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Natural Gas Generators: The Go-To Option as Extreme Weather Brings Rolling Outages

Daniel Collins
Nov 17, 2022

Guidehouse Insights

In early September, the California Independent System Operator requested the activation of temporary emergency natural gas-fired generators deployed by the Department of Water Resources (DWR) in Northern California. The generators have a combined capacity of 120 MW and are in place as backup for any extreme heat events, wildfires, or other climate-driven energy emergencies. With climate change expected to worsen the frequency, intensity, and impacts of extreme weather events, natural gas technologies, for the time being, have an important role to play in keeping the lights on.

Natural Gas Gensets Are a Well-Established Distributed Generation Technology

Natural gas gensets provide cheap reliable power and are widely adopted in behind-the-meter applications. They can be utilized as a primary or backup energy source and are frequently used in hospitals, nursing homes, and other prominent institutions that require constant, reliable power. Natural gas gensets compete with diesel models in most markets, with diesel historically taking a greater market share due to broader access to the fuel, a slightly smaller footprint, and better blackstart capabilities. However, recent years have seen natural gas systems proliferate due to emissions regulations and better performance in continuous power applications. 

Guidehouse Insights’ Natural Gas Distributed Generation Forecast 3Q22 values the market (including stationary fuel cells and microturbines) at $7.92 billion in 2022 and projects it to expand at a compound annual growth rate of 6% through 2031. Gensets will dominate the market but that does not mean the other technologies will not have a significant role to play. Natural gas-powered stationary fuel cells have experienced a surge in adoption but still need to become more cost-effective to gain significant traction in power markets. Micro-turbines constitute a fraction of the market but are a viable alternative in the right setting, such as oil & gas fields.

Extreme Weather Events Spur Deployment in Commercial and Residential Settings

In addition to the 120 MW of generation from the temporary emergency power generators in California, DWR has coordinated with major utilities to procure, install, and operate backup generators (totaling 80 MW in capacity) to be operated only during a level 2 power emergency. DWR is also developing the Strategic Reliability Infrastructure Assets program as part of the state’s Strategic Electricity Reliability Reserve. North of the border, generator sales have surged in Atlantic Canada as the region experiences more frequent and severe storms with extended power outages. An estimated 80% of Nova Scotia Power customers have been affected by power outages since Hurricane Fiona made landfall. 

In the wake of the Russian invasion of Ukraine, the European Union has firmly positioned itself as moving away from natural gas to more sustainable fuel sources. Moreover, technological innovations in energy storage systems allow for the provision of peak shaving and other grid balancing services with far cleaner emissions profiles, and genset manufacturers are already incorporating hydrogen-ready products into their fleets. Nevertheless, amid growing demand for reliable and continuous onsite power supply, natural gas gensets perform critical functions in various settings, and will be sticking around for now.

Guidehouse Insights’ Natural Gas Distributed Generation Forecast service assesses the state of the natural gas genset, stationary fuel cell, and microturbine markets, covering the residential, commercial, institutional, and industrial application segments. Areas of insight in-clude annual and cumulative additions, annual revenue, and a ranking of the top country markets.