Before Crimea, many countries relied on Russian gas to power their homes and businesses. But since Russia has cut off much of their supply, it’s left these nations scrambling to find an alternative.
However, as natural gas becomes more expensive, more countries are looking towards renewable power sources e.g.,solar and wind. This will open doors for players in the power generator market as they look to expand into new business areas.
Here’s how companies making power generators are profiting from the Ukraine-Russian war gas shortage.
Ukraine/Russia War: What’s the Gas Shortage Status?
The gas shortage is affecting many countries, and as of October 2022, it is causing problems in at least eight countries.
The gas shortage stems from various factors, including weather, political tensions, and military conflicts.
Gas pipelines were damaged during the Crimea battle in 2014, preventing gas from flowing into Europe. This fall-out created an immediate supply shortage for Europe.
Remember, Russia had historically supplied about a quarter of all gas used in the EU. The ongoing war has only worsened the crisis.
As a result, some European countries are shifting to coal power plants due to limited natural gas resources. Other countries affected by this shortage include:
- The Czech Republic
Each country is experiencing different levels of severity.
The Far-reaching Demand for Generators
It’s easy to understate the real benefit of generators if you don’t consider these driving factors– all tied to the Kremlin conflict:
- The wide range of end users who rely on generators amid the gas shortage
- The increasing urge (among nations) to look for renewable sources
- Changing consumer demands
- Rapid technological advancements to create better generators
That said, here’s how companies are profiting from the current situation.
Responding to increased demand from a wide range of end-users
Generator makers have also benefited from this shortage as many industries turn to them for different power needs. These companies serve a wide range of the sectors, including:
- Oil and gas
All these users depend heavily on gas-powered engines for their operations. But since the gas supply was interrupted due to sanctions imposed after Crimea, in March 2014, the power generator industry has benefited from a backlog in orders for emergency power plants.
Companies are recording a surge in demand for generators that can provide backup power for homes or commercial buildings.
Making profits off generator rentals
Generator purchases have gone up, and the same is true for rentals, according to a report by Research & Markets (RM).
The generator rental business in the United States was 2.5 billion USD in 2020. Aggreko PLC, APR Energy, Atlas Copco, Caterpillar Inc., and United Rentals, Inc. are key players in the generator rental sector.
Meanwhile, China is predicted to reach a market value of 2.6 billion USD by 2027, growing at an 8 percent CAGR from 2020 to 2027.
Other notable markets include Canada and Japan, expected to increase at 4.6% and 1.7%, respectively, within the same period. Germany will expand at a CAGR of around 2.1% in Europe.
Meanwhile, the Asia-Pacific market will reach US$1.6 billion by 2027, led by nations like Australia, South Korea, and India.
Responding to the demand for more convenience
As the Kremlin maintains its position on the war, consumers continue to look for convenient alternative power sources. This explains the increasing focus on technologies like portable generators.
A portable generator works by driving a gas/diesel engine that rotates an inbuilt alternator to create power. The growing need for a continuous and dependable power supply is driving the demand for such tech.
These products offer numerous benefits, including more user-friendliness and versatility. The worldwide portable generator market will likely reach $2.5 billion by 2024 according to RM.
Brands Responding to the Increased Demand for Alternative Power Sources
As companies respond to the rising demand, they must consider changing market needs. Here are some brands that have benefited from meeting customer demands:
This company is now the sole supplier for a significant power-generating project in Azerbaijan, worth $3 billion.
The Swedish machinery giant secured a contract with Saudi Arabia’s National Petrochemical Company (NAPC) to supply more than 200 ultra-high-speed turbines for the Ras Tanura Refinery expansion project.
The UK-based engineering company was awarded a contract by the government of Pakistan to design, manufacture and install generators for Karachi Electric Supply Corporation (KESC).
Kirloskar Electric Co. Ltd, India:
This Indian manufacturer of diesel-engine generators recently signed a $300 deal with Uttar Pradesh State Power Generation Company Ltd (UPP).
Kirloskar will supply 1,000 HP engine sets for UPP’s 250 MW grid-connected generator set in Noida and Ghaziabad districts of UP state.
Caterpillar, Inc. is another major generator maker. The company’s stock has risen from $73.00 to $81.85 in the last three months.
Cummins is a diesel engine manufacturer that has seen its stock rise from $92.25 to $94.08 in the last three months.
These are trends that analysts at Credit Suisse Group expect will continue as long as gas prices remain high.
Rolls-Royce Power Systems has been working to perfect generators. Recently, it rolled out mtu engines for construction equipment, industrial applications, agriculture, and excavation of sustainable fuels
The power unit will offer a unique combination of fuel efficiency and power output that can be useful in various applications.
It’s also the 1st diesel engine to incorporate Rolls-Royce’s new catalyst tech meant specifically for this application.
Other Businesses Taking Advantage of the Situation
But generator makers are not the only ones profiting from the status quo. Companies related to generator products are also taking advantage of the situation. Some noteworthy names include the following:
Eaton Corporation manufactures electrical components such as motors, switches, and circuit breakers that make renewable energy sources work.
They’ve reported increased sales of these items over the past year, but their stocks have been relatively stagnant due to market volatility.
Power Generator Market: What’s the Future?
The Business Research Company predicts a bright future for generator makers despite the crisis.
According to the researcher, the global generator market will thrive at a CAGR of 11.6 percent. This figure represents a growth from $17.67 billion last year to 19.72 billion USD in 2022.
Remember, the Ukraine-Russia war has hampered the worldwide economic recovery from COVID-19. It has led to economic sanctions, increased input costs, and supply chain delays affecting markets worldwide.
Still, the researcher predicts the generator sector will reach $26.65 billion by 2026.
The study cites several drivers, e.g., changing buyer demands, the shift to renewable sources, and strategic acquisitions.
One serious issue facing countries worldwide is the gas shortages due to the Russia-Ukraine conflict.
As of this writing, the war persists and it’s unclear how long it will last and its ultimate impact on the global economy.
Because energy is a basic need, generator companies are working to meet the demand for alternative energy solutions in different ways.
Moving forward, firms should focus on groundbreaking generator technologies and strategic mergers to cater for different end-users. They must also develop solutions with increased fuel efficiency, renewable energy sources, and lower emissions.