Commercial and industrial (C&I) businesses are looking carefully at the financial impact of electrical outages and are increasingly seeking ways to mitigate the losses, according to a new report from S&C Electric.
The 2020 State of Commercial & Industrial Power Reliability Report, based on a survey of 255 companies that achieve average yearly revenues of $4 billion, found that 61% of C&I businesses had plans to install some form of backup power source.
“That is a telling number,” said Brian Levite, director of regulatory affairs at S&C Electric, who cited another data point from the report. One-third of respondents said they would be willing to pay a premium to guarantee reliability during severe weather.
“C&I customers are expecting the impact of energy outages on their bottom line to increase,” Levite said. “As that happens, more companies than in the past are making plans to address that challenge by tracking outage costs, investing in backup energy, and even requesting remuneration from utilities.”
While the 2020 study shows that the frequency and duration of electrical outages have remained flat over the last three years, it also shows that many companies are becoming increasingly dependent on reliable power. And, as energy dependence increases, companies are becoming more willing to pay premiums to secure reliable power.
Smaller franchises, however, do not see themselves as more energy dependent, but do see themselves as more vulnerable to electrical outages, Levite said. And, as a company becomes more energy dependent, the financial impact of outages tends to rise. Financial loss stems not only from reduction in productivity during power outages, but also from the costs to bring operations back online after electric service is restored, Levite noted.
The report, which focused on C&I businesses in the United States and their perspectives on power reliability, found little change in the number of companies estimating a loss of $100,000 or less from electric service disruptions over the past three years. But the number rose of companies reporting an estimated loss of $100,000 or more per outage, revealing an increased recognition of the costs incurred from outages.
Of the companies that experienced weekly outages, 79% reported losses of at least $50,000 per outage, and 29% of companies that experienced an outage once a week or more estimated a loss of upward of $2 million per event. The 62% of companies that reported outages two to three times a month estimated losses of at least $50,000 per event, and 45% of companies lost $100,000 either weekly or two to three times per month. Extrapolating these costs over a given year, results in an annual financial loss of $5.2 million to $104 million, according to the report.
The aim of the survey was to gauge companies’ reliability experiences, the impact of poor reliability, and how companies are thinking about options to improve power reliability in the future.
“The report tells a story about where C&I expects the world to go,” Levite said. “It tells the tale that reliability is only going to become more important.”
Frost & Sullivan conducted the report research, surveying high-level managers responsible for power-related decisions, such as facility directors, facility managers, operations directors, energy management managers, property managers, and purchasing managers. The research was split into four regions of the United States and taken across five major C&I company categories: manufacturing, healthcare, small franchises, education, and retailers. The average monthly energy consumption for the C&I businesses ranged from 10 MWh to more than 50 MWh.
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