In 2004, San Antonio, Texas-based business consulting firm Frost & Sullivan predicted a big future for the residential standby power systems market. According to its “North American Onsite Residential Power Systems Markets” report, the company estimates that the industry will be close to hitting the billion-dollar mark by 2010, experiencing an average annual growth rate of 13.3 percent in the next four years. Contributing to the rise in demand is the proliferation of home automation and home offices in conjunction with the almost-nightly news reports of costly rolling blackouts debilitating large areas of the nation this summer. The unreliability of the aging electrical infrastructure in times of natural disaster, such as last year's storms and this summer's heat wave, is also influencing homeowners and developers in the decision-making process to install standby power in residential applications.
“The demand for these products continues to grow, even in areas that are less prone to weather-related events,” said Mike Carr, manager of marketing communications at Generac Power Systems Inc., Waukesha, Wis. “There is a growing awareness of the threat of power outages in every region of the country.”
However, generator sales have experienced some shifts in geographic markets based on the hurricanes of the past couple of years. Florida, traditionally a state without an infrastructure of natural gas lines, had been resistant to onsite power systems but now leads the pack in residential generator installations. “Anywhere along the coastline is really hot right now because of all the hurricanes,” said Melanie Tydrich, senior product manager for Kohler Power Systems, Mosel, Wis. “But that doesn't mean that the rest of the country doesn't have plenty of hot spots. If you go down the center of the United States, you'll find quite a number of states that are going to have outages that last for more than 24 hours at least seven times a year. It's not just a hurricane product.”
It's undeniable, however, that the power outages caused by the storms have improved the market. “Take away the hurricanes, and the market's still good, but it wouldn't be anywhere near where it is today,” said Charlie Habic, vice president of manufacturing for Detroit Diesel Corp., a subsidy of Gillette Mfg. Inc., Elkhart, Ind. “I don't call this an established or mature market. I call it a baby market — not even walking yet.”
One if by sea
Habic attributes 40 percent of his company's present generator backlog to the storms that left approximately 2.6 million customers without power. “We're not a big company, but still a year later we're working from Katrina,” Habic said. “Coastal homes lose power more than inland communities. Anywhere you have homes near the sea, you're going to sell generators.”
Electrical contractors located in storm country are often inundated with requests for generator installations immediately after power outages. “Every time there's a storm, I get 10 calls a day along with everybody else,” said Master Electrician Louis Torregrossa, Illuminations Lighting Design, Houston.
However, not all the calls come to fruition as paying projects. According to Torregrossa, his firm typically installs around five onsite generators a year, preferring to work on the larger projects involving total installation in new, large residential projects. “Out of 10 people who call, we might take on one or two jobs.”
For some electrical contractors, sales, installation and service of residential standby power systems can become a full-time job. Many manufacturers and distributors offer generator sales opportunities to electrical contractors through dealer agreements.
“Electrical contractors can order these products through their electrical distributor and have them delivered right to the job site,” said Carr. “By both selling and installing generators, there's a double-profit opportunity that will add to both the top and bottom line.”
In other arrangements, electrical contractors work through contracts with manufacturers and dealers. Americas Generators, Miami, hires electrical contractors throughout the nation to install its generators. “We have an electrical contractor or a general contractor who handles installation,” said Eric Johnston, senior vice president. “We sell the plan, and then we have people throughout the nation who actually go out and do the installation and startup. They work through us.”
Typically, if an electrical contracting firm buys a certain amount of units from a manufacturer through an electrical distributor or electrical wholesaler — where the electrical contractor may already have established credit — they may be put on a list as an installation specialist. No other qualifications are necessary, although most states require generator installers to be licensed electricians.
“In New Jersey, to do any electrical work you have to be licensed by the state,” said David Descoteau, owner of Deceaux Power Systems, Pennington, N.J.
An electrical contractor that specializes in residential and commercial security systems and emergency power generator systems, Deceaux Power Systems currently has dealer agreements with four generator manufacturers. With a staff of four, Descoteau acts as a service dealer for two and an installation and service dealer for two. “There are no other qualifications,” he said. “You just have to sign up with the manufacturer in some capacity. Maybe buy a unit or two to commit yourself. If you'll sell their product, they'll sign you on anyway they can whether you're an electrician or not. But in the state of New Jersey, obviously, you have to be an electrician to do the electrical work to install these things.”
