In Pakistan and throughout Asia, energy shortfall is a pressing issue being faced by utilities and all forms of industries and large building projects. This need for power has left power users and producers with a critical choice about the most suitable power generation solutions to satisfy energy demands.
Prior to the start of projects, utilities and companies must identify the system for power generation that best meets the required power capacity. There are several factors that come into play when closing in on the optimal solution to the type of power generation.
These decisive factors include the amount of power required, the duration, timing and the operating and financial aspects of the process. Recently, another option has become available to power users in Pakistan; the option of renting a power package for the short or medium term from Aggreko, the global leader in power rental services.
Power for Rent: The critical decision between renting or buying a power system will depend largely upon the urgency of the problem being faced and the length of time that the power solution will be needed. Purchasing power generating equipment may at first seem to be the preferred option, however, consideration should be given to power rentals, as they can often provide the most effective use of working capital, especially when 'fast-track' power supply solutions are included in the equation.
There is no simple answer to the rentals versus purchase debate, as each situation requires its own tailor-made solution. In some cases, the right power supply system is immediately obvious, for instance if the need for power is clearly temporary, as in an emergency. In such a situation, rental is the obvious choice, as the power can be supplied rapidly, often within a matter of days.
However, renting power equipment for large and small projects is becoming popular in various industries, as it represents quick delivery and avoids the need for large capital expenditure. When the project is completed, there is no need for the user to arrange for the removal and storage of the power equipment, as this is carried out by the rental company.
Power plant ownership brings with it many responsibilities and hidden costs. Firstly, there are all of the factors involved in the capital purchase such as up-front costs, loan repayments, interest charges, taxes and other hidden fees. The power plant operator will then need a team of skilled engineering personnel to operate and maintain the power generating system and all the plant's auxiliary equipment involved, such as controls and fuel handling. Plus, there are the essential items such as transmission and distribution equipment and the constant need for fuel supplies to be taken into consideration. Additionally, the owner takes all the risk if the equipment breaks down. Over time, the power asset will also depreciate in value and will therefore be worth less than the original purchase price. All of these hidden costs and responsibilities are avoided when utilising a full-service power rental company.
Rapid Availability and Flexibility: One of the most frequent reasons for choosing a rental solution is timing. As power rental can be a fast-track supply, it provides the end user with the vital power supplies needed within a short time. This fast delivery is critical to many users, especially if there has been an unplanned power outage and reliable power is of paramount importance. Long lead times can be a serious problem for companies purchasing permanent equipment; a 20 MW power plant can take 18 months or even two years before it can generate power. It is at times like these when power rentals are the more practical answer.
When TATA Chemicals, a division of the giant TATA Group and India's leading producer of inorganic fertiliser and soda ash, faced disruption to production at its facility in Gujarat, India, due to a fire that damaged the company's power generation facility, they required a reliable 5 MW power package at short notice.
Aggreko quickly mobilised a complete power package comprising of 5 1250 kVA generators plus a transformer, fuel tanks and ancillary equipment. In addition, Aggreko provided engineers on site for the duration of the contract to operate and maintain the equipment and ensure 24-hour availability of power. The additional power allowed the customer to maintain production during the emergency period and minimised any financial losses.
Another benefit of renting power equipment is the flexibility it offers, as rentals allow the customer the freedom to increase or decrease the amount of power generating capacity according to need. In addition, there is the extensive range of technical support services provided by the rental company which ranges from advice and design through to replacing faulty equipment and even operating and maintaining the equipment. Increased industrial development in Bangladesh, along with delays in implementation of long-term power projects had resulted in a country-wide power shortage that was presenting a major constraint to Bangladesh's economic growth. The problem was compounded by a natural gas shortage in the country, which meant that the utility grid was not able to cope with the peak summer demand for power. In order to bridge the gap, the Bangladesh government tendered contracts intended to reduce the impact of load shedding on the country. Aggreko provided a 40 MW / 132 kV power package which seamlessly supplemented the national grid, with power being produced at the Goalpara substation in Khulna.
Aggreko: In recent years, the specialist power rental company, Aggreko has seen their rentals business increase significantly in Asia. Headquartered in Scotland, Aggreko is the global leader in the rental of power and temperature control, and provides 24 by 7 availability and service support across the world. Aggreko's regional operations provide local support for projects, backed by the service and response of a truly global operation.
Although Aggreko has traditionally offered diesel-powered generators, the company has expanded its offering in recent years to offer its customers the option of using natural gas generators. One of the company's first gas projects came about in Tanzania, where two-thirds of generating capacity is hydro based. With a draught being faced in East Africa, Tanzania experienced a significant drop of water inflows to its hydro power dams, thereby severely limiting its electricity production capacity. The situation forced Tanzania Electric Supply Company (TANESCO), the public utility company to introduce heavy power rationing to conserve reservoir waters. TANESCO awarded a contract to Aggreko for the supply of 40 MW natural gas-fired temporary power plant to support the national grid.
Aggreko designed and supplied a full turn-key gas power solution including equipment, mobilisation, installation, operation, servicing and maintenance of the plant. Aggreko supplied the plant in two phases of 20 MW each, with the full 40 MW power plant operating 10 days earlier than stated in the agreement.
With a greater emphasis on keeping capital available and with rental providing benefits such as lowered capital expenditure, flexibility and risk management, the option of renting as opposed to purchasing equipment will likely remain an attractive one even as the world economy eventually strengthens and the world enters another positive growth period. Although the question, 'Is it better to buy or to rent?', will continue to be asked by companies and utilities contemplating large equipment purchases, many will likely find themselves deciding that the benefits of rental power make it the most attractive option.