Dexter Gauntlett
Research Analyst
Kerry-Ann Adamson, PhD
Research Director
RESEARCH REPORT
Executive Summary: Diesel Generator Sets Distributed Reciprocating Engines for Portable, Standby, Prime, Continuous, and Cogeneration Applications
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Published 1Q 2013
RESEARCH REPORT
Diesel Generator Sets
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Section 1 EXECUTIVE SUMMARY
1.1 Overview
The diesel generator set (genset) market designates the use of internal combustion engines for distributed power production. Today, reciprocating engine-based gensets are among the fastest-selling, least expensive distributed generation (DG) technologies in the world. The many specialized segments spanning power classes, applications, and end-use customers offer a rich ecosystem of opportunities for market participants.
In backup or standby applications, diesel gensets offer reliable performance with expanding opportunities among homeowners and commercial facilities like hospitals and data centers requiring mission-critical power in the event of a grid outage. As a source of continuous or prime power, diesel gensets have historically been the leading baseload DG technology. However, natural gas (NG) gensets are now capturing increasing market share as emissions regulations and inexpensive NG point to long-term value for new installations.
As a whole, the diesel genset market has experienced steady historical growth. From a cost perspective, diesel gensets are characterized by very low installation costs, but high fuel costs and risk of price volatility. Gasoline is the leading fuel choice in the consumer market (<15 kW). In the higher power class ranges, though, diesel and NG are the primary options.
To date, the NG genset market has represented a fraction of the overall genset market due to historically high prices and lack of NG infrastructure. Over the next decade, however, the boom in unconventional gas resources and tightening emissions regulations for stationary generators will favor clean-burning NG systems over their diesel counterparts in North America. There may be a ripple effect throughout the world as other countries seek to tap unconventional shale gas reserves, as well. These developments, however, will take time to fully materialize. In the short-term, countries with strong economic and/or population growth rates that are increasingly burdened by blackouts such as Nigeria, India, Chile, South Africa, and others, continue to drive diesel genset sales. Industries in India have become highly dependent on diesel due to power outages spanning as much as 16 hours per day, making them more vulnerable to price volatility.
1.2 Competitive Landscape
A relatively small number of players lead the diesel genset market due to a wave of acquisitions by corporate giants such as Caterpillar (CAT) and Cummins Power Generation. Kohler, Generac, MTU Onsite Power, and others are also expected to see continued growth. With the exception of a few diversified companies, market participants remain highly specialized in one or more market segments, catering to a narrow set of needs. For this reason, the market is expected to remain very stable with high barriers to entry for new market participants in the mid- and high-power classes.
Diesel Generator Sets
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Many companies are shifting or expanding their focus to NG gensets and offer diesel-to-gas conversion kits, reflecting recent fuel cost trends favoring NG in the North American market. While economic growth in the developing world is a prime opportunity for incumbent manufacturers, new low-cost entrants from Asia Pacific are increasingly competitive in those regions in the lower power classes.
1.3 Market Overview
Annual diesel genset capacity installations are expected to increase by 30.9 GW from 2013 to 2018, representing a 9.9% compound annual growth rate (CAGR). Meanwhile, global revenue from the installation of diesel gensets is expected to grow from $25.7 billion in 2013 to $41.2 billion in 2018. In total, 395.7 GW of cumulative capacity will be installed during that time, representing $197.9 billion in cumulative revenue. Asia Pacific and North America, which together will account for 73% of the capacity shipped in 2018, are expected to continue to be the two largest markets for diesel gensets, led by China and the United States, respectively. Globally, annual capacity installations of diesel gensets in the 500.1 kW to 6,000 kW power class will lead growth across all regions, but gensets in the 15.1 kW to 50 kW power class will also show strong growth.
