Climate change calls for backup power, and one company benefits

Climate change calls for backup power, and one company benefits

Living on the South Carolina coast means living under the threat of dangerous weather during storm season. But the added risk of the pandemic made Anne Freeman nervous.

What do I do if there is an evacuation or a storm and you have all this coronavirus and hotel problems? ‘ said Mrs. Freeman. ‘I said, ‘Maybe the time is now.’

That’s why Ms. Freeman spent $12,400 last year to install a Generac backup generator at her home on Jones Island, an offshore island near the Charleston Peninsula. The wait – about three months – seemed long.

But she was lucky: the wait is double now.

Demand for standby generators has soared over the past year, as homegrown Americans focus on preparing their homes for the worst, just as a severe wave of weather ensured that many experienced it.

Hurricane Ida left more than a million people without power in Louisiana and Mississippi for several days in scorching weather late last month. At least 10 deaths in New Orleans are believed to have been heat-related. Over the summer, officials in California warned that wildfires could once again lead to power outages amid record heat and the risk of wildfires. In February, a severe freeze turned deadly after a widespread outage in Texas. Even minor outages — last month, storms in Michigan left nearly a million homes and businesses in the dark for up to several days — made many American homeowners buy their own small power plants.

The vast majority are manufactured by one company: Generac, 62, Waukesha, Wis. , the manufacturer that accounts for approximately 75 percent of sales of standby home generators in the United States. Her dominance of the market and the growing threat posed by increasingly volatile weather have turned her into a Wall Street darling.

Generac’s stock price is up nearly 800 percent since the end of 2018, and its earnings have nearly doubled since June 2020. The company recently opened a new plant in Trenton, South Carolina — its third residential generators to produce — while demand and supply chain associated with the pandemic have pushed customer waiting times snarls to Almost seven months.

Need drives demand. The United States experienced 383 electrical disruptions last year, according to an accident count required to be reported to the Department of Energy, up from 141 in 2016. As of the end of June — the most recent data available — there were 210 this year, a 34 percent jump from the same point in the year 2020.

“We are not climatologists, but weather events are becoming more and more dangerous,” said Aaron Jugfield, CEO of Generac, whose generators are integrated into existing fuel sources and turn on automatically once a home loses power. Mark a list of weather events that have grabbed the headlines over the past year, from freezes to floods to droughts.

“The air is hotter and the water is warmer,” he said. “The combination of these two results in more extreme weather events.”.

That means his company is getting the attention of investors who are betting that the confluence of the coronavirus and climate crises is changing the priorities of American consumers.

“Instead of nice backup power, the need to have it increases, when you work at homesaid Mark Strauss, an analyst at JPMorgan who covers Generac and other alternative energy stocks.

So-called stay-at-home stocks – including Zoom Video, Peloton and Etsy – have shined as a result of the shocks of the Covid era and economic turmoil. Vaccine maker Moderna is the top performing stock in the S&P 500. But Generac and a few other alternative energy companies have swelled in value at the same time.

Enphase, which makes devices that convert power directly from solar panels into a convenient home format, has risen more than 500 percent since the pandemic began. Over the past two years, investors have driven the value of Bloom Energy, which makes small, zero-combustion fuel cell generators for on-site power generation, from less than $1 billion to as much as $7 billion, although it has fallen sharply since then. Plug Power, another alternative energy stock, is up nearly 700% since the end of 2019.

Generac, which has been a quietly good performer for most of the past decade, took off in 2019 as investors began focusing on growing demand for home generators in a large and largely untapped market: California.

Because of its mild weather, California – the world’s fifth largest economy in its own right – has not been a hot spot for home generators. But 2019 was the second year in a row that massive wildfires prompted the state’s largest utility, Pacific Gas and Electric, to repeatedly cut power to millions of residents in starved communities in hopes of preventing its equipment from fueling fires. Generac’s stock price doubled that year, and then again in 2020 as drought conditions persist.

A severe freeze that hit Texas in February, collapsing the state’s power grid, and leaving millions in the cold and dark, has boosted demand.

Rhonda Collins’ home outside of Austin has electric heat, which meant nearly a week of cold nights when the power went out. She, her husband, and her three German dogs – Tito, Dixie and Guinness – were sitting under multiple blankets to keep warm.

“I stayed in my teens and low twentiesAnd the Which is ridiculous for Texas,” Mrs. Collins said. “We just don’t. I mean, it was like the end of the world.”

Another cut occurred in June during the heat wave, and the prediction in the farmers’ calendar of another round of storms early next year made the decision easy: It’s time to buy a generator.

A 15,000-watt Generac generator was delivered last week, which is large enough to keep the house warm if the power goes out this winter. “I will never have that again,” said Mrs. Collins.

Generac sales are up nearly 70 percent over the past year and orders are vastly outpacing production. The new plant in South Carolina — the other two that produce residential generators in Wisconsin — is up and running and the company plans to hire about 800 people there by the end of the year. JPMorgan analysts reported in a recent customer note that company officials raised the possibility of adding more manufacturing operations near fast-growing markets such as California and Texas.

Generac seems to need them. The average delivery times of their generators have been prolonged during the pandemic.

Despite its dominance of the domestic market, Generac may be at risk if competitors are able to serve customers faster. Major manufacturers such as engine maker Cummins and heavy equipment company Caterpillar have a relatively small share of the home generator market, but they have the experience to ramp up production if they see an opportunity. Generac, which is aware of potential competition from other players as well as home solar panels and other solutions, has made a series of acquisitions in the battery and energy storage industry, which is emerging as a small but rapidly growing revenue stream for the company.

But there is no doubt that its core product is in demand at the moment.

Having her generator installed last week, Mrs. Collins took a walk around the neighborhood and noticed a neighbor opening his trunk in the driveway.

“We are not the only ones,” she said.

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