is part of the service that you try to provide. Whether it’s an industrial plant, a data center, you name it, one of the things we try to do is work with them on being part of their contingency plans.” Companies that specialize in disaster situations such as Aggreko and United Rentals have sophisticated weather-tracking systems and swing into action well in advance of a potential hurricane landfall.
“We have a team that tracks potential events, mainly Atlantic storms as they make their way towards the U.S.,” says David Scott, region vice president for Power HVAC for United Rentals with responsibility for North America. “We usually look at the forecast two to three weeks ahead. If there’s a possibility of landfall or strengthening of the storm we begin to make preparations and that consists of a couple of different things. Internally, especially if we have a projected landfall, we’ll prepare the branches in the affected areas as best we can, making sure our employees have suitable housing and resources to stay safe as the storm approaches. We’ll send staff to the area and rent hotel rooms, start moving fleet just outside the storm’s path so we can easily access it. So it’s basically mobilization of personnel and fleet resources, outside the affected area. You really can’t move it inside the area but the goal is to get it as close as possible where you can access it readily. A lot of the activity is before anything makes landfall.”
Satrazemis says it’s important to keep the long-term view in mind. “Are customers just looking at their power needs or are they looking at their broader disaster planning?” he says. “And what is mission critical that they need to keep running, what do they have, what do they want dispatched before a storm? For customers that really have mission-critical operations that can’t stop even if a storm comes, they shouldn’t be waiting for the eye of the storm to be over their plant. We work with them to have it down to a science where they know X number of hours before the eye is X-radius of their location that we’re going to dispatch these types of assets.”
A backup power plan
Although hurricanes are by nature dramatic events, they can, at least, be anticipated. However, unexpected storms, tornados, earthquakes or blackouts that occur with less anticipation are, therefore, even more potentially dangerous for businesses. As power-generation providers point out, every building and business should have a backup power plan and know exactly what they need to do should a loss of power occur.
“We offer an emergency power plan, where for smaller customers we send out a form, and they answer nine questions,” says Kerins. “For larger customers, such as supermarkets, data centers, universities, we perform audits where we go out to the site. We take pictures, we find out where connection points are, the voltages, the key contacts, the vendors. We give them a folder when we’re done that has all that information in it. We performed over 300 of these this year alone. It’s key to not only have the plan, but to make sure you have the vendors in place, the fuel being a key one. Once you get a generator there you want to make sure you have a reliable vendor that will fuel the generator. We also sell what we call docking stations that mount to the side of a building, and when a generator rolls up, you just plug it into the docking station.” Kohler distributor Kinsley Power Systems, East Granby, Conn., sends current and prospective customers an Emergency Power Planning Worksheet. “It allows the customer to work in conjunction with an electrical contractor to basically plan out what they need,” says Andrea Stone, director of rental operations. “We can help with filling this form out. It goes through the size generator that they need, the electrical service information that they have, where are we going to place the generator, who is their electrical contractor, and emergency contacts, so if a call does come in, we know exactly what they need and where they need it.”
“We want to identify a solution that works for that particular company,” says Scott. “It could be a restoration company, a property-management company, or the end user, and as part of our proactive sales approach, we would establish how many locations they have that are subject to some kind of emergency response plan and can we encompass all those locations. We can offer products and services throughout North America in the event of emergency so the scope of our geographic footprint is certainly something that we sell to the end user and restoration companies. We’ll try to establish what their needs are, whether it’s just power, or a combination of power and temperature control, whether it’s for emergency backup power or if it’s to run critical systems. We can go in and evaluate their power and HVAC needs and develop a custom solution.”
No margin for error
Not every construction-oriented rental company likes to rent to special events applications, partly because their timetable tends to be completely different than the 7 a.m. to 5 p.m. schedule that most rental companies prefer, but for those that don’t mind some of the differences, the opportunities can be vast. Not every rental company can be like Aggreko and power Super Bowls, Olympics, World Cups and presidential inaugurations, but concerts, fairs, outdoor theater, Little League games, weddings, political rallies, movie and TV production and a host of other scenarios can be a very lucrative business if handled correctly.
