Growing Again

Five years ago in 2018, if you'd asked where the market for diesel generator sets was headed, a rational response would probably have been along the lines of into maturity, a few growth areas but with a gradual overall decline through the 2020s.

Today the market is booming and we explore why.

But since 2020, the market has been riding a relatively steep growth curve, reaching an all-time high of almost $13 billion in 2022.

So where has the renewed growth come from?

At a global level, the answer is clear: the overall market growth CAGR from 2018 to 2022 is 4%, a respectable level of growth, but it's significantly higher for diesel generator sets between 2000 and 4000 kVA.  Data from Parkinson Associates' Genstat database point to:

• 12% CAGR in the 2001 - 3000 kVA band

• 7% CAGR in the 3001 - 4000 kVA band

More recent comparisons point to even higher year on year growth rates in 2022 vs 2021 for these higher power bands, with the 3001 - 4000 kVA band growing much faster, at 20%+.

One of the most well-known drivers of this growth is, of course, the data center sector, and in particular hyperscale data centers which we'll feature in another article.  But across the board, there are other multiple sources of growth.

And at a regional level, there's also a growth story.

North America

Ten years ago, the North American market was valued roughly at the same level as the Middle East:  today North America is three times larger than the Middle East and accounts for a quarter of the entire world market, with a 7% CAGR from 2013 - 2022, 8% CAGR from 2018 - 22 and 13% growth from 2021 - 22.  In other words, its growth is accelerating.  

Of course the data center sector has been a major driver (53% of the world's hyperscale data centers are in the US).  But North America also has a well-established rental sector with almost 400 rental operators of varying sizes offering diesel generator sets.  The region has also been economically resilient with a relatively strong construction sector.  

And lastly North America has a power grid that is at capacity, with transmission and distribution systems dating from the 1950s and 1960s, designed only for a 50-year life.  At a time when there's much sensitivity to power loss and greater consciousness of extreme weather events many businesses are turning to generator sets as cost-effective and practical insurance against outages.  Simply, more generator sets are being bought and rented.  

The Future

Today there are many ways to generate and store electricity but for many businesses and applications, diesel generator sets remain tried and trusted, the first go-to option.  Recent events, both natural and human-made, have shown that when it comes to guaranteeing electric power, diesel generator sets are both effective and practical.  

Through the next decade, expect to see advances in fuel technology for generator sets, with cleaner fuel options.  Diesel generator sets will also start to feature more often as part of wider, more balanced power systems, alongside renewable generation and energy storage.

Data center owners, particularly hyperscale operators, remain sensitive to the presence of diesel generator sets at their sites, even if they are barely used.  Some have committed to their removal by the end of the decade and are exploring alternatives, including hydrogen and energy storage.  Much of this is still experimental and a large-scale commercially viable solution may still be some way off, but it’s clear that as soon as it's found, data centers will quickly move away from diesel, possibly by the early 2030s. 

The electric power industry is at a pivot point with exciting new technology and processes being explored.  But short-term demand for high quality and reliable power is increasing much faster than commercialization of new technology.  For this reason, for the short term, and certainly at least through the 2020s, the market for diesel generator sets is likely to see continued growth, probably at a higher level than over the last ten years.