GVEA vs. a diesel generator

Would running my own diesel generator be cheaper than purchasing power from GVEA?

“I’m so tired of high electric rates. I’m going to get a generator. Wouldn’t that be cheaper?” emailed a member recently.

The short answer is no. Here’s why:

The average residential member consumes 700 kilowatt-hours of electricity each month. Given GVEA’s current rates, a monthly bill runs the average member $156.03. That’s about 23 cents per kWh. Not bad when you think about what you can do with a kWh, right?

Say the same member purchased a diesel generator to replace the power he was getting from GVEA. A 7.5 kW generator should be sufficient for household energy needs, but there may be some lifestyle changes. For example, running the oven, microwave, dishwasher and washing machine at the same time could result in a tripped breaker.

Let’s assume this member does not have batteries, nor does he augment with renewable energy like solar or wind. When running, the generator would operate at half capacity output on average.

The upfront cost of the diesel generator is $8,000 (note: a gasoline powered generator would cost less than a diesel generator, but has a much shorter lifetime.) Add the cost of fuel – approx. $4.10 per gallon of heating oil at this date – and consider an average lifetime generation of 75,000 kWh, it will cost about 64 cents to generate one kWh of electricity. Keep in mind, this price does not include oil changes or maintenance costs.

Economies of scale come into play in this scenario. GVEA operates diesel generators to produce electricity too, but the cost of maintaining the generator and supplying it with fuel is shared across 34,060 members.

A couple more things to consider:

  • Many Alaskan villages use small diesel generators to generate power. They require power cost equalization to keep their electric rates palatable. Even with PCE, the villages pay more than we do.
  • Having a back-up power source for when the generator failed would be critical at 40 below.
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