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The Market for Power on Lease and Rent - Dominant Factors in 2024

MarketsandMarkets, 22 Feb 2024


During the projection period of Market for Power on Lease and Rent Growth as estimated by our analysts, North America will be a major market for power rentals.

The power on lease market in each of the following five regions has been examined: Asia Pacific, Europe, North America, South America, and Africa. The U.S. power rental and lease market has the quickest rates of growth, including those in nations like the US and Canada. Due to factors including rising investments in the mining, oil and gas, and construction industries, North America is anticipated to maintain its leading position in the power leasing market during the course of the projected period. The need for power leasing equipment is also being driven by the region's growing investments in mining and related exploratory operations throughout the course of the projection period.

On-Lease Natural Gas Powered Generators – Restraints, Output and Growth

The shift towards more eco-friendly power solutions is evident, with natural gas generators emitting significantly lower levels of harmful pollutants. This aligns with stringent global environmental regulations, making them an attractive option for businesses aiming to reduce their carbon footprint while ensuring power reliability.

Natural gas's cost efficiency, particularly in regions with well-developed gas distribution networks, adds to its appeal. The operational costs of natural gas generators are generally lower than those of diesel counterparts, especially in the context of fluctuating fuel prices and the push for more sustainable energy sources.

Rental Diesel Powered Generators – Restraints, Output and Growth

Despite their proven dependability and rapid deployment capabilities, diesel generators face scrutiny under stringent global emissions regulations, potentially increasing operational costs and impacting their market desirability. The rising diesel prices further challenge their cost-effectiveness, especially when juxtaposed with the declining costs of renewable energy alternatives.

The environmental regulatory landscape is compelling a shift towards more sustainable solutions. For instance, the US EPA's ultra-low sulfur diesel (ULSD) mandate aims to reduce harmful emissions, pushing manufacturers to innovate cleaner, compliant models. However, this regulatory pressure, coupled with diesel's price volatility combined with growing global electricity and fuel demands — positions diesel generators in a challenging environment.

Power Rental Companies in North America and APAC

Some of the world leading companies that offer diesel-powered generators on lease, cater to a wide range of industries including construction, events, manufacturing, and emergency power supply.

  1. Caterpillar Inc.: Known for its high-quality machinery and power systems, Caterpillar offers a comprehensive range of diesel and natural gas powered generators for rent, suitable for various applications from small to large-scale projects.
  2. Aggreko: A global leader in temporary power and temperature control solutions, Aggreko provides diesel and natural gas powered Temporary and emergency gas generator rentals with lean burn technology for a multitude of applications, including events, data centers, industrial projects, and emergency power needs. It’s products’ capacity ranges from 30 to 2100 kVA and come with remote monitoring capability.
  3. United Rentals: As one of the largest equipment rental companies in the world, United Rentals offers a wide selection of “portable gas generators and diesel generators” that are towable, among its extensive equipment inventory, catering to construction sites, commercial needs, and more. It’s products’ capacity ranges from 2,000-watt generator to heavy-duty 300-kilowatt generator and have reduced controlled and reduced noise levels, trailer-mounted options.
  4. Cummins Inc.: Cummins is renowned for its durable and reliable engines and power generation equipment. The company offers diesel and natural gas powered generators for rent that are suitable for a wide range of applications, including industrial, commercial, and emergency backup power.
  5. Herc Rentals: With a broad inventory of power generation equipment, Sunbelt Rentals provides diesel generator rentals that support construction, industrial, event, and emergency backup power applications. They have 5 KW upwards output capacity towable product options.
  6. Atlas Copco: A world leader in rental power generators, it offers rental gensets, diesel generators, modular power stations, energy storage modules.            

Power Rental Segments by End Users

Power rental market segments that have depended on Electric power transmission and distribution include Utilities, Oil & gas, Construction, Manufacturing, Metal & Mining, IT and Data centers, Corporate & Retail, Events.

These depend heavily on the grid and any off-the-grid power sources do not form major power source for the heavy industrial demand in these segments. Most multinational corporations have sustainability goals defined and have a tough balancing act to manage power requirements.

