The increasing demand for electricity and frequent power outages have encouraged commercial and industrial entities to secure backup power sources. Projections indicate that India’s electricity consumption will surge by 1,200 million tonnes of oil equivalent by 2070. In response to this growing need, rental power solutions have emerged as a crucial means to address urgent power requirements and alleviate high loads during peak hours. By minimising downtime during outages, these solutions enable businesses to maintain smooth operations. The power rental and leasing market, which provides businesses access to electricity through the temporary or seasonal renting or leasing of power generation equipment, has witnessed significant growth, propelled by advancements in the manufacturing industry and the ever-increasing energy demand.
Market trends
According to estimates, the global power rental market was valued at $9.8 billion in 2022 and is expected to reach $12.8 billion by 2027, growing at a compound annual growth rate of 5.6 per cent. The rental power market in India is witnessing rapid expansion, driven by several key factors. The increasing demand for electricity in both urban and rural areas, coupled with occasional power shortages, has fuelled the need for quick and temporary solutions, making rental power a viable option. In addition, the growing industrial and commercial sectors in the country often require supplemental power during peak periods or as a backup, contributing to the market’s growth. Moreover, rental power solutions are flexible and cost-effective.
Rental power solutions
Rental power solutions range from stand-alone temporary power packages to multi-megawatt units operating on fuels such as diesel, natural gas and coal. One of the most commonly deployed solutions are diesel generator (DG) sets providing temporary power supply at construction sites, events, industries, and during power outages. Apart from being a reliable power source, DG sets are highly fuel efficient with high power density, making them suitable for applications with varying power demands. The diesel segment holds a significant share in the rental power market.
In addition, natural gas generators are emerging as a solution to address the growing demand for reliable and efficient power generation. These systems leverage the energy potential of natural gas to produce electricity, offering a cleaner and more environmentally friendly alternative to traditional fossil-fuel-based generators. A notable advantage of natural gas gensets is their lower emissions profile, with reduced levels of pollutants such as sulphur dioxide and particulate matter compared to diesel or coal-based generators. In addition, natural gas is more cost-effective and abundant.
Challenges and the way forward
The expansion of the rental power market has faced several obstacles, primarily stemming from the revised emission norms applicable to fossil-fuelled equipment. The increasing adoption of renewable energy sources, such as solar and wind power, also presents a challenge for the rental power market. Although renewable energy offers a sustainable alternative, its intermittent nature poses a reliability issue. This issue can be addressed through energy storage systems, which enable the storage of excess energy during peak generation periods and release it during low renewable energy output, ensuring a consistent power supply. This shift towards energy storage is reducing the demand for rental power services. Furthermore, the dependence on imported fuels like diesel or natural gas exposes power rental companies to price volatility and supply chain disruptions. These external factors can lead to increased operational costs, creating additional challenges for the growth and sustainability of the rental power market.
The use of DG sets for captive power generation in industrial areas is a key contributor to environmental pollution. In fact, DG sets constitute a significant proportion of the overall yearly diesel oil consumption by industrial sectors. To curtail the prevalent use of DG sets, a strategic focus needs to be placed on establishing a reliable and uninterrupted power supply infrastructure. This involves replacing DG sets with more environmentally friendly alternatives, particularly gas-based sets. In this regard, the implementation of new piped natural gas-based sets and a phased replacement strategy for existing DG sets emerge as practical solutions. Ensuring a continuous supply of gas becomes imperative in this transition. Despite the lower initial capital cost of DG sets compared to gas-based sets, the latter proves to be more economically viable in the long run, given the lower operational costs associated with compressed natural gas. Thus, promoting a shift towards gas-based power generation is not only environmentally responsible but also economically sustainable in the context of industrial energy needs.
Going forward, as India continues to address its power generation and distribution challenges, the rental power sector is likely to remain a vital component in ensuring a steady and uninterrupted power supply.