Electrical contractors wanting to delve into the sales and installation of generators must also have a good working relationship with a plumber. “You've always got to call an electrical contractor and a plumber on a generator because of the gas,” Torregrossa said.
Some electrical contractors may be resistant to getting into the residential-generator-installation market because of the potential odd hours of servicing the units, as well as the learning curve on the technology. “You have to go out and work when there's a problem, so you might have more service work at undesirable hours,” Descoteau said. This is something that could possibly be overcome with the proper training. “You can waste a lot of time on a problem,” he said. “But once you know what's going on with the units and you understand them, it's a very simple job.”
Although most manufacturers advertise the smaller generators used in residential applications — from 7kW to 15kW — to be “plug-and-play,” most offer sales and installation training to electrical contractors in the form of traditional printed materials, Web casts, traveling demonstration vehicles, and inhouse hands-on training seminars.
“If they're going to be in the business, we recommend a two-day troubleshooting class just so they have the knowledge if they do run across something that may or may not be related to our product or even to the connections that they're making,” said Jake Hjemvick, product engineer for Eaton Corp., Cleveland. “Maybe the plumber improperly sized the gas line. They have to be able to diagnose that and rectify those types of problems.”
The technical training part may be easier for some electrical contractors than sales and customer service. For those that need a crash course in soft skills, most manufacturers also offer materials and training. “Something as simple as a binder that has literature in it may provide them with ideas to help grow their business,” said Karen Primm, Eaton's marketing communications manager. “We make suggestions to them like getting in front of condo association and neighborhood groups to talk about standby power. We supply them with a sales presentation and brochures to take to customers and ads that they can use to advertise locally.”
A good sales pitch may also be the difference between speaking in technical terms versus plain language. This is also where many electrical contractors may feel uncomfortable.
“They need to know how to talk to homeowners and talk in nontechnical terms because most homeowners don't know what a kilowatt is,” Tydrich said. So many manufacturers stress field training with their distributors. “We have a lot of local support throughout the country,” Tydrich said. “Our distributors work with the dealers.”
Code of honor
Installations must satisfy the national code as well as any local laws. “Certain municipalities are coming up with new and improved ideas of what the local code requires,” Tydrich said. “Keeping up with local codes is critical now.”
Although most manufacturers follow the NEC in their installation manuals, municipalities may have their own ideas as to how things should be done. “We've even found in certain localities there might be an inspector who wants a generator placed farther away from a house than is even recommended by the national code,” Tydrich said. “Once you've placed that generator you really don't want to have to move it again.”
Noise ordinances must also be followed. “A big factor down here is the noise,” said Torregrossa. “We're governed here in Houston at what they call 65dBa at 23 feet, so that's going to sound like a 3- or 5-ton AC unit starting up. They all start up once or twice a week just to run for 20 or 30 minutes just to make sure they're going to run when you need it. It's at that point that if it's loud and your neighbor next door is asleep, then it becomes an issue.”
Torregrossa works with his clients to discuss the type of noise insulation of the unit as well as positioning. “It's going to sound like a lawnmower right in your window if you're a neighbor,” he said. “They always say that if you're a nice neighbor and you get to come over when you've got a storm, that's one thing. But if y'all don't get along, and this guy cranks up his generator every week for maintenance, then the neighbor can call the city.”
Neighbors in close proximity with one another may have to get used to the hum of generators as onsite installation becomes ubiquitous in neighborhoods around the country. Installation of onsite standby power systems is now being compared to what happened with central air conditioning. As recently as 1970, only 35 percent of houses had modern cooling convenience. However, as the footprint of the units came down, as well as the price, installation of what was once considered a luxury item for large homes became more common in smaller homes as well.