Chart 1.1 Annual Diesel Genset Installation Capacity by Region, World Markets: 2013-2018
(Source: Navigant Research)
-
10
20
30
40
50
60
70
80
90
2013 2014 2015 2016 2017 2018
(GW
)
North AmericaEuropeAsia PacificLatin AmericaMiddle EastAfrica
Diesel Generator Sets
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Section 9 TABLE OF CONTENTS
Section 1 ........................................................................................................................................................... 1
Executive Summary .......................................................................................................................................... 1
1.1 Overview ............................................................................................................................................ 1
1.2 Competitive Landscape ....................................................................................................................... 1
1.3 Market Overview ................................................................................................................................. 2
Section 2 ........................................................................................................................................................... 3
Market Issues .................................................................................................................................................... 3
2.1 Overview ............................................................................................................................................ 3
2.1.1 Distributed Generation in the Global Context.................................................................................. 3
2.1.2 Gensets as a Distributed Generation Resource .............................................................................. 4
2.1.3 Role of Diesel Gensets in the Distributed Generation Market .......................................................... 5
2.2 The Global Genset Market .................................................................................................................. 6
2.2.1 Reciprocating Engine-Based Genset Shipments ............................................................................. 6
2.2.2 Diesel Genset Market Share .......................................................................................................... 9
2.2.3 Portable versus Stationary Gensets .............................................................................................. 10
2.3 Comparing Diesel and Natural Gas Gensets ....................................................................................... 12
2.3.1 Fuel Security ............................................................................................................................... 12
2.3.2 Emissions ................................................................................................................................... 12
2.3.3 Performance, Reliability, and Convenience ................................................................................... 13
2.3.4 Cost ............................................................................................................................................ 14
2.4 Diesel Genset Applications ................................................................................................................ 15
2.4.1 Standby Power ............................................................................................................................ 15
2.4.2 Prime Power ................................................................................................................................ 16
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2.4.3 Peak Shaving .............................................................................................................................. 16
2.4.4 Grid Support ................................................................................................................................ 16
2.4.5 Combined Heat and Power ........................................................................................................... 17
2.5 Diesel Genset Markets ....................................................................................................................... 17
2.5.1 Consumer Market Opportunities ................................................................................................... 17
2.5.2 Commercial and Industrial Market Opportunities ........................................................................... 18
2.6 Market Drivers ................................................................................................................................... 20
2.6.1 Emissions Regulations ................................................................................................................. 20
2.6.2 Greater Adoption of Renewables .................................................................................................. 21
2.6.3 Increase in Catastrophic Power Outages ...................................................................................... 21
2.6.4 Rural Electrification ..................................................................................................................... 22
2.7 Market Barriers .................................................................................................................................. 23
2.7.1 Volatile Diesel Fuel Costs ............................................................................................................ 23
2.7.2 Low Natural Gas Pricing in the U.S. Market................................................................................... 24
2.7.2.1 Europe ................................................................................................................................... 26
2.7.2.2 Asia Pacific ............................................................................................................................. 26
2.7.3 Interconnection and Utility Barriers ............................................................................................... 26
2.7.4 Maintenance Challenges and Cost ................................................................................................ 27
Section 3 .......................................................................................................................................................... 28
Diesel Genset Opportunities and Key Trends .................................................................................................. 28
3.1 Overview ........................................................................................................................................... 28
3.2 Diesel Gensets and Remote Microgrids .............................................................................................. 28
3.3 Diesel Gensets and Military Forward Operating Bases ......................................................................... 29
3.4 Biodiesel Gensets .............................................................................................................................. 31
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Section 4 .......................................................................................................................................................... 32
