2023

A Record Year

2023 was a remarkable year for producers of diesel generator sets.  

The overall industry value for units above 7.5 kVA grew by 23% of which around two-thirds was attributed to volume and around a third due to industry price increases as producers faced higher costs.

This level of growth matched the upturn in 2010.  But the growth in 2010 was industry recovery after the 2009 financial crisis:  2023 was different. 

What's different this time is that 2023's growth levels were on the back of another strong year in 2022, where the industry grew by 13%.  

And that means the industry has reached an all-time high of around $16 billion (based on OEM ex-works value). 

Each quarter, Parkinson Associates monitor the industry across 12 power bands at country level and we've grouped them together for the chart in figure 1.  While almost every one of the 12 power bands saw double-digit % growth, in 2023 by far the largest growth was seen at power bands above 1,500 kVA (up 38%)and particularly between 3,000 and 4,000 kVA (up 55%), driven by the data center sector, and particularly by the hyperscalers.  

Globally we believe the data center sector accounts for around 30% of the value of installed generator sets above 1,500 kVA (i.e. the global population).  But in terms of the 2023 market, that figure is probably around 50%.  

And that is having a major impact on the dynamics of the industry.  

North America

North America remains the world's largest regional market for diesel generator sets. In 2023, we value the market at around $4.5 billion, almost $2 billion larger than Europe, the world's second largest regional market.  Overall, we saw the market grow by almost 40%, the world's fastest growing region.

Three factors have driven this strong market performance: 

Economy:  Despite the many shocks which the global economy has endured recently, the economies of North America have been relatively resilient, particularly the United States which accounts for 90% of the regional opportunity for diesel generator sets.  Much of this economic growth has been driven by industries which impact positively on the market for generator sets. 

Concerns over grid resilience and reliability:  The electricity grid of the United States is one of the most complex in the world:  connecting 145 million customers with more than 7,300 power plants, around 640,000 miles of high-voltage power lines and millions of miles of low-voltage power lines with distribution transformers. 

Most of the electricity network dates from the last century and much of its transmission and distribution systems were designed in the 1960s and 70s with a 50 year life expectancy.  Although surplus capacity was often designed into the system, in many cases that has now been reached or surpassed.  

The grid was also designed for the climate of the mid 20th century when extreme heat and storms weren't as common as they are today.  Most distribution lines are above ground and vulnerable to storm damage while the lines also become less efficient in extreme heat, at the very point when demand for power typically reaches its peak.  And grid transformers are also more vulnerable to failure in extreme heat.  

Although in global terms, the risk of power outages in the US is very low, in practice tolerance of power outages has decreased substantially over the last 5 - 10 years, particularly with more remote working and as the digital world becomes more embedded in daily life.  More businesses and homeowners are prepared to invest in a source of standby power. 

Data center sector growth: The US has more data centers than any other country in the world, with facilities at more than 2,000 sites and around half of the world's hyperscale data centers.  

The data center business model is built on 24/7 uptime and availability at peak efficiency levels.  In the US, although the overall risk of data center outages is relatively low, the consequences of downtime are severe, especially at hyperscale facilities.  Avoidance of outages is therefore the highest priority. 

Power is among the most common factors in data center outages and this includes failures in UPS systems, generator, switchgear or transformers connecting the facility to the grid. 

Every data center site operates its own standby generator sets, with additional units in place to back up in case any fail.  

Generator sets at data centers can be powered by either diesel or natural gas engines, but the industry has a marked preference for diesel, despite higher emissions.  Sometimes there are challenges with utility gas supply, there are more rigorous safety considerations with gas storage and typically gas generator set installations are more costly and complex.  Given that generator sets at data centers will operate for only a bare minimum of time, the trade-offs for diesel are considered acceptable. 

The data center sector has been a major growth driver for the US diesel generator set market, particularly at ratings above 3,000 kVA.  

Europe

Until a couple of years ago, the overall European market for diesel generator sets was flat to declining, with a few bright spots.  In 2022 and 2023, that changed.   In 2023, we value the market at around $2.6 billion, the highest we have ever seen it, and growing at 33%

Three factors are in play.

Ukraine: Manufacturers continued to ship large quantities of diesel generator sets to Ukraine.  In 2023, we see Ukraine in the top 10 of world markets, with an opportunity value of almost $300 million.  Over the shorter term, we see this demand easing, but at some point in the future a massive rebuilding program will initiate further demand for generator sets over a period of years.    

Fears of electricity outages: In 2022 and reaching into 2023, uncertainty created by the conflict in Ukraine also spilled over into the rest of Europe.  Fears of electricity outages driven by shortages of natural gas drove many businesses and government facilities to buy generator sets.  And the result was a spike in demand in otherwise mature market sectors, across all power bands.  

Data center sector: As in other global regions, the European data center sector is growing rapidly, as high as 15 - 20% in 2023.  Supply concerns pushed many data center operators to pre-order more generator sets for new data centers in the pipeline and in 2023, we saw growth of almost 50% for diesel generator sets above 2,000 kVA and even higher for ratings from 3,000 - 4,000 kVA where hyperscale data centers are major customers.  

In 2023, Europe demonstrated once again that when it comes to guaranteeing standby or emergency electrical power, in terms of cost, flexibility and responsiveness, a diesel generator set is a solid and reliable option.   

South East Asia

Along with North America and Europe, South East Asia was one of the world's fastest growing regional markets, growing 22% in 2023. 

We've seen two major factors in play.

Pressure on power grids:  The region’s power grids have been placed under pressure from regular and sustained heatwaves.  

In 2023, Bangladesh saw power rationing and factories in Vietnam were told to reduce power usage, with cuts applied to public lighting. Thailand and Cambodia were also impacted.  And Sri Lanka’s grid faced serious problems with fuel shortages. 

In the short to medium term, there is little line of sight to a remedy at utility level, and for many businesses a diesel generator set remains the quickest fix.  

Data center sector growth:  Data center growth has also been strong across the region in 2023, driving substantial growth at higher power ratings, especially in Indonesia, Malaysia and Vietnam.