Diesel Genset Market Trends

Growth Drivers

• Increased demand for uninterrupted power needs: The rising demand for backup power in telecom towers, hospitals, and data centers is readily uplifting the diesel genset market internationally. According to an article published by the IEA Organization in July 2025, the electricity demand is projected to rise by 3.3% by the end of 2025, which is more than twice the overall energy growth. In addition, this particular growth is a deceleration from the 4.4% increase as of 2024, which remains well above the 2023 average of 2.6%. Besides, renewables are predicted to overtake coal, which is considered the largest electricity and power source, by 2025. Based on this, India and China are projected to drive 60% of the surge in international electricity consumption by the same year, thus suitable for boosting the market’s exposure.

• Surge in urbanization: The rapid development in the Asia Pacific is driving the diesel genset market’s adoption for commercial and construction facilities.  As stated in a data report published by Global ABC Organization in 2025, the construction and building sector’s emissions were at 34%, and meanwhile, energy consumption accounted for nearly 34% of the international demand. Additionally, green building certifications surged significantly, with 20% of the newest commercial buildings across the Organization for Economic Cooperation and Development. Besides, circular construction practices, including modular building and material reutilization, are also contributing ground with recycled materials, catering to 18% of construction inputs, particularly in Europe, thereby denoting a positive outlook for the market’s upliftment.
• Focus on residential adoption: The increase in the frequency of power outages in developing countries has boosted the small-capacity genset demand, which is fueling the diesel genset market globally. As per an article published by the U.S. Department of Energy in November 2023, almost 81% of reported major power outages, especially in the U.S., are attributed to weather-based incidents. In addition, the average yearly number of weather-driven power outages has upsurged by nearly 80%. Besides, there have been over 1,500 weather-based power outages, and an average business or home is expected to go without power for almost 7 hours per year. However, the DOE has declared almost USD 3.5 billion for 58 projects across 44 states, with the intention of strengthening electric grid reliability and resilience, thereby driving the market’s development.

Challenges

• Presence of stringent environmental regulations: One of the most pressing challenges for the diesel genset market is compliance with increasingly strict environmental regulations. Governments worldwide are tightening emission standards to reduce greenhouse gases, particulate matter, and nitrogen oxides. For example, the U.S. Environmental Protection Agency (EPA) enforces Tier 4 Final standards, while the European Union applies Stage V regulations, both requiring advanced after-treatment technologies. These mandates significantly increase manufacturing costs, as companies must invest in research and development to produce cleaner gensets. Smaller manufacturers often struggle to keep pace, leading to market consolidation, which in turn is negatively impacting the market’s expansion.
• Volatility in fuel prices: Operations in the diesel genset market are highly sensitive to fluctuations in global fuel prices. Diesel fuel accounts for a significant portion of the total cost of ownership, especially in applications requiring continuous or prime power. Price volatility, driven by geopolitical tensions, supply chain disruptions, and OPEC production decisions, directly impacts operating expenses for end-users. For instance, spikes in crude oil prices can make diesel gensets less economically viable compared to gas-based or renewable alternatives. In emerging markets, where gensets are often used for extended hours due to unreliable grids, rising fuel costs can severely strain budgets for industries such as mining, construction, and manufacturing. This volatility also complicates long-term planning for both manufacturers and customers, as cost projections become uncertain.