Technology Issues ........................................................................................................................................... 32
4.1 Overview ........................................................................................................................................... 32
4.2 Engine Types for Diesel Genset Power Plants ..................................................................................... 33
4.2.1 Two-Stroke Low-Speed Diesel Engines ......................................................................................... 34
4.2.2 Four-Stroke Medium-Speed Diesel Engines .................................................................................. 34
4.2.3 Engine Speed Considerations ...................................................................................................... 35
4.2.4 Installed Costs ............................................................................................................................ 36
4.2.5 Diesel Fuel Costs ........................................................................................................................ 36
4.3 Genset Applications by Power Rating ................................................................................................. 39
4.3.1 Continuous Power ....................................................................................................................... 39
4.3.2 Prime Power ................................................................................................................................ 39
4.3.3 Standby/Backup Power ................................................................................................................ 39
4.4 Diesel Genset Technology Development ............................................................................................. 40
4.4.1 Fuel Efficiency Improvements ....................................................................................................... 41
4.4.1.1 Bi-Fuel Systems ...................................................................................................................... 41
4.4.2 Monitoring Systems and Software ................................................................................................. 42
4.4.3 Emission Control Techniques ....................................................................................................... 43
Section 5 .......................................................................................................................................................... 44
Key Industry Players ........................................................................................................................................ 44
5.1 Competitive Landscape ...................................................................................................................... 44
5.1.1 Briggs & Stratton ......................................................................................................................... 45
5.1.2 Caterpillar ................................................................................................................................... 45
5.1.3 Cummins ..................................................................................................................................... 46
5.1.4 Dresser-Rand .............................................................................................................................. 47
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5.1.5 GE Energy .................................................................................................................................. 47
5.1.6 Generac Power Systems .............................................................................................................. 48
5.1.7 Guascor Power ............................................................................................................................ 48
5.1.8 Kohler Co. ................................................................................................................................... 48
5.1.9 MTU Onsite Energy ..................................................................................................................... 49
5.1.10 Perkins ....................................................................................................................................... 49
5.1.11 Wärtsilä ...................................................................................................................................... 50
Section 6 .......................................................................................................................................................... 51
Market Forecasts.............................................................................................................................................. 51
6.1 Methodology ...................................................................................................................................... 51
6.2 Key Flex Points ................................................................................................................................. 51
6.3 Genset Market Outlook ...................................................................................................................... 52
6.4 Diesel Genset Installations Forecast ................................................................................................... 53
6.4.1 Forecast by Region ...................................................................................................................... 53
6.4.2 Capacity Forecast by Power Class ............................................................................................... 55
6.4.3 Revenue Forecast by Power Class ............................................................................................... 57
Section 7 .......................................................................................................................................................... 58
Company Directory .......................................................................................................................................... 58
Section 8 .......................................................................................................................................................... 60
Acronym and Abbreviation List ....................................................................................................................... 60
Section 9 .......................................................................................................................................................... 63
Table of Contents ............................................................................................................................................. 63
Section 10 ........................................................................................................................................................ 68
Table of Charts and Figures ............................................................................................................................. 68
Diesel Generator Sets
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Section 11 ........................................................................................................................................................ 70
Scope of Study ................................................................................................................................................. 70
