In today’s world, electricity has become a basic necessity for survival just as food, clothing and shelter. Though the majority of aspects are dependent on electric power, there is no denying the fact that we frequently experience power outages. The country has not reached the state of perfection in terms of power supply or distribution, as yet. For an outfit that needs constant supply of power for 24×7 refrigeration or a unit where several appliances are dependent on electricity to operate. A power outage can cause chaos and result in consequential financial catastrophes. This precedent holds true for every setting and scenario.
Diesel Power Generators have for long been the insurance against these outages even as power deficits fell to below 1% in the last decade.The backup and prime power generators are basically machines which provide standby power to be used during power outages. Based on the requirements of an establishment, generators are available in various configurations with the capability to generate power starting from a range of a few kilowatts to over 3 megawatts. The most widely popular and commonly used generators operate either on diesel or CNG (compressed natural gas). There are solar powered generators as well. Generators, over the years, have become more fuel easy to maintain, non-cacophonous and environmentally favourable. Modern-day generators are even capable of instantaneously taking over power distribution responsibilities in case of a power outage to ensure seamless operations.
Market size and Demand Drivers
The Indian diesel generator market was valued at $1.04 billion in 2018 and is projected to reach $1.52 billion by 2024, showing a compounded annual growth rate (CAGR) of 6.5% during the forecast period. This growth is expected to be driven by the high demand and adoption of medium- and high-horsepower diesel generators across the country.
Amit Shah of Motilal Oswal Securities said in a report, that they expect the DG Sets industry volume growth to revert to 10% compounded annual growth rate over FY18-20. The growth would be driven by rising demand in the key end markets of Infrastructure (Roads, Metro Rail, Railways), Commercial (IT/ITES, Data Centers, Hotels, Malls, Hospitals, Educational Institutions), and Manufacturing (Pharmaceuticals, Automotive).
“Growth in the DG industry is linked to base power deficit and IIP growth–both of these are a reflection of the demand for industrial and residential power, and have been declining over the past five years. A revival in economic growth would drive up both manufacturing/IIP growth and power deficit, in turn resulting in higher demand for DG sets,” Shah said.
Factors driving demand for Diesel Generators
The current government is focusing on pump priming the economy through increased infrastructure spending, especially on roads, metro rail and railways. These areas will propel the demand for DG Sets in years from 2019-2020.
Roads: If we look at the roads sector, the government ordered construction of more than 25,000 km of roads in FY18, and also took road construction to 41km per day from 22km per day in FY17. In FY17, there was a 40 per cent jump in road construction. During road construction, the need for DG sets is felt in remote locations, where availability of power is an issue.
Railways: The Indian Railways is looking to install or replace the diesel generators used to power air conditioners in trains. Each generator car has two DG sets and the annual industry volumes are 500 units, implying a market size of Rs 200-250 crore. Key participants in space are Cummins India, Kirloskar, Volvo and Greaves Cotton.
Metro Rail: Another big opportunity for DG sets over the next few years is in metro rail projects. With a new metro rail policy on the anvil and every large city with population of over one million (360 cities in India) will look to construct a metro rail network.
Each metro station would need to have DG sets as backup in case of power failure. The typical ratings used in a metro station vary from 500kva to 1,000kva. With 855km of metro rail projects coming up in India over the next few years at an overall capex of 300,000 crore the opportunity in this segment is immense.
Datacenters: A data center (or datacenter) is a facility composed of networked computers and storage that businesses or other organizations use to organize, process, store and disseminate large amounts of data. A large datacenter uses as much electricity as a small town. Every datacentre includes backup power supplies in the form of high horse power (HHP) DG sets. This power usually requires multiple 750kVA-and-above DG sets. Key sectors looking at putting up datacenters are BFSI, Social Media, Entertainment, Ecommerce and Telecom.
Product reliability – Technology and R&D key differentiators
Cummins India and Perkins or Caterpillar have a distinct advantage over their Indian peers, as they have access to their parent’s technology and product portfolio, which can be replicated and localized for the Indian market. This helps them to have the shortest timeline to launch new products. Globally, it has been seen that every time there is an emission norm change, Cummins has taken market share. This is because it is usually the first to adapt its engines to the new technology. Post the new emission norms in July 2014, Cummins India was amongst the first to get its DG sets certified.
India is a developing nation with several large industries coming up in the country. Some of the top multinational companies have their industrial plants and factories in India. However, Indian industries face a perennial problem of power shortage. The demand for electricity is much greater than its supply thereby forcing these factories to use generators to bridge the gap.
There are several features and specifications that a user needs to consider while buying a generator. Amongst those features and specifications, the fuel on which the generator operates is one of the most important ones as its functionality, application and usability (based on where and for what purpose it is being used) can vary a lot based on this sole factor.
As mentioned earlier, diesel and CNG generators are the most preferred ones amongst all available types of generators. So, let’s compare these two types of generators and understand which one could be the most suitable one for you.
