There are two basic types of generators used for on-site power generation, synchronous generators and induction generators. These generators differ in the way they produce power and how they are used for on-site power generation.
Synchronous generators are most often used for "emergency" or "standby" power, but in many cases may be used to provide all of the power requirements of a facility. The customer who must, or desires to, be completely "power independent" from the utility company must use this type of generator. When using a synchronous generator as the sole source of power, the generator must be sized large enough to provide for the highest peak loads occurring when starting equipment being powered by the generator, even though the peak load may only be momentary. However, paralleling equipment and switchgear may be installed to allow the synchronous generator to be operated in parallel with the utility. This allows the customer to use their on-site generators to provide most or all of the "base load" for the facility, using the utility company only for the short "peak loads" or for power during "off peak" hours when power is cheaper, while providing the customer the peace of mind of having power available during utility power outages.
Induction generators are most often used for "peak shaving" (providing the power needed for starting large motors, additional air conditioning load on hot days, etc.), or for "base load displacement" (the power normally used to operate a facility). Induction generators will not produce power without the "excitation" drawn by the generator from a synchronous power source (another generator) or from the utility, and is always run in parallel with one of these power sources. One advantage of induction generators is that since they cannot produce power absent the utility load, much of the protection equipment required for synchronous generators may not be required when using induction generators, thereby reducing equipment acquisition costs.