Distribution Center – Backup Power Made Easy

AEP OnSite provides enough onsite power to back up 100% of the customer’s facility.

AEP OnSite delivered 3 MW of natural gas generators that began operating in June 2021.

Within the first year of its inception and when the energy market was extremely volatile, the customer gained significant savings and price certainty through an innovative and long-term fixed price energy supply agreement.

Overview

A large U.S. retailer has a major distribution center in the greater Philadelphia area that is a critical distribution hub serving nearly 2,000 retail locations throughout the east coast. Power outages are costly as there are ripple down effects that cause issues with the supply chain and have detrimental impacts to the bottom line.

This customer chose AEP OnSite Partners (‘AEP OnSite’), a well-known and trusted subsidiary of American Electric Power (AEP), to lead their resiliency project. The experts at AEP OnSite helped guide, inform, and ultimately execute a power supply contract that provided long-term price certainty inclusive of a backup power system that can serve 100% of the customer’s electricity supply needs.

The Challenge

Although the customer’s local utility provides electric service through two distribution circuits, power was less reliable due to the utility’s aging infrastructure. A number of factors result in poor power reliability, including the number of miles of overhead distribution lines that can experience outages due to vehicle to pole accidents. These power outages were costly for the customer as it disrupted the ability to deliver goods to their retail outlets. As such, the customer decided to pursue back-up power sufficient for the entire facility.

The Solution

AEP OnSite collaborated with the customer to design the generation project that delivers backup power to the site in a cost effective manner. There was no upfront capital required to fund the project, and since AEP OnSite is responsible for all areas related to the project there were no incremental maintenance activities needed by the customer’s resources. AEP OnSite oversees the operational responsibilities from its headquarters in Columbus, Ohio, including daily monitoring of the wholesale power markets and activating the generators seamlessly if market prices support doing so. Careful and continuous monitoring means that the site is always ready to provide service to the customer, whether in the event of emergency backup generation or for economic value.

In addition to the backup power project, AEP OnSite delivered a long-term, fixed-price energy supply contract for the customer. Regardless of whether the on-site generators are producing power, or if power is being sold to the customer from the market, a fixed price per kilowatt hour is paid for the duration of the contract. This simplistic commercial structure allows the customer to benefit by being able to lock in their energy supply cost for a long-term contract, which provides budget certainty inclusive of 100% back up power at the site.

The Results

AEP OnSite delivered four Caterpillar G3512B natural gas generators to meet the customer’s technical requirements. The project was delivered on budget and on time, and provides the piece of mind that the distribution center will always have power to allow for continuous operations, even during extreme weather events or other external factors that can cause power outages. During the first year of operations, the market price of power became extremely volatile and prices reached high levels over the second summer of operation. By locking in the price of power, the customer was able to significantly save money on it’s energy supply costs. AEP OnSite and the customer are in active discussions and looking to roll out similar projects at other locations across the United States.

AEP OnSite Partners offered a unique solution to help us with our power reliability issues. They were professional, responsive, and helped us creatively structure the contract in a way that provides us both the backup power we need as well as long term price certainty on our electricity supply.”
General Manager