In the wake of last summer's blackout in the Northeast, some landlords are refusing to be left in the dark again. They are turning to co-generation — a way of recycling waste heat such as steam for use as electricity — to both guarantee backup power during an emergency and trim energy bills. By improving efficiency, co-generation systems can lower fuel costs associated with providing heat and electricity to a facility.

For example, Paragon Village, a northern New Jersey assisted living facility, installed a 500 kilowatt (KW) co-generation system earlier this year. The system — which produces electricity, hot water and backup power — has provided power for Paragon through several local blackouts that have plagued the area since last spring.

In the Northeast, the installation for such a system can cost up to $1 million.

Robert Meier, a senior manager in Ernst & Young's energy advisory practice, says co-generation is worth the initial investment. “Instead of spending $600 per kilowatt hour for a backup generator, owners can pay on average $1,800 to install a co-generation system,” he says. Although a co-generation system is roughly three times the price of a backup generator, Meier says it only takes four years on average for the co-generation system to pay for itself via savings. Not all co-generation systems will function during a blackout, but Meier says many manufacturers are adapting this use into their systems.

For landlords who already own diesel generators, regular testing is necessary to ensure their ability to function during a blackout. “The diesel generators have a failure rate of 25% to 50%, and many of these generators simply aren't tested,” says IT Reliability consultant Jerry Nolan of Eagle Rock Alliance.

Fortunately, the lights never went out at Trizec Properties' 110 William Street in lower Manhattan because the firm had completed periodic regular testing of its generators. Trizec installed the backup generators in the 868,000 sq. ft. building after the terrorist attacks on the World Trade Center on Sept. 11, 2001.

“We were very prepared for this. We had landlines [phone lines connected directly to the system] in the lobby that worked throughout the blackout and, frankly, I expected more problems than we ended up having,” says Jerry Schumm, Trizec's vice president of operations for the Eastern region.

The testing itself can often fall short. Since few building managers will take their property off the grid briefly during a test of their generator, they cannot be entirely sure how the generator will function with the grid down. “If there's a point of failure in your generators, you just won't see it during a drill,” says Gary Graham, Jones Lang LaSalle's vice president of energy advisory services. “You will probably see it, if the building is taken off the grid.”