Data Center Generator Market

Market Overview

The global data center generator market size was valued at USD 2.03 billion in 2021. It is expected to reach USD 3.23 billion by 2030, growing at a CAGR of 5.4% during the forecast period (2022–2030).

Data centers are mission-critical infrastructures that manage and process a large volume of data across multiple industries; as a result, data centers contribute significantly to the global economy. For data center facilities, however, reliable power backup to prevent data loss during power outages is of utmost importance. Generators offer a safe and cost-effective way to provide backup power for data centers and prevent the downtimes caused by restarting the entire system. Generators do not require an external power source to operate and can meet a data center's massive electrical power requirements have been the driving force behind the market's expansion.

Manufacturers of data center generators market are focused on equipping their products with technologically advanced features to meet the diverse needs of data center facilities. In addition, companies such as Cummins, Inc., and Himoinsa have added remote monitoring capabilities to generator sets. Thus, the data center operator can remotely observe the load levels, power system status, and alternator data and remotely control the alternator. These characteristics result in lower maintenance costs and increased operational efficiencies for the data center facilities. The market value chain for data center generators includes raw material suppliers, component suppliers, manufacturers, distributors, and end-users. Iron, steel, aluminum, plastic, semiconductor components, and insulating materials are the primary raw materials used in the production of generators. Some raw materials are supplied directly to generator manufacturers to develop the necessary components.

Additionally, raw materials are supplied to component manufacturers, who perform primary processing and distribute the components to generator manufacturers following their specifications. To meet the demand of generator manufacturers, vast quantities of raw materials are sourced from numerous sources. Demand for advanced generators with auto-start and stop systems is rising in data centers. A typical UPS can power data center servers for minutes. It gives data center operators time to start the generators after an outage. Thus, data centers need UPS to ensure uninterrupted power.

Market Dynamics

Market Driving Factors

• Growing Need for Effective Power Centers

A data center is made up of networked computers and storage applications that are used to store, process, and distribute mission-critical data. As organizations expand and automate the management of their business data, several data centers are being established in various regions of the globe. However, effective power management is a significant obstacle for data center operators. Data centers use substantial electricity to power their computers, servers, and networking equipment. They also provide electricity to power the cooling equipment. Data centers must maintain temperatures of approximately 20 degrees Celsius. Not only can power outages disrupt the operation of the entire data center facility, but they can also affect the performance of the cooling equipment. Therefore, data centers rely heavily on generators to provide backup power during power outages. As a result, demand for data center generators is increasing, driving market expansion.

Several businesses are adopting cloud computing to improve their business operations' scalability, efficiency, and adaptability while simultaneously reducing their operational expenses. As more enterprises adopt cloud computing and rely on web hosting, colocation, and cloud services to run their operations, mega data centers are being constructed worldwide. While cloud computing involves managing large amounts of data, it also requires substantial computational power. The uninterrupted power supply is of the utmost importance if mega data centers continue to provide the necessary computational power during power outages. Thus, data center operators are aggressively investing in data center generators market to ensure an efficient and uninterrupted power supply for their data centers.

• Rising Advanced Generator System

As data center power densities rise, backup power supply systems become increasingly important. Generators are powered by fuel and do not require an existing or stored power source to function. Consequently, they can serve as an efficient secondary power source in the event of a loss of primary power and power all of the data center's systems, such as computers, servers, networking equipment, and cooling systems. Thus, generators can guarantee a continuous power supply for data centers so long as they have fuel. However, conventional generator systems suffer from reliability and performance problems. Conventional generators sometimes fail to start or provide sufficient power due to issues with their subsystems. While their runtime was susceptible to low fuel levels, they frequently failed under unexpectedly high-power loads. However, advancements in generator systems, such as standby generator systems operating on diesel, natural gas, liquid petroleum, and gasoline, among other fuels, have resulted in the introduction of energy-efficient generator systems for data centers and are anticipated to create growth opportunities for the data center generator market over the forecast period.

Natural gas or diesel-powered standby generator systems are the most prevalent. A generator system typically comprises an emergency generator, an automatic transfer switch (ATS), and a management system. The figure above illustrates the output distribution. The ATS is supplied by two power sources, the utility, and the standby generator, with the utility being the preferred power source. In a power outage, the ATS automatically switches to the backup generator to ensure that the data center continues to receive uninterrupted power.

Market Restraining Factors

• Emergence in the Fuel Cell Power Solutions

The fuel-powered generators used in data center facilities emit nitrous oxide, carbon dioxide, particulate matter, and other hazardous exhausts into the atmosphere. Therefore, data centers must comply with various environmental sustainability regulations when installing such generators. In addition, ample space and sizeable on-site fuel tanks are necessary for establishing the generators. In addition, a dedicated UPS is required for the generators to operate correctly. Due to the factors above, data center operators are evaluating alternative technologies to fuel-powered generators.