Impact of Data Centers’ Growth on power rentals

In 2024, data centers are expected to continue their trajectory of significant energy consumption, with estimates suggesting they could use between 240 and 500 terawatt-hours of electricity, accounting for 1-2% of global consumption. This range surpasses the entire electricity usage of countries like Australia and approaches that of France. The expansion of digital services is driving the growth of data centers, with tech giants like Amazon, Google, Meta, and Microsoft doubling their electricity usage from 2017 to 2021, consuming 72 terawatt-hours in the latter year alone.

The demand for power in data centers has led to innovative solutions to ensure a reliable supply, including the use of power rental services. Microsoft has explored using a standalone gas plant to power a data center in Dublin, circumventing local grid limitations. This approach highlights the strategic use of alternative power sources, including rentals, to maintain uninterrupted operations in data centers.

The reliance on power rentals is partly due to the logistical challenges of delivering large amounts of electricity to concentrated areas, such as Northern Virginia's data center alley. Here, the local utility company paused new power connections to manage the surge in demand.

As data centers increasingly become a critical component of the digital economy, their energy consumption and the strategies employed to meet this demand, including the use of power rentals, will remain a key focus for companies like Microsoft, OpenAI, Google, IBM, and Apple. These companies are likely to continue seeking efficient and reliable power solutions to support their massive data centers, ensuring the seamless operation of their services.

Impact of Construction Growth on Power rentals

The surge in construction of high-tech facilities and renewable energy projects in 2024, driven by substantial federal investments, is likely to escalate the demand for power rental equipment. As these ambitious projects require reliable and flexible power solutions to meet their intensive energy needs during construction and operational phases, the power rental market is poised for significant growth. This trend is further bolstered by the industry's shift towards sustainability, necessitating the use of cleaner, more efficient power sources, such as natural gas generators, to align with green construction practices and reduce carbon footprints and pollution.

The International Energy Agency highlights that buildings are responsible for nearly a third of worldwide energy use and over a quarter of energy-related global emissions. However, with the increasing use of energy-efficient materials and green building techniques, the sector is poised for significant transformation.

This shift is crucial to meet the Agency's ambitious goal for a Net Zero Emissions future by 2050, which mandates that all new constructions and a fifth of existing buildings must be prepared for zero carbon emissions by 2030. Reflecting this trend, the US Green Building Council's 2023 findings reveal that sustainability remains a core focus for the majority of engineering and construction companies, resonating with their core values and strategic business plans.

In 2024, significant investments are anticipated in the construction of semiconductor manufacturing sites, biotech labs, electric vehicle battery plants, and other renewable energy initiatives, marking a pivotal year for high-value projects. The manufacturing sector growth trajectory is expected to increase in 2024, underscoring a robust expansion in manufacturing construction – and an increasing reliance on various power sources such as power leasing and rentals.

Power Leasing and Rental Equipment Output Range

  1. Small-Scale Example: A common small-scale diesel generator might have an output capacity of around 20 kW to 30 kW. These generators are often used for small businesses, residential backup power, or small construction sites where the energy demand is moderate.
  2. Large-Scale Example: For industrial or large-scale applications, diesel generators can have much higher capacities, such as 1,000 kW to 2,000 kW (1 MW to 2 MW). These larger generators are typically used in settings like hospitals, data centers, large construction projects, or as backup power for commercial buildings where the energy requirements are substantial.

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Power Leasing and Rental Market Growth in coming years

The power rental market is anticipated to expand from a valuation of $9.8 billion in 2022 to reach $12.8 billion by the year 2027, demonstrating a compound annual growth rate (CAGR) of 5.6%.

This growth trajectory is anticipated due to the swift expansion within the industrial domain coupled with a rising need for consistent and reliable electricity supply. Despite facing hurdles such as strict regulatory measures concerning generator emissions, particularly for diesel-powered units, the sector sees potential in the fusion of rental power solutions with green energy technologies. This approach aims at reducing carbon footprints and enhancing sustainability.

The segment of the market dealing with natural gas-powered generators is poised for the quickest growth, attributed to their economic efficiency and reduced environmental impact when compared to their diesel counterparts.

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