Sources and Methodology ............................................................................................................................... 70
Notes ................................................................................................................................................................ 71
Diesel Generator Sets
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Section 10 TABLE OF CHARTS AND FIGURES
Chart 1.1 Annual Diesel Genset Installation Capacity by Region, World Markets: 2013-2018 ........................... 2
Chart 2.1 Installed Distributed Generation Capacity by Region, World Markets: 2012 ...................................... 4
Chart 2.2 Genset Units Shipped by Power Class, North America: 2009-2012 .................................................. 7
Chart 2.3 Genset Capacity Shipped by Power Class, North America: 2009-2012............................................. 8
Chart 2.4 Market Share of Genset Capacity Shipped by Fuel Type, World Markets: 2012 ................................ 9
Chart 2.5 Genset Capacity Shipped by Application Type and Power Class, United States: 2011 ..................... 10
Chart 2.6 Genset Capacity Shipped by Application Type, All Fuel Types, United States: 2009-2011 ............... 11
Chart 2.7 Estimated Cost of Fuel for Operating Diesel Generators for Selected Durations of Time at ¾ Load,
$4/gallon No. 2 Diesel .................................................................................................................. 14
Chart 2.8 Average Annual Spot Price of Natural Gas by Market, World Markets: 2001-2011 ........................... 24
Chart 2.9 Oil and Natural Gas Price Ratio, United States: 1990-2012 ............................................................ 25
Chart 4.1 Diesel Power Plant Installed Costs, Select Countries: 2008 ........................................................... 36
Chart 4.2 Estimated Cost of Fuel for Operating 20 kW Diesel Generator for Selected Durations of Time at
¾ Load, No. 2 Diesel ................................................................................................................... 37
Chart 4.3 Estimated Cost of Fuel for Operating 200 kW Diesel Generator for Selected Durations of Time at
¾ Load, No. 2 Diesel ................................................................................................................... 38
Chart 4.4 Estimated Cost of Fuel for Operating 2,000 kW Diesel Generator for Selected Durations of Time at
¾ Load, No. 2 Diesel ................................................................................................................... 38
Chart 6.1 Annual Genset Installation Capacity by Fuel Type, World Markets: 2013-2018 ................................ 53
Chart 6.2 Annual Diesel Genset Installation Capacity by Region, World Markets: 2013-2018 .......................... 54
Chart 6.3 Annual Diesel Genset Installation Capacity by Power Class, World Markets: 2013-2018 .................. 55
Chart 6.4 Annual Diesel Genset Installation Capacity CAGRs by Power Class and Region, World Markets:
2013-2018 ................................................................................................................................... 56
Chart 6.5 Annual Diesel Genset Revenue by Power Class, World Markets: 2013-2018 ................................... 57
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Figure 2.1 REGLA 47.6 MW Packaged Diesel Power Station in Cuba ............................................................. 12
Figure 2.2 Weekly No. 2 Diesel Retail Prices, United States: 1994-2013 ......................................................... 23
Figure 3.1 U.S. Department of Defense Small Generator Inventory ................................................................. 30
Figure 4.1 Thermal Efficiency Variations, Based on Genset System Configuration .......................................... 33
Figure 4.2 Bi-Fuel Generator Fuel Use, 600 kWe ........................................................................................... 42
Table 2.1 Applications and Markets for Diesel and Gas-Fired DG Technologies .............................................. 5
Table 2.2 Estimated Genset Market Share by Fuel and Lower Power Classes, United States: 2012 ................ 18
Table 2.3 Estimated Genset Market Share by Fuel and Higher Power Classes, United States: 2012 ............... 19
Table 2.4 Example Emerging Opportunities for Diesel Gensets ..................................................................... 20
Table 2.5 Estimated Losses per Hour of Grid Failure .................................................................................... 22
Table 4.1 Reciprocating Engine Types by Speed (Available MW Ratings) ...................................................... 35
Table 5.1 Snapshot of Genset Original Equipment Manufacturer (OEM) Market ............................................. 44
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Section 11 SCOPE OF STUDY
Navigant Research has prepared this report to provide current direct and interested stakeholders with an analytical overview of the diesel generator set (genset) market. The report covers company, policy, and technology developments related to reciprocating internal combustion engine gensets of less than15 kW to 6,000 kW utilizing diesel fuel. The report also covers, on a limited basis, natural gas (NG) gensets that utilize gaseous fuels, including NG, propane, biogas, landfill gas, and synthetic biogas (syngas).
The report’s purpose is not to provide an exhaustive technical assessment of diesel genset technologies. Rather, it offers a strategic assessment of current market positioning, issues that the market is facing, and a projection assuming business-as-usual scenarios. Navigant Research strives to identify and examine new market segments to aid its readers in the development of their business models. To this end, information on key companies involved in the diesel and NG genset market is provided. In addition, the report covers the major geographic regions and includes a detailed discussion on the key opportunities and challenges for diesel and NG gensets. The forecast period for this report extends out to 2018.
SOURCES AND METHODOLOGY
Navigant Research’s industry analysts utilize a variety of research sources in preparing Research Reports. The key component of Navigant Research’s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community.
Additional analysis includes secondary research conducted by Navigant Research’s analysts and its staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report.
These primary and secondary research sources, combined with the analyst’s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Navigant Research’s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients.
Navigant Research is a market research group whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. Navigant Research is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets.
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NOTES
CAGR refers to compound average annual growth rate, using the formula:
CAGR = (End Year Value ÷ Start Year Value)(1/steps) – 1.
CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well.
Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2013 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding.
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Published 1Q 2013
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