GlobalData reports on the world generator market and presents an overview on the key drivers shaping the sector13 January 2016
As the population continues to grow, power demands increase as well. GlobalData reports on the world generator market and presents an overview on the key drivers shaping the sector.
Global power requirements are growing annually but utilities have not been able to ramp up their generation capacity to match the growing demand, which has created a market for generator sets. The global generator market is largely dominated by diesel generator sets; gas generator sets, the second, most popular type, account for less than 10% of the market share.
The global generator market is highly competitive; the technology used is maturing and replaceable, and there are pricing challenges. However, in the past decade, the market grew over 40%, and by 2025, it is expected to grow by another 50%. The market growth during the forecast period will largely depend on the market growth in the Middle East and Africa, and Asia-Pacific.
Caterpillar Group leads the highly fragmented market, GE Group and Cummins are close followers. The other key manufacturers include MTU, Kohler, FG Wilson, Himoinsa, MWM, Pramac, Aksa, Volvo Penta, MAN and Atlas Copco.
Globally, annual generator set installations increased by around 35%, to 75.0GW in 2014, from 56.0GW in 2006. By 2025, the annual installations are expected to reach 100.2GW, from 77.3GW in 2015, growing by more than 30%.
The market size of global generator sets reached $14.5 billion in 2014, from $10.3 billion in 2006, registering a compound annual growth rate (CAGR) of 4.4%. The market declined during the period of recession from 2008 to 2009, but the trend during the past five years has seen a gradual increase. This will continue in the coming years, although the growth rate will be slightly lower than it is at present.
By 2025, the global generator market is expected to increase to $22.0 billion, from $15.1 billion in 2015, registering a CAGR of 3.9%.
Share by fuel type, region, capital and service
Diesel generator sets dominated the market during 2014, with around 87% of the market share, whereas gas generator sets, the distant second, accounted for around 9%, while generator sets running on heavy fuel, biofuel or dual fuels accounted for less than 4%.
The global generator market was dominated by North America in 2014. Demand for generator sets in this region accounted for around a third of the total market. This was followed by the combined share of the Middle East and Africa, which accounted for close to a quarter of the generator sets ordered globally. The other significant regions were Asia-Pacific, Europe and South America.
In terms of device capacity rating, the market was dominated by the 1-5MW category in 2014. Products with a capacity rating of below 1MW had the second-largest share. The products with a capacity rating of 5-10MW accounted for 5% of the global market, while the 10-20MW category accounted for only 3.2%. The share of generator sets with a capacity rating above 20MW was negligible.
Generator sets are primarily used for three kinds of services: continuous, standby and peaking power requirements. Continuous power generators act as the primary source of power supply and operate continuously. Standby power generator sets are a secondary source of power and remain idle when the primary source is available, like grid feed power. They begin operation only when the primary source of power is not available. Peaking power generator sets are used only to meet the power demand during peak hours, which is in excess of the available power.
Continuous power generator sets led the market with a 50% market share in 2014. Standby power generator sets were almost equal to this, with a 48% share while peaking power generators accounted for only 2%.
In 2014, the global generator market was completely dominated by products operating at above 1,000rpm. The combined share of medium and low-speed engines accounted for less than 2%.
Global key drivers
Demand for electricity in emerging economies, along with the growth of telecoms networks and data centres, are the key factors responsible for the growth of the generator market.
The power requirements of emerging economies often exceed the maximum generation capacity, leading to a power deficit. This situation opens up the market to other sources of power generation, such as generator sets.
Many African countries' telecoms networks are seeing major investment and expansion. However, this often involves expanding to remote areas that are not connected to the grid. The resultant isolated telecoms towers depend on stand-alone power sources such as generator sets to meet their power requirements. In addition, data centres need a constant power supply to maintain their servers, as a loss of power means the loss of valuable data, for which they employ back-up options such as generator sets. Both of these factors create an ideal market for growth and investment.
Adverse economic conditions are a key deterrent to the growth of the generator market. In addition, the leading generator markets of North America and Europe have matured, meaning growth will slow in these regions.
The markets of North America and Europe have matured over the years. Their power sectors are well developed, and now have either surplus power or very small deficits. Power requirements are also not expected to grow significantly in the future. As a result, the generator market of these countries will not register significant growth in the coming years.
Economic conditions are representative of market sentiments. A positive economy means the market is flourishing, and that the industrial sector, among others, is thriving. Additional power is required to support and sustain this growth, often met by generators, which are well suited to meeting power requirements quickly. Positive economic conditions therefore benefit a country's generator business.
On the other hand, if the economy is sluggish, demand for consumer products decreases, reducing industrial activity and electricity requirements, pushing the generator market into a phase of sluggish growth.
Gas generator market
Gas generator sets, which at present account for only 9% of the market, are expected to witness a large increase in market share in the coming years. Growing environmental concerns and the imposition of stricter emission norms limiting the operational hours of diesel generator sets during a year, are the key factors that will drive this change.
The other notable change during the recent past has been the commercial exploration of shale gas, which has resulted in a significant reduction in the cost of the fuel. The US, which has the largest gas generator market globally, is also the only country to explore shale gas economically, which highlights its importance to the market. This has generated optimism and enthusiasm in several other countries that have a significant technically recoverable shale gas reserve. If they are able to explore their reserve economically then countries like China, Brazil and South Africa will witness a major upturn in their gas generator markets.
The biggest challenge the market faces is the high initial cost, which is approximately four times that of a diesel generator of the same specification. However, gas generator sets are more economical in the long term, due to the minimal operation and maintenance costs. The other major challenge for the development of the gas generator market is the absence of adequate gas transportation infrastructure in many countries, whereas diesel is relatively easily available, which gives those generators a competitive edge.
North America dominated the global gas generator market in terms of the market size of generator sets in 2014. It was followed by Asia-Pacific, which accounted for almost a quarter of the market, largely due to rising demand from China and India. The rising share of this region can be attributed to the rapidly growing economy, increasing construction activities and the power deficit. The other significant regions were South America, the Middle East, Africa and Europe.