Standby Rates

Standby rates are utility rates that a customer pays to receive power from the grid at times when its own DG is unavailable either unexpectedly or for maintenance reasons. The cost of standby delivery strongly affects the economic viability of the DG technology in instances when the customer cannot or chooses not to disconnect from the grid. It is impractical for a customer to completely isolate himself or herself from the utility's grid unless the customer maintains its own backup power source. Thus, standby rates have become a significant point of discussion in barriers to implementation of distributed generation technology.

Most of a utility's cost for providing standby service is associated with the fixed cost of the T&D system. Generally, a utility customer will pay a tariff in the form of a monthly demand charge per kW. This is in addition to any electrical generation charges for actual electricity used. Many utilities require a customer to contract for the measured peak electrical output of the customer's onsite electrical generator. This is prohibitive to applications that would shed a significant amount of their load in a situation that required standby power from the utility.