Living on the South Carolina coast means being at risk of dangerous weather during storm season. But the added threat of the pandemic made Ann Freeman nervous.
“What do I do if there is an evacuation or a storm and you have all this coronavirus and problems with hotels? ”Ms. Freeman said. “So I said, ‘Maybe now is the time.'”
That's why Ms. Freeman spent $ 12,400 last year installing a Generac backup generator in her home on Johns Island, a marine island near the Charleston Peninsula. The wait – about three months – seemed long.
But she was lucky: the waiting time is now twice as long.
The demand for backup generators has skyrocketed over the past year as home-bound Americans focused on preparing their homes for the worst, just as a surge in extreme weather conditions ensured many saw it.
Hurricane Ida left over a million people in Louisiana and Mississippi without power for days in muggy weather late last month; At least 10 deaths in New Orleans are said to have been linked to the heat. Over the summer, officials in California warned that forest fires amid record heat and the threat of forest fires could lead to rolling blackouts again. In February, a deep freeze became fatal after widespread outages in Texas. Even lesser-known outages – last month, Michigan storms left nearly a million homes and businesses in the dark for up to several days – have prompted many American homeowners to buy their own miniature power plants.
The vast majority are made by a single company: Generac, a 62-year-old manufacturer from Waukesha, Wisconsin that accounts for about 75 percent of standby home generator sales in the United States. Its dominance in the market and the growing threat of increasingly volatile weather have made it a Wall Street favorite.
Generac's share price is up nearly 800 percent since late 2018, and earnings have roughly doubled since June 2020. The company recently opened a new facility in Trenton, SC – its third facility producing residential generators – while demand and pandemic supply chain growls have increased customer waiting times to around seven months.
Demand drives demand. There were 383 power incidents in the United States last year, according to a list of incidents reported to the Department of Energy, up from 141 in 2016. By the end of June – the latest available data – there had been 210 that year, a jump of 34 percent compared to the same point in time in 2020.
“We're not climate researchers, but the weather has gotten much worse,” says Aaron Jagdfeld, CEO of Generac, whose generators are integrated into existing fuel sources and automatically switch on when a house fails. He ticked a list of headline-grabbing weather events from the past year, from frosts to floods to droughts.
“The air is hotter, the water is warmer,” he said. “And the combination of these two things leads to more extreme weather events.”
That means his company is attracting the attention of investors who are betting that the concurrence of the coronavirus and climate crisis will shift American consumer priorities.
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9/15/2021, 10:43 a.m. ET
“Instead of nice-to-have, backup power is increasingly a must when you work 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 – have shone due to the shocks of the Covid era and economic disruptions. And vaccine maker Moderna is the top-performing stock in the S&P 500. But Generac and several other alternative energy companies have risen in value at the same time.
Enphase, which makes devices that convert electricity directly from solar panels to 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 makes small, incineration-free fuel cell generators for on-site power generation, from less than $ 1 billion to as much as $ 7 billion, though it has declined sharply since then is . Plug Power, another alternative energy stock, has risen nearly 700 percent since late 2019.
Performing reasonably well for most of the last decade, Generac took off in 2019 as investors focused on growing demand for home generators in a large and largely untapped market: California.
Due to its typically mild weather, California – the fifth largest economy in the world – has never been a hotspot for home generators. But 2019 was the second year in a row that massive forest fires caused the state's largest utility, Pacific Gas and Electric, to repeatedly cut power to millions of residents in parched communities to keep their equipment from contributing to the wildfires . Generac's share price doubled this year and then again in 2020 as drought conditions persisted.
The freezing frost that struck Texas in February, causing a breakdown in the state's electrical grid that left millions of people in the dark, only added to demand.
Rhonda Collins's house outside Austin has electric heating, which meant cold nights for almost a week when the power went out. She, her husband, and her three excited dachshunds – Tito, Dixie, and Guinness – lay under blankets to keep themselves warm.
“It stayed with the teens and low 20s, which is absurd in Texas,” Ms. Collins said. “We just don't do that. I mean, it was like the apocalypse. “
Another outage occurred in June during a heatwave, and a forecast in the Farmers' Almanac for another round of storms early next year made the decision easy: it was time to buy a generator.
The 15,000 watt Generac generator was hooked up last week, big enough to keep the house cozy if the power went out this winter. “I'm not going to go through this again,” said Ms. Collins.
Generac's sales rose roughly 70 percent last year, and orders far exceed production. The new South Carolina factory – the other two that make residential generators are in Wisconsin – is up and running, and the company plans to employ approximately 800 people there by the end of the year. Company officials have announced the prospect of expanding to include additional manufacturing operations in nearby fast-growing markets such as California and Texas, JP Morgan analysts reported in a recent customer note.
Generac seems to need it. Average delivery times for its generators have increased during the pandemic.
Although Generac dominates the home market, Generac could be vulnerable if competitors are able to serve customers faster. Big manufacturers like engine maker Cummins and heavy machinery maker Caterpillar have a relatively small share of the home power generator market, but have the expertise to ramp up production when they see an opportunity. Generac is aware of the potential competition from other players, as well as home solar panels and other solutions, and has made a number of acquisitions in the battery and energy storage industry that is becoming a small but rapidly growing source of income for the company.
But there is currently no doubt about the demand for its core product.
After her generator was installed last week, Ms. Collins took a tour of the neighborhood and saw a neighbor in the driveway unpack one.
“We're not the only ones,” she said.