Most events don’t require the size of fleet and level of sophistication of the Olympics, but mistakes cannot be tolerated in the middle of a play or concert or any such event. Mess it up and word will spread fast. So rental companies have to know their stuff. “It’s more than a rental business, it’s a technical-service-driven round-the-clock operation,” says Wessels. “In this business, there is no margin for error. So relationships are built on trust and repeat performance. Power failures during live events are generally not expected or accepted.”
Obviously, as in any other generator application, the right equipment for the job is essential. For live events only the quietest generator sets are applicable. The whirr of a generator is not part of the sound of a symphony or a jazz band or Shakespeare in the park or a movie set and is an insurmountable distraction.
“At minimum when you talk about the products required, power products used in event applications require sound attenuation,” says Wessels. “They have got to be quiet, just because of the nature of the business. Safety features are a must, the general public is typically in close proximity to the equipment. The event business also requires built-in features to allow technicians to unload and set in place and plug in ready to play. Products include power-generation with paralleling capability, single-unit redundant power, which keeps the footprint to a minimum.”
Power distribution units are important in special event applications, making it possible to distribute power to heaters, air conditioners, lighting units and other items with a minimum of generators and outlets.
“One of the challenges we find in the event business is that a lot of the customers have multiple needs,” says Kerins. “They have heaters and air-conditioners, so it’s important to have a fleet of distribution equipment, and be able to use that effectively where the equipment can do multiple things so you don’t have to rent someone a generator just to power up a heater. Distribution equipment nowadays has really evolved. You can come off a generator, plug into a distribution box that can then distribute out to power up heaters and air conditioners, and also provide lighting. Having that versatility in your fleet of distribution is important.”
“Whether it’s a storm, or an entertainment or sporting event, there are similarities, it all starts from the front end where we’re actually working with the customer to design the solution they need,” says Satrazemis. “The World Cup is a good example where our team is embedded with FIFA, and we’re working with them to design the right size of power solutions and cooling solutions that they need for the various venues. Golf events, another great example, we’re working with the teams and they’re designing the actual passages for the tents, the large screens, etc. We’re not just giving somebody a generator or a chiller. It’s not just providing a commodity, we’re looking to provide a value as well and that is to help the customers design it.”
United Rentals has an event division and provides power for a wide range of events. Scott also emphasizes the pre-planning as the key to success in powering events. “That almost always involves either the sales representative or project manager walking the event with a customer beforehand and making sure all their needs are covered and developing a solution based on the particular event,” he says. “It could be a stationary event like a golf tournament or it could be a tour where you’re traveling from city to city. There are a lot of different moving pieces and each one is a unique solution for a customer.”
The same essential principles are at play whether involving large events or smaller. If it’s a concert in the park, a Little League game or an outdoor garden party, it’s not just a matter of renting a generator, but rather assessing the needs in person and making sure the pieces fit.
Remote power
Powering construction sites has always been a major part of the power generation rental business and continues to be so. In recent years, powering remote oil-and-gas exploration and extraction projects has been a growing part of the business. Satrazemis says the use of distribution equipment is an important part of powering drilling operations.
“We are working right now with oil and gas customers in the shale plays, which is one of the great stories for the American economy,” he says. “What many of them used to do was put power right at the wellhead, in a very distributed way. With many of these customers now we’re saying ‘Let us sit down and look at your overall field, and come up with a power solution for you.’ They’re still going to do things at the wellhead for some of the [remote] wells, but for many customers we are able to put together a much more efficient solution where we’re putting in a mini power plant and then running actual distribution out to the different places that need power. We’re seeing customers really liking that concept and moving away from just thinking, ‘I just need to rent a generator.’ Instead they’re looking at their overall power needs.”
Providing power for such remote applications has become increasingly common for rental companies and the use of telematics systems has facilitated them.
“One of the things we do to monitor the project should it not require staffing onsite is have GPS on all generators so we can monitor the location and hours and the machine operating remotely,” says Scott. “That gives us visibility to machines that are not geographically located near the branch.”
No matter the distance or the application, it’s all in the planning.
