California power outages could boost Generac sales by $50 million this year

Generac's headquarters in the Town of Genesee

Last updated on March 17th, 2020 at 01:37 pm

The precautionary power outages implemented by California utilities in an effort to prevent wildfires are creating a new level of interest in home standby generators made by Waukesha-based Generac Holdings Inc.

Aaron Jagdfeld, chief executive officer of Generac, told analysts Thursday the power outage activity to date could lead to $50 million in new sales for the company this year with the potential to grow to $200 million annually in the future.

“It is going to be, we think, a long tale event, similar to other major events,” Jagdfeld said.

Generac is no stranger to seeing increased demand for its home standby products following major natural disasters, especially hurricanes. Extended power outages typically create interest in the product category. The company then works with its dealers to hold in-home consultations before eventually installing a unit.

The problem for Generac is California has not traditionally been a big market for the company. It had around 100 dealers in the state to start the year and has scrambled to increase the total to 300 currently. Jagdfeld acknowledged the comparison is against a small number, but in-home visits are up 500 to 600% this year.

“We are inundated right now,” he said, adding the company is sharing leads with other channel partners to get information to potential customers. “Obviously we don’t want people to have to wait to talk to someone about these products.”

Jagdfeld said the backlog for consultations can be up to a couple weeks depending on the area, adding that it is important to maintain the quality of the visits in order to be able to close sales.

He said most of the $200 million opportunity for the company will come in the residential market, but Generac is seeing interest in other areas as well. Some of the equipment Generac makes is used in brush clearing and forest management, so it will be in demand as California confronts more wildfires.

Generac also makes generators used by telecom companies and Jagdfeld said he expects those customers to be taking a closer look at their networks as the power outages continue, noting the potential for people to be stuck with the power out and the threat of wildfires as “an untenable situation.”

One area where Generac is currently facing challenges is portable generators. Demand typically peaks before or just after natural disasters and the company tries to stock up retailers in advance of events like a hurricane.

In California, however, the California Air Resource Board has set stricter emissions standards for the generators. Generac sells a different product into California. Since the state has not historically seen a lot of demand for portable generators, the company did not plan to make a lot this year.

Generac does have plenty of its standard portable generators, having stocked up ahead of Hurricane Dorian only to see the storm skirt along coastal areas.

“We have a lot of product we could put in California today and we have retailers who are begging for it, but we can’t ship it there legally,” Jagdfeld said.

The company is currently working with the California Air Resources Board and the EPA to seek a temporary waiver to be able to sell the standard generators in the state, he said.

Longer-term, Generac also expects to see demand for its clean energy and energy storage products in the state.

“You’ve got a lot of solar rooftops, people who have solar (panels) on their homes out in California that thought they were covered in a blackout. What they’re finding out is those systems are structured such, they’re engineered such, that the power is fed back to the grid. It’s basically a one-way trip,” Jagdfeld said.

He noted that only about 2% of solar systems in the U.S. are connected to energy storage systems.

“That’s a very ripe market for us to go after,” Jagdfeld said.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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