How a diesel generator works?
A diesel generator is used to generate electric energy by using a diesel engine with the help of an electric generator. Diesel gensets convert the mechanical energy generated by the diesel engine into electricity using alternators. An alternator comprises of a rotor (a moving component that produces rotating magnetic field) and a stator (a stationary set of electrical conductors wound in coils over an iron ore). The rotor generates a moving magnetic field around the stator and thus voltage difference is induced between the windings of a stator. This is how electricity is produced by the generator.
Features of Diesel Generators
The diesel generators are classified based on wide range of power output. Those used for industrial purposes are generally large in size and can provide a great deal of power for a long period of time. They are generally used by industries where power demand is high. Whereas diesel generators used for domestic purposes are very small in size and provide power up to a limited range. They are ideal for use in houses, small shops and offices.
The other feature is air cooled diesel gensets, which rely on air to provide the cooling function for the generator. These gensets do not require any additional part except an air intake system. Liquid cooled diesel generators rely on liquids for cooling and comprise of a separate system for achieving this function.
Finally the diesel gensets have control and power management systems. These modern day generators have the ability to automatically transfer the source of power supply from the grid to the generator during a power cut and vice versa. They can also display warning messages such as low fuel and other performance issues, along with providing a broad range of analysis data, which in turn helps to increase the efficiency of the diesel generators.
Three Segments of DG Sets & Important Players
Low HP (15-75kva): While this segment has traditionally been dominated by Mahindra, Ashok Leyland and Kirloskar Oil, new players like Cooper Industries, FG Wilson, JCB India and Cummins India are also looking to make inroads and increase their share. This segment accounts for the highest volumes in the Indian DG market, but profitability is low due to intense competition, resulting in high pricing pressure for the incumbents.
Midrange (75-375kva): While Kirloskar and Cummins are the dominant players in this segment, competition from Mahindra, FG Wilson, Cooper Corporation and Ashok Leyland is increasing. This would imply higher competition in this segment for Cummins and Kirloskar.
High HP (>750kva): This is the most attractive segment in terms of profitability and per unit value is the highest in this segment. Traditionally, Cummins has been the dominant player in this segment, with more than 55-60% market share, followed by Perkins and Caterpillar. New entrants in this range include Kirloskar.
Challenges to DG Sets market
Until recently, diesel generators were the most commonly used generators. The efficiency of diesel generators is well known but they have their disadvantages as well. Diesel generator working principle is such that they invariably cause a lot of noise. Also, the exhaust fumes from diesel generators cause environmental pollution. There are alternatives available which use natural gas or Liquified Petroleum Gas (LPG) instead of diesel as fuel. However, these fossil-based fuels are in constant danger of depletion. Under such circumstances, solar generators provide the best alternative for these conventional generators. It also explains why major companies in India are opting for solar powered generators over conventional diesel generators in their industrial outfits.
Cost Disadvantages of DG Sets: Although diesel-powered generators are less expensive as compared to solar-powered generators. Solar generators are cheaper in the end because they do not incur recurring costs like fuel charge. Moreover, solar generators do not require much maintenance after their installation. It is not the case with diesel generators. The cost of diesel is also on the rise all the time. It adds to the overhead cost, thereby pushing up the overall expenditure in the long term. On the other hand, solar power is available free of charge in the form of sunlight.
The most significant disadvantage of diesel generators has always been pollution, both noise and the environment. The Government of India has imposed various conditions for diesel generator manufacturers and users to follow to reduce noise and environment pollution. Solar generators do not have any such issues because they are noiseless and zero-emission devices.
Both diesel and solar generators are efficient. However, the operation and fuel consumption are invariable of the power being consumed. This can be a vital factor in determining the efficiency of a diesel genset. On the other hand, disruptions in receiving ample sunlight can be a drawback in the case of solar generators. However, solar generators have batteries to store energy that can be used when sunlight fades away, especially during the night. Solar generators do not occupy much ground space as they can be installed on the terraces of industrial buildings. Thus, you can state that solar generators are more efficient in comparison, especially when implemented on a large scale.
India has an advantage over countries like the US and those in Europe because of the abundant availability of sunshine throughout the day. Other than during rainy days, most of the time, you have good sunlight. Hence, in a country like India, solar generators are more reliable as compared to diesel generators.
Solar-powered generators are beneficial for industries. At the same time, solar generators for homes in India are also steadily gaining popularity. Solar generators have many other uses such as solar generators for camping, for commercial buildings, and so on. Nowadays with solar powered generator portable models becoming available, people have started preferring them over portable diesel generators.
Conclusion: It can be said that despite all the challenges and with less than 15 per cent of the demand for DG sets being for prime power, the 85-90 per cent demand belongs to the backup power segment. This implies that despite low power deficits, the need for DG sets will continue to grow with demand from real estate, IT/ITES, Infrastructure and Hospitality sectors