SUMMARY: Gen-set sales in Q4 2019 rose 3.5% from Q3 2019, driven primarily by growth in the middle power ranges. The 21-50kW range experienced the fastest growth at 7.5%, followed by 10-20kW at 3.7% and 101-300kW at 3.5%.
When looking at this growth by application, we see that standbys were the only application to experience meaningful growth this quarter, ending with a strong 7.5% increase. Unlike previous quarters, this increased demand came from more than residential consumers. Institutional and industrial consumers increased their demand by 2.5% and 3.75%, respectively. This is the strongest fourth quarter showing for these consumer types in the last five years.
Also worth noting is the exceptionally strong performance of smaller-to-medium diesel gen-sets. Each of the <10kW, 10-20kW, and 21-50kW ranges posted double digit growth, with <10kW nearly reaching 20% growth over Q3 2019.
Each of these ranges grew by at least 10 points, QoQ, than in any other fourth quarter in the last five years. Natural gas also had a solid showing in the medium ranges, growing about 5% in the 21-50kW 51-100kW, and 101-300kW ranges.
On a Year-on-Year basis, overall unit sales for Q4 2019 were up 4.5% compared to sales levels in Q4 2018.
The data comes from the proprietary PowerTrackerTM series of syndicated surveys conducted each quarter by Power Systems Research (PSR). A total of 1,400 interviews are completed each quarter with gen-set dealers and distributors, businesses and households across North America.
This quarter, we were particularly interested in seeing how the repeated planned blackouts from Pacific Gas & Electric might impact demand for gen-sets, and we did hear from a number of dealers that they had an exceptionally good quarter, as residential, institutional, and industrial consumers sought to rapidly prepare themselves for future blackouts.
The combination of winter storm season with the new planned blackouts in California led to a 12-point jump in the number of business consumers who responded “Yes,” when asked if they had an electrical power generator on the premises. While that clearly translated into very strong growth in the small and medium power ranges, the large power ranges also posted some of their smallest Q4 losses in the last 5 years.
Dealer inventory levels rose 0.8% in Q4. This leaves inventories roughly flat compared to Q3 2018.
As part of our PowerTrackerTM series, we also monitor gen-set sales trends by application. Standby gen-set sales continue to be dominant, growing about 14% while portable sales were flat and all other applications declined. This marks the fifth consecutive Q3 with double-digit growth for standby sales. No other application has such a consistent pattern for Q3 sales, but cogeneration does stand out with its marked 7% decline in a time of year when it typically at least holds flat.
METHODOLOGY: Since 1998, Power Systems Research (PSR) has been continuously maintaining its PowerTrackerTM series of syndicated surveys, conducting 1,400 interviews each quarter among three key respondent groups in North America: gen-set dealers and distributors, businesses and households.
We conduct 200 interviews each quarter among dealers and distributors; the focus of this survey is on recent sales and market observations for the current quarter as well as expectations for the coming quarter.
Our Business Consumer survey consists of 900 interviews per quarter among a wide cross section of businesses to gather their input concerning ownership, usage trends and motivating factors for purchase, including any concerns about the reliability and availability of electric power.
Finally, our Household Consumer survey consists of 300 interviews per quarter to learn more about gen-set ownership trends among households and monitor the likelihood of a gen-set purchase.
Dealer/Distributor Outlook for Q1 2020
Dealers and distributors are projecting a continued resurgence of small diesel power generation in Q1, anticipating double-digit QoQ growth in the <10kW and 10-20kW diesel power ranges. Overall, however, they expect these ranges to experience a modest decline compared to Q4.
Growth is expected to be driven by the construction season, primarily for natural gas gen-sets in the 101-300kW, 301-500kW, 501-1000kW, and 1MW-2MW ranges. Each of those ranges is expected to grow between 6 and 7.5% for natural gas in Q1 2020. These are the most optimistic projections dealers have reported to us in the previous five years.
Interestingly, dealers are projecting some of the lowest growth in the last five years for diesel in those same power ranges. Each quarter, we are noticing a progressing trend that dealer expectations are beginning to segment the market into strong small-diesel sales and strong medium-to-large natural gas sales, with weak sales for each fuel type in the other ranges. We will be watching to see if those expectations are solidified in the after-the-fact sales numbers.
When asked, “Why do you expect sales to change in the upcoming quarter?” comments from dealers focused on the following market observations:
- End of Planned Power Outages: Many dealers were very happy to talk to us about how the planned power outages by PG&E led to very strong sales in Q4. Of course, they told us, that also means that next quarter is going to see a return to reality. We wonder, though, whether these planned power outages will have a similar effect on the consumer population that the severe hurricane season in 2017 did, and whether they might raise the salience of backup power enough to keep demand growing even after the outages have stopped.
- Mixed First-Quarter Effects: For many dealers, first quarter is a hibernation period between hurricane and camping seasons. For others, it is when things pick back up again with a strong construction market. Despite uncertainty around trade and oil prices, economic indicators are strong and the risk of a recession this year has greatly diminished. Dealers are clearly expecting it to be a relatively strong Q1.
When asked, “What changes have you recently noticed among particular customer groups or product categories within your market?” there were several comments that emerged as common themes. Many of these are comments that have carried from quarter to quarter but the following is a sampling of some key observations:
- In some ways, the answers to this question were remarkable this quarter for what hasn’t changed. There is a continued growth in the interest in standbys, driven in large part by residential consumers. Business consumer concern about the availability of power reached all-time lows in 2019, with only a minute uptick at the end of the year, but clearly residential consumers, both young and old, are experiencing concern.
- That being said, a substantial number of dealers mentioned a resurgence in price sensitivity, and an increasing phenomenon of being undercut by direct-to-consumer sales by the OEM.
PSR
Tyler Wiegert is a Project Manager at Power Systems Research (PSR), a market research and consulting company headquartered in St. Paul, MN
