Climate Change Calls for Backup and a Company Makes Money


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

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

That’s why Ms. Freeman spent $12,400 last year building a computer. Generac backup generator At his home on Johns Island, an offshore island close to the Charleston peninsula. The wait – about three months – seemed long.

But he was lucky: The cooldown is now twice as long.

Demand for backup generators has soared over the past year as home-bound Americans focus on preparing their homes for the worst, just as the extreme weather wave has made so many to experience it.

Hurricane Ida left more than a million people without power for days in Louisiana and Mississippi in sweltering weather late last month. Over the summer, officials in California warned that wildfires could once again lead to disruptions amid record temperatures and the threat of wildfires. In February, the deep freeze became deadly after widespread blackouts in Texas. Even low-profile outages—last month, storms in Michigan left nearly a million homes and businesses in the dark for several days—cause many American homeowners to buy their own mini power plants.

The vast majority are made by a single company: Generac, 62, of Waukesha, Wis., the manufacturer that accounts for roughly 75 percent of backup home generator sales in the United States. His market dominance and the growing threat of increasingly erratic weather have made him the darling of Wall Street.

Generac’s share price has risen almost 800 percent since late 2018, and its profits have roughly doubled since June 2020. The company recently opened a new factory in Trenton, SC – the third manufacturer of residential generators – with demand and pandemic-related supply chain Snarls pushing customers’ wait times to roughly seven months.

Need drives demand. The United States had 383 power outages last year, according to a tally of incidents that needed to be reported to the Energy Department, down from 141 in 2016. , a 34 percent jump from the same point in 2020.

“We’re not climate scientists, but weather events have gotten much more severe,” said Aaron Jagdfeld, CEO of Generac, whose generators are integrated into existing fuel sources and automatically kick in when a home’s power goes out. He ticked off a list of weather events that have made headlines over the past year, from frosts to floods and droughts.

“The air is warmer, the water is warmer,” he said. “And the combination of these two things produces weather events that are more extreme..

This means his company has caught the attention of investors who are betting that the combination of the coronavirus and climate crises is changing American consumers’ priorities.

“Instead of a nice-to-have power, backup power is increasingly needed when working at home.said Mark Strouse, a JP Morgan analyst who covers Generac and other alternative energy stocks.

So-called stay-at-home stocks — including Zoom Video, Peloton and Etsy — It shone as a result of Covid-era shocks and economic disruptions. And vaccine maker Moderna is the best performing stock in the S&P 500. But Generac and a few other alternative energy companies also gained in value.

Enphase, which makes devices that convert power directly from solar panels into a format suitable for the home, has grown more than 500 percent since the pandemic began. Over the past two years, investors have increased the value of Bloom Energy, which produces small, non-combustible fuel cell generators for on-site electricity generation, from $1 billion to $7 billion, but has since fallen sharply. . Plug Power, another stock of alternative energy, has risen nearly 700 percent since the end of 2019.

Having quietly performed well for most of the last decade, Generac began in 2019 as investors began focusing on growing demand for home generators in California, a large and largely untapped market.

Because of its typically warm weather, California, the world’s fifth largest economy on its own, has never been a hotspot for home generators. But 2019 was the second year that massive wildfires caused Pacific Gas and Electric, the state’s largest utility, to repeatedly cut power to millions of residents in parched communities in hopes of preventing their equipment from contributing to the fires. Generac’s share price doubled that year, then again in 2020 as drought conditions continued.

The deep freeze that hit Texas in February, causing a collapse in the state’s power grid that left millions cold and in darkness, only 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 excited dachshunds – Tito, Dixie and Guinness – hid under multiple blankets to keep warm.

“Stayed in the teens and low 20s, which is ridiculous for Texas” said Mrs. Collins. “We’re not just doing that. So it was like apocalypse.”

another interruption Shot during a heat wave in Juneand a prediction in the Farmer’s Almanac for another storm round early next year made the decision easier: It was time to buy a generator.

The 15,000-watt Generac generator was hooked up last week, big enough to keep the house comfortable if the power goes out this winter. “I won’t experience this again,” said Miss Collins.

Generac’s sales increased by nearly 70 percent compared to last year, and orders greatly outpaced production. The new South Carolina factory—the other two in Wisconsin that manufactures residential generators—is operating, and the company plans to employ about 800 people there by the end of the year. Company officials have voiced the possibility of adding more manufacturing operations to fast-growing markets such as California and Texas, JP Morgan analysts reported in a recent client note.

Generac seems to need them. Average delivery times for generators have been extended during the pandemic.

Despite dominating the domestic market, Generac may be vulnerable if competitors can serve customers faster. Large manufacturers such as engine maker Cummins and heavy equipment company Caterpillar have a relatively small share of the home generator market, but have the expertise to ramp up production if they see an opportunity. Aware of potential competition from home solar panels and other solutions, among other players, Generac has made a number of acquisitions in the battery and energy storage industry, which has emerged as a small but rapidly growing source of revenue for the company. .

But right now there is no doubt about the demand for its main product.

After her generator was installed last week, Ms. Collins ran around the neighborhood and noticed that a neighbor had opened the box in her driveway.

“We’re not alone,” he said.



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