Why Electric Reliability is so Important for the Retail Sector

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A new special report from Microgrid Knowledge explores how businesses use retail microgrids to reduce costs and enhance resiliency and reliability. This excerpt focuses on the value of retail microgrids in a world where electric reliability is both increasingly important and increasingly threatened.

retail microgrids

Download the full report.

Hardly a day goes by without the United States facing a new threat to its electric reliability — whether it is hurricanes, heat waves, snowstorms or wildfires. 

The threats come not only from nature’s onslaughts, but also equipment failure, such as the July 2019 transmission relay malfunction that left about 72,000 customers in the dark in Manhattan. Everyday events, like car accidents or hungry squirrels, can cause power outages too. 

The US Energy Information Administration reports that outages nearly doubled from 2016 to 2017. In total, the nation saw 3,526 blackouts that affected 27 million people, according to Eaton’s Blackout Tracker. 

With such threats come a rising tide of damages and losses. For example, Hurricane Harvey knocked out 10,000 MW of generating capacity and left hundreds of thousands of customers on the Texas Gulf Coast without electricity for days. Estimates put losses from the 2017 storm at $125 billion. 

Overall, power outages cost the US economy about $44 billion a year, according to Lawrence Berkeley Laboratory. Businesses take the biggest hit. Although they comprise only 10% of electricity customers, businesses shoulder 70% of the costs. Unfortunately, power outages are growing in both frequency and duration. 

Electric reliability rules 

In today’s digital economy, communities require access to continuous power. Electric reliability is crucial for government offices, first responders and essential services, such as police and fire departments. Lives can hang in the balance if equipment fails at a medical facility. Critical infrastructure, such as water pumping stations and wastewater treatment plants, require uninterrupted power to keep cities safe, dry and sanitary. 

But when retail operations lose power, communities often feel the most immediate impact. With local stores shuttered, food and water become hard to secure. Travel is restricted since gas pumps do not work. Delay occurs in repairing homes and buildings with tools and materials difficult to secure. 

Customers have come to rely on retailers to keep them comfortable and safe. So, if they expect a store to be open and find it closed, they may seek another alternative and lose confidence in that retailer. 

Power outages cost the U.S. economy about $44 billion a year.  — Lawrence Berkeley Laboratory

“The retail industry is being held to higher standards by today’s consumer. In fact, retail plays an increasingly essential role during storms as a ‘safety net’ for the community. Not only can a grocery store, gas station, convenience store or pharmacy provide essential goods — water, food, gasoline, medicine — but it can serve as a refuge, a place to shelter, recoup and reconnect with loved ones,” said Allan Schurr, chief commercial officer at Enchanted Rock, a microgrid development company. “Consumers expect to buy what they need, when they need it, even if conditions make it difficult for the retailer to provide these goods.” 

Retailers that cannot serve customers lose revenue and customer loyalty. Power outage is no longer an acceptable excuse for businesses. Without a resiliency plan, retailers stand to lose customers to other businesses that have power. Retailers with a backup power system can differentiate themselves from competitors because they maintain normal operations with dependable electricity. A sign on the door that the power is out sounds increasingly like ‘the dog ate my homework.’ 

Designed to keep the power flowing when the central grid fails, microgrids offer retail operations a way to ensure customer retention and stable earnings, even as nature batters land and sea. (Photo: Shuttestock/by Adisa)

Financial losses 

For some retailers, even a few minutes of downtime can lead to tens of thousands of dollars of lost revenue. E-commerce giant Amazon, suffered a technical glitch on July 18, 2019 that knocked its website offline for about 13 minutes, causing the online retailer to lose about $2.6 million in revenue. That translates to $203,577 per minute.

In a 2018 study, Frost & Sullivan found that 18% of businesses took a financial hit of $100,000 or more from their worst power outage in 2017, and 19% sustained costs of $50,000 or more. 

Those costs accrue in a variety of ways. Outages may decrease employee productivity or lower the rate of unturned inventory, which can have a lingering effect on financial performance. An abrupt shutdown of power may damage data from computer systems — or worse cause its loss. Other types of equipment may become damaged, particularly now when even the most basic machines come loaded with computer controls. 

“Consumers expect to buy what they need, when they need it, even if conditions make it difficult for the retailer to provide these goods.” — Allan Schurr, chief commercial officer, Enchanted Rock 

Retail Microgrids

Retailers may feel powerless in the face of rising threats to their electric reliability While they cannot control the weather or many other events that cause grid disruptions, they can take control of their own power supply. There are solutions — such as retail microgrids. 

Businesses take the biggest hit. Although they comprise only 10% of electricity customers, businesses shoulder 70% of the costs. — Lawrence Berkeley Laboratory

Retailers equipped with microgrids offer an important public service when communities are most vulnerable. Designed to keep the power flowing when the central grid fails, microgrids offer retail operations a way to ensure customer retention and stable earnings, even as nature batters land and sea. 

Microgrids have been around for decades, but they are now growing in use as our Internet-based economy becomes increasingly dependent on electricity.

In the next chapter, we will explain how retail microgrids work and why they offer so much more than backup generation. 

Download the full report, “Microgrids for the Retail Sector: Your competition is in the dark, but you’ve got power,” courtesy of Enchanted Rock, to explore how businesses use retail microgrids to increase electric reliability and manage costs. 

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