Looking by application, Portables and Standbys were slightly positive, while Temporary, Peak Shaving, Baseload, and Cogeneration were all negative by double digits compared to Q1 2020. This translated into a 5% increase in sales to Private consumers, and about 6% decreases in Institutional and Industrial sales.
On a Year-on-Year basis, overall unit sales for Q2 2020 were up 1% compared to sales levels in Q2 2019, with Q1 2020 having almost completely wiped out the gains earned in Q3 2020 of last year.
The data comes from the proprietary PowerTrackerTM series of syndicated surveys conducted each quarter by Power Systems Research. A total of 1,100 interviews are completed each quarter with gen-set dealers and distributors and businesses across North America.
As a data company, Power Systems Research (PSR) continues to closely monitor the effects of the COVID-19 pandemic on the power generation market, and we are seeing two simultaneous phenomena.
The first is a mixed recovery as businesses begin to reopen. The segment is still extremely weak and mostly declining relative to last quarter, which was split between open activity and stay-at-home orders. The second is new demand created by the pandemic, primarily a run on portable and standby generator sets as people try to secure their power supply for home-offices and remote learning. This new demand is interacting with the threat of power outages in California and hurricane weather in the southeast to create explosive demand in those regions.
As part of our PowerTrackerTM series, we also monitor gen-set sales trends by application. Portable sales grew by more over Q1 2020 than in any other second quarter since 2008. Standby sales were about flat compared to Q1 2020. We offer two hypotheses for why this might be.
In some regions, standby sales might be negative, like the other, more-commercial applications, which are down by double-digits. That negative may be offset for the country as a whole because of the high demand in California and hurricane states.
It is also possible that Portable sales grew so much because many dealers reported running out of Standby generators, leaving consumers to buy Portable sets. In other words, demand for Standby generators may have outpaced supply this quarter. Weak supply was offered by more dealers this quarter as a reason for weak sales than in any quarter in at least the last four years.
METHODOLOGY: Since 1998, Power Systems Research (PSR) has been continuously maintaining its PowerTrackerTM series of syndicated surveys, conducting 1,100 interviews each quarter among two key respondent groups in North America: gen-set dealers and distributors, and business consumers.
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.
Dealer/Distributor Outlook for Q3 2020
Diesel is projected to slightly outperform natural gas in terms of QoQ increase, hitting 5-6% in the 51-100kW and 101-300kW ranges. These projections are driven by severe weather forecasts and regular seasonal changes, and undoubtedly depend a great deal on whether consumers feel confident enough to return to normal economic activity, something that dealers did not report for this quarter.
When asked, “Why do you expect sales to change in the upcoming quarter?” comments from dealers focused on the following market observations:
- · COVID-19: The coronavirus has had multiple, sometimes opposing impacts. Sales were far down in Q1 2020 and Q2 2020, so dealers are projecting an increase simply because of the low baseline. Some dealers did not project that economic activity would return to something like normal next quarter and are expecting to experience further decline.
They stated that consumers are holding onto their money more tightly in the climate of uncertainty, even as quote activity is increasing. Some dealers are experiencing strong demand from the stay-at-home workforce and are only expecting to see that rise. Generac was mentioned by a few as an OEM that has capitalized on the new expanded need for home backup power. Whether that increased demand translates into higher sales depends on whether OEMs can increase their supply of gen-sets.
- : Primarily in California, consumers are expecting more rolling blackouts to prevent forest fires. California’s coronavirus case trajectory is back in a downward direction, but it is unlikely that work-from-home arrangements will go away anytime soon. That reality combined with the widely-expected nature of the blackouts is causing an interactive multiplier effect on demand for home backup power there.
- : We are in the middle of what may be the most active severe storm season on record. Every second quarter and third quarter, one of the dominant factors in sales projections is the severity of the storm season. Similar to the power outages, the widely-expected nature of the severe storms combined with the necessity of power during work-from-home arrangements is creating a regional multiplier effect on demand in the southeast. One thing we are watching for is if larger employers will start to either rent or subsidize backup power for employees to ensure an uninterrupted continuation of business operations in the face of these storms.
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:
- has been a regularly cited change by dealers, leading to regular increases in non-residential demand in some regions.
- Most dealers reported increasing demand for residential and non-residential generators but said that weak supply was preventing them from meeting this demand. This indicates that the process of restarting the economy might not be as fast or easy as a simple resumption of activity.
- Some dealers also reported a reluctance to spend among consumers who do not know how reliable their next paycheck is going to be or how long the pandemic will affect the economy. One thing we have heard much less of this quarter than in previous years is a reluctance to spend as a result of election uncertainty, leading us to wonder if that uncertainty is still affecting demand, or if it has been entirely subsumed by the pandemic. PSR
Tyler Wiegert is a project manager at Power Systems Research