In addition, the integration of battery technologies such as fuel cells and Li-ion batteries has resulted in the emergence of fuel cell power systems, which is anticipated to impede market growth. Clean, scalable, and dependable fuel cells provide a means for data centers to satisfy their energy needs and environmental sustainability objectives. Depending on the fuel source, fuel cells offer low to zero emissions, thereby mitigating data centers' environmental and climate impacts. In addition, fuel cell systems can heat excellent data center equipment to maintain proper climate conditions, maximize server performance, and improve overall efficiency. Even though fuel cell power systems eliminate the need for large backup generators and reduce data center emissions, these systems have several drawbacks. Fuel cell power systems are more expensive per kilowatt-hour (kWh) than generators.

Moreover, fuel cell systems are only economically viable with government grants. In addition, fuel cell power systems have complex designs and require a constant power load. This factor continues to drive demand for power generators that are simple to install and have fewer complications than fuel cell systems.

Key Market Opportunities

• Shifting to the More Efficient Natural Gas Generator Solutions

In addition to data and productivity losses, power outages in data center facilities can incur high costs. There is a growing demand for dependable generators in data center facilities for efficient system backup due to the escalating frequency and severity of natural disasters and extreme weather events worldwide. Diesel, natural gas, liquid petroleum, and gasoline are used to operate generators. In the market for generators used in data centers, natural gas generators present the most significant expansion opportunities. These generators offer high efficiency and dependability, reduced gaseous emissions, and a chance for data center facilities to monetize unused power generators.

Furthermore, natural gas generators adhere to stringent government regulations regarding the greenhouse gas emissions of data centers. In addition, natural gas generators deliver superior efficiency and output power performance. In developed regions, the high dependability of the natural gas grid eliminates the risk of limited run times and refueling associated with other generator types. Natural gas generators can reduce the emissions of a data center. Natural gas-powered generators can reduce NOx emissions by 80 to 90 percent and CO2 emissions by up to 25 percent compared to diesel-powered generators. In addition, the relatively high prices of diesel and gasoline-powered generators and changing government policies and regulations are expected to spur demand for natural gas generator systems.

Segmental Analysis

The global data center generator market is segmented by Product Type, Capacity, and Tier Standards.

By Type

Based on type, the global data center generator market is classified into Diesel and Gas.

The diesel segment dominates the global data center generator market and is expected to grow at a CAGR of 6% during the forecast period. Customers prefer diesel-powered generators due to their ability to manage high power loads during blackouts. Moreover, diesel generators are highly efficient due to their integration with flywheel UPS topology and batteries to provide backup power.

By Capacity

Based on capacity, the global data center generator market is classified into <1MW, 1MW-2MW, and >2MW. The < 1 MW segment holds the largest revenue share and is projected to grow at a CAGR of 7.1% during the forecast period. This expansion is due to the widespread use of edge data centers worldwide. In addition, the general use of on-premise data centers in developing nations, which require generators with a capacity of less than 500 kW, is anticipated to contribute to the segment's growth.

By Tier Standards

Based on tier standards, the global data center generator market is classified into Tier1, Tier2, Tier3, and Tier4. The Tier IV segment is projected to grow at a CAGR of 8.1% during the forecast period. Incorporating fault tolerance technology into the infrastructure's topology is anticipated to increase its uptake in the upcoming years. Luxembourg is home to a quarter of all tier IV-verified data centers in Europe, indicating a significant growth rate for Tier IV adoption in the continent.

Regional Analysis

The global data center market is primarily segmented into three regions, namely North America, Europe, and Asia-Pacific.

The North American market is dominating the global data center market at a CAGR of 6.0% during the forecast period. The region is characterized by several service providers, OEMs, and a large customer base. Companies such as Cummins, Inc.; Caterpillar Inc.; and Generac Holdings Inc. are based in the region, significantly contributing to its dominant market share. However, the Asia-Pacific region is anticipated to witness a significant percentage. Investments by market leaders in developing countries like China and India are expected to drive the regional market.

Recent Developments

• February 2020, Nikkiso cryogenic industries collaborated with Takkisio Co. Ltd to improve Nikkiso's presence in the APAC region.
• July 2019, Atlas Copco acquired Brook's Semiconductor Cryogenics Business to increase worldwide sales and earn a whopping revenue.
• In April 2019, Elliott Group completed its merger and acquisition with Ebara International to expand its business horizon globally with custom-engineered cryogenic pumps.

Data Center Generator Market Segmentation

By Type

• Diesel
• Gas

By Capacity

• <1MW
• 1MW-2MW
• >2MW

By Tier Standards

• Tier 1
• Tier 2
• Tier 3
• Tier 4

By Regions

• North America
• Europe 
• Asia-Pacific
• Latin America
• The Middle East and Africa