Diesel generators are used for powering emergency loads during a sustained grid outage, the design utilisation is typically less than 70% of the rated capacities because of the need to conform to operation considerations such as system load variability, load nonlinearity and to satisfy environment derating factors. It is a significant capability achievement if the 30% of reserve potential can be unlocked partially or in full for operational use, realising enhancement in asset and space utilisation. Energy storage is known to the industry to be able to achieve economic advantages such as “peak shavings” and more efficient usage of renewable energy. This paper explores how smart Energy Storage System (ESS), by means of an inverter in parallel interface to a diesel generator, operating seamlessly in a hybrid system, could lead to a 28 percentage point increase of the generator prime capacity, and result in better diesel generator capacity utilisation. It is proposed to configure ESS to support load variability and allow diesel generator to operate more in constant power mode, thereby freeing up generators from load-following constraint. When the generator is decoupled from instantaneous load variability, the additional degree of freedom in the system allows it to operate at closer to its rated capacity.