The diesel electricity generator business is booming, thanks to unreliable grids
The Financial Times reports that sales of diesel-powered electricity generator business is booming, thanks in part to unreliable power grids in California and Texas. The FT writes:
One of the background sounds in cities such as Lagos, Baghdad or Kabul is the heavy thrumming of diesel generators, which rise in pitch and volume as the grid-powered street lights dim with equipment failures or fuel shortages.
You can see another effect of the diesel gensets on global air quality maps, where the grid-poor and diesel-intensive cities glow red with pollution. Now that thrum and haze are spreading across America, growing louder and dirtier with the summer heat.
This was supposed to be the year of the green recovery, with union-scale workers pulling the wraps off wind turbines, solar panels and massive batteries, as environmentally conscious fund managers in pretentious plastic hats looked on in satisfaction.
Well, some people are making money. Even as alternative energy shares have sputtered and drifted down since the beginning of this year, grimy old diesel genset manufacturers are coining it.
The largest pure-play diesel genset maker, Generac Holdings Inc of Wisconsin, has seen its shares rise more than 250 percent over the past 12 months and nearly eight times over the past two years. It is now trading at price equivalent to 58 times its earnings over the past 12 months, a rather aggressive valuation. That is even with earnings per share up by 36 per cent in 2020 and a revenue increase of 12.7 percent.
Clearly, people are willing to pay up to get their hands on diesel gensets, and the company confirms that it is hard put to make the equipment fast enough.
Some of this growth comes from the demand for back-up generators for data centers, a fast-growing application in recent years. But sadly, much of the increase in the diesel business has been created by the declining reliability of US electricity grids, particularly in storm-wracked coastal areas, inland tornado alleys and, recently, renewable energy-intensive California and Texas.
The biggest problem with central planning is that it fails to predict how people will react to changing situations.
In this case, the ivory tower energy modelers that pretend wind and solar will be able to keep the lights on and reduce emissions fail to appreciate that when blackouts inevitably show up, people will do their best to protect themselves in the future. Now, people are flocking to diesel. The FT notes:
Americans dependent on air conditioning and internet access are unwilling to accept power outages. So they will spend $15,000 to $20,000 to buy a home back-up diesel system, or $75,000 for one of the new gasoline-powered Ford F-150 pick-up trucks with built-in 7.5kW generators.
An increasingly unreliable power grid powered by wind and solar will ultimately result in more pollution if people turn to diesel generators to keep their air conditioners running when the demand for power is high. This could cause an increase in local air pollution and carbon dioxide emissions compared to running large, centralized power plants with coal or natural gas.