In late March, about halfway through the United States’ first round of social distancing, Generac CEO Aaron Jagdfeld spoke with Yahoo Finance’s Seana Smith about whether Generac was seeing a spike in demand from COVID-19.
Smith noted that the power generation segment tends to do better during and after a natural disaster, and wanted to know the answer to a question that has also been on our minds at Power Systems Research: “Is COVID-19 a Natural Disaster?”
Like many of the other questions surrounding COVID-19, like “Is the United States heading into a recession?” or “How do we distribute scarce medical resources?” the answer isn’t clear cut.
Additionally, hotels and other buildings are being converted into temporary hospitals as states prepare for their regular ICUs to reach capacity. He states that those buildings might not have typically had back-up power, but now need to be quickly outfitted to meet regulations for critical care centers.
So, in the sense that there is a large push among businesses and government units to maintain and support infrastructure, COVID-19 is having a very similar effect to a natural disaster on the power generation segment.
Jagdfeld first noted that demand from the health sector and telecommunications companies was very high. Hospitals risk being overwhelmed, and there is increased stress on the telecom sector with so many Americans working from home. Currently about 3 out of every 4 Americans is under a stay-at-home order.
But, Jagdfeld continued, penetration remains very low among homeowners and small businesses. Those rates are higher in areas used to natural disasters, like California, which was rocked by an intense wildfire season last year. Consumers there were already faced with the virtual certainty of losing power during planned or unplanned outages, and now are working from home, where they can’t rely on the backup power systems their businesses might have had in place.
For these smaller users, then, it seems like COVID-19 is acting more like an exacerbating effect on recent natural disasters by amplifying consumer sentiments they already held, rather than as a natural disaster itself, which might convince consumers who had never thought about power generation to purchase a system for their home or small business.
Source: Yahoo Finance Read The Article
These types of questions are at the core of Power Systems Research’s mission to add value to our clients by providing specialized business intelligence.
In addition to our global team of analysts, one of the tools we have at our disposal to help answer these questions is PowerTracker, a quarterly survey of 200 gen-set dealers and 900 business consumers to get a sense of how they performed and thought about power generation in the previous quarter.
Unfortunately, the deadline for this article came just a few days before our data for the PowerTracker Q1 2020 report were completed, so I encourage you to check out our free summary of that report. We will certainly be exploring the effects of COVID-19 on the market from both a dealer and business consumer perspective.
Even without that data, though, there are some relevant takeaways from the past few years when it comes to natural disasters and demand for power generation, and some things we will be looking for in the new data.
One thing we have seen solidify over the past 2.5 years is that after the hurricane season of 2017, demand for power generation rose to a new baseline. We see this about every 6-10 years, where something will spark a surge in sales for generators, and there won’t be a correction.
Based on the open-ended comments we receive from dealers in that report, we believe a similar state of elevated consciousness about power systems exists in California. More specifically, the data shows a persistent strong growth in demand for standby power systems in the ranges appropriate for whole-home systems and small businesses.
What this means is that recent natural disasters have not only caused more consumers to enter the market (who dealers say are often younger and more well-informed than their standard customers), but has also pushed them to purchase larger systems than the single-circuit systems that previously drove demand.
COVID-19 is different from these disasters, though, in the sense that it does not directly impact power generation. New and temporary health centers may demand more generators, because they need to comply with regulations, and the stakes of a normal power outage for them are much higher than for a person working from home.
But for the typical household consumer, running out of toilet paper is more likely than experiencing a power outage from COVID-19. But like with the run on guns and toilet paper, the indefinite timeline of the health crisis might start to drive consumers to prepare for the anticipated, realistic or otherwise, effects of a longer-term pause on economic activity by seeking backup power.
At this point, the situation is too fluid and fast-changing for anyone to know exactly what the impact of COVID-19 is going to be on each sector, but as our analysts continue to get feedback from OEMs and we get data in through on-the-ground surveys like PowerTracker, we will be able to provide a clearer picture. For now, we wish you all well, and hope that you are staying healthy. PSR
Tyler Wiegert is Project Manager and Power Generation Analyst
