A research report from EB SECURITIES suggests that the global acceleration in data center construction is expected to continuously boost demand for gas turbines and diesel generators. The firm believes that upstream component and HRSG manufacturers, as well as gas turbine generator set integrators engaged in deep collaboration with international leaders, are likely to be among the first to benefit. The construction of data centers is driving up global demand for power generation equipment, with leading gas turbine and diesel generator set manufacturers holding full order books and initiating expansion plans. The report indicates that domestic companies within the gas turbine and diesel generator set supply chains that have established deep partnerships with international giants stand to gain early advantages.
Data Center Construction Fuels Demand for Power Equipment Like Gas Turbines and Diesel Generators
According to IDC data, the IT energy consumption of global artificial intelligence data centers is projected to increase from 23TWh in 2022 to 146.2TWh by 2027, representing a compound annual growth rate of 44.8%. This substantial rise in energy consumption from data center development poses significant challenges to national power grids, with two issues being particularly prominent: 1) The sharp increase in data center energy usage in the United States, coupled with a fragmented and aging local grid infrastructure, creates an urgent need for off-grid power generation solutions like gas turbines. 2) Data center security is paramount, and to prevent data loss from power outages, the role of emergency power equipment, such as diesel generators, becomes critically important. As global data center construction accelerates, demand for gas turbines and diesel generators is anticipated to rise steadily.
International Gas Turbine Leaders with Robust Orders and Expansion Plans Create Opportunities for Domestic Supply Chain
Data from McCoy Power Reports indicates that global demand for gas turbines for power generation is forecast to reach 96.1GW in 2025, a year-on-year increase of 71.0%. Market dominance is held by three major players: GE Vernova, Mitsubishi Heavy Industries, and Siemens. Driven by rising data center demand for gas turbines, these international leaders have seen significant growth in revenue and orders, prompting them to launch expansion initiatives. As these international gas turbine manufacturers ramp up production, the report suggests that upstream component and HRSG (Heat Recovery Steam Generator) manufacturers, along with gas turbine generator set integrators engaged in deep collaboration with these leaders, are positioned to benefit first.
Diesel Generator Sector Faces Capacity Shortfall, Benefiting Domestic Component Makers and Creating Substitution Opportunities for Local Assemblers
According to Schneider Electric data, diesel generator sets account for approximately 8.6% of the total construction cost of a data center. Consequently, demand for diesel generator sets is expected to grow significantly alongside increases in data center capital expenditure. In the data center diesel generator set market, international leaders such as Cummins, MTU (Rolls-Royce Power Systems), and Caterpillar still hold dominant positions. However, domestic manufacturers like Weichai Heavy Machinery, Shanghai Cooltech Power, and Tellhow Sci-Tech have captured a certain market share. The report posits that as data center demand for diesel generator sets rises substantially, upstream component manufacturers are likely to benefit from the production expansion of midstream assembly companies. Simultaneously, given the tight capacity among international leaders, domestic assembly manufacturers also have the opportunity to substitute for overseas brands in domestic data center construction projects.
Key Risk Factors to Consider
Potential risks include data center investment falling short of expectations, power generation equipment manufacturers failing to meet expansion targets, and increases in overseas tariffs.
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