By 1997, 80 percent of homes had central air. Currently, 87 percent of homes are cooled by onsite units. “It's something that went from a luxury item to an almost standard item in homes in a very short amount of time,” Tydrich said. “With the recent weather events and the power-grid issues, those sales are only going to increase. People are starting to take notice, and they're seeing backup power — and it's not just for the rich and famous who want it for luxury purposes.”
Descoteau attributes the growing demand for onsite residential units to the increased demands on the power grid, making it more unreliable. “They're not upgrading the power grid, and we're having more and more development in this state, putting more and more stress on the power grid,” he said.
He also points to the storms and flooding in his area that are forcing homeowners to consider installing generators, but that demand is more sporadic than the one caused by the general condition of the state's infrastructure. “(The residential generator market) is definitely growing, but it comes in spurts,” he said. “In New Jersey, we just had a lot of storms and a lot of flooding down along the Delaware River. People were underwater, and the power got cut off in certain areas. Even people that weren't flooded were out of power for four or five days. But it's one of those things that's spotty. Right now, I'm busy. I've been working 12 to 14 hours a day, but a month from now I might not have anything to do for a week or two, as far as generators go.”
When the storms die down and the demand for generator installation subsides for the moment, Descoteau will busy himself with other electrical work. But that is something he expects will change with time. “It comes and goes,” he said. “But it is filling in the gaps over time. When I started out, it kept one person busy maybe 40 percent of the time. On some days now I'm completely busy with generator work 100 percent of the time, and I have my other men working on installations.”
Soon, electrical contractors in the generator business may have more work than they can handle. “Every time there's an outage in your area or elsewhere, it's in the news,” Carr said. “It's on people's minds.”
One of the biggest issues most homeowners face when deciding what type of generator to buy for their home is fuel supply. “The determining factor of how long your generator will run is the amount of fuel you have on hand,” said Eric Johnston senior vice president of Americas Generators, Miami.
Traditionally, gasoline- and diesel-powered portable or mobile generators have been the popular choice for residential application, but because of drawbacks to using gasoline or diesel — spoilage, spillage, emissions and sluggishness in cold weather — diesel and gasoline standby systems have recently been surpassed by units that can run on natural gas or liquid propane fuel (LP). Some manufacturers are even producing generators that can switch between the two. “Homeowners don't like to have a lot of gasoline sitting around the house,” Johnston said.
Therefore, the selection of a specific generator type may actually be driven by resource availability or geographical region. “Most people, if they don't have natural gas piped to their home for their range or dryer will typically have propane tanks for those appliances or for heating their pool,” said Jake Hjemvick, product engineer for Eaton in Cleveland. “Those are really the two main fuel types we see this market migrating to.”
Diesel's pretty well out of the picture, according to Master Electrician Louis Torregrossa, Illuminations Lighting Design, Houston. “It's all natural gas,” he said. “The majority of anything from about 8kW on up are all natural gas, and they hook them up to the gas line.”
David Descoteau, generator specialist for Deceaux Power Systems, Pennington, N.J., also installs more natural gas than diesel units. “You don't have to worry about it as long as it is still flowing,” he said.
The flow of natural gas can be a problem in rural areas and during times of extreme weather. For instance, during Hurricane Katrina the natural gas sources were shut off for fear of a mainline break. “They're pumping it from a station, and those stations are backed up with generators, too,” Descoteau explained. “But when natural gas isn't available, they have propane onsite.”
Some industry players don't worry about hurricane zones, but prefer not to install those units in areas prone to earthquakes. “Unless you're in an earthquake zone, natural gas is going to be delivered comfortably through almost anything,” said Mike Carr, manager of marketing communications at Generac Power Systems Inc., Waukesha, Wis. “I talked with a guy in Florida on the panhandle coast, and he said that the municipality has its own natural gas utility, and through 25 years of hurricanes hitting the panhandle, they've never had an interruption in their natural gas service. Obviously, if you're in California, it's a different situation.”
To help with the issue of refueling, some manufacturers offer propane delivery services, something that electrical contractors in the generator business may want to consider offering their clients. “We have contracts where people come out every three days or so and refill the tanks, whether it's propane or diesel,” Johnston said. “They're constantly keeping that supply going so the homeowner doesn't have to worry about it.”