Frost: Operation, Maintenance Drive Demand for N. American Generator Sets

February 5, 2008 // Published as a news service by IHS

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Developments in the commercial domain are creating lucrative market opportunities for standby and base power application generator sets, according to Frost & Sullivan.

In areas where renewable energy technologies are not viable, generator sets continue as the power source of choice because of their simple operating mechanism and easy installation.

Recent analysis from Frost & Sullivan of the North American generator set markets found earned revenues of $2.98 billion in 2006, with estimates to reach $4.29 billion in 2013.

The North American generator set market is mature, but far from saturated, analysts said, as is evident from its dynamic growth in the last few years.

The commercial sector end-user group contributes heavily to this growth, due to increased construction of new telecom and IT offices, buildings and data centers, as well as a booming resource sector.

The high sales figures of small generator sets are indicative of the rapid growth of the computer industry.

"Telecommunication towers are increasingly upgraded from battery backup to generator sets, which are an improvement over the former, as batteries tend to add more heat and require more equipment," said Frost & Sullivan director of energy and power systems, Roberta Gamble.

"IT companies need prompt Internet connectivity and uninterrupted operations, generating demand for backup power and also increasing sales of generator sets in the low-end range."

The opening of several new revenue streams should not slacken manufacturers' focus on other factors, analysts said, such as the U.S. Environmental Protection Agency's (EPA) present and future regulations regarding emission controls. While these regulations are likely to be more stringent, there will be additional threats from increased power infrastructure in the region and growing awareness of renewable energy technologies.

"North America is notorious for its greenhouse gas [GHG] emissions and there is pressure on generator set end-users to periodically improve and renew their fleet with the changes in engine technology and emission laws," said Gamble.

"Gradually, the market may also see a shift toward renewable energy technologies that are deemed more environmentally friendly and may also carry reduced operation and maintenance [O&M] costs."

To prevent this situation, original equipment manufacturers (OEMs) and generator dealers must show greater prudence while devising their marketing and distribution strategies, Gamble said. "They have to highlight their products' benefits of standby application, quick generation of power for peak shaving purposes and cost-effectiveness in case of blackouts to compete effectively with new technologies on more than just price."

However, many end-users still prefer generator sets to alternative power sources for their easy availability, lower capital expense and simplicity of operations.

"Generator sets are gainful and cost-effective tools for energy-intensive companies and industries to meet their short-term power requirements, as well as decrease their losses in case of outages," said Gamble. "Demand has been burgeoning for standby applications of generator sets, as well as peak shaving applications during summer months, when additional power capacity is required."

Source: Frost & Sullivan.