Guest Op-Ed: What's Good for Generac Is Bad For America
By Robert Bryce
Sometimes complex subjects can be grasped by looking at a single image. That’s the case with the chart above, which shows the revenue growth since 2010 at Generac Holdings, the Wisconsin-based company which manufactures about three-quarters of the home generators sold in the U.S.
As can be seen by looking at the chart -- which I copied from the company’s latest investor presentation -- Generac’s revenue has more than doubled since 2019. Over that same time frame, the company’s stock price has quintupled. Earlier this month, during Generac’s earnings call, the company’s CEO, Aaron Jagdfeld, said “second-quarter results were very strong with robust revenue growth, significant sequential margin expansion and all-time records in net sales, adjusted EBITDA, and adjusted EPS.”
Generac’s soaring sales are evidence that the U.S. electric grid is becoming less reliable. And as the reliability of the grid declines, consumers are spending billions of dollars on home generators to make sure they are not left in the dark when the grid falters. And the grid is faltering all across the country. According to Department of Energy data, the number of what the agency calls “major electric disturbances and unusual occurrences” (read: blackouts) has jumped 13-fold.
The grid is the Mother Network. It’s the energy system upon which all of our most-critical systems depend: GPS, communication, traffic lights, water, and wastewater treatment. And yet, it is being undermined by bad governance and misguided federal tax policy.
Three things are making our grid weaker. First, the rush to add renewable energy sources such as wind and solar, has made the grid more dependent on the weather. Last year, the North American Electric Reliability Corporation, a nonprofit trade group, that “changing resource mix” is the most urgent challenge for reliability. The same report said that America’s electric generation capacity “is increasingly characterized as one that is sensitive to extreme, widespread, and long duration temperatures as well as wind and solar droughts.”
Generac has made a similar point in its investor presentations, noting that “Increasing use of renewables [is] leading to variability of supply and grid instability.”
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Second, over the past few years, numerous coal and nuclear plants that provide baseload power and help keep the grid stable have closed. Third, regional transmission organizations such as ERCOT in Texas and CAISO in California are mismanaging the system. They are not providing enough incentives to ensure reliability such as providing payments to generators that have on-site fuel storage.
It's no coincidence that Generac is targeting its sales efforts on Texas and California. Last year, in one of the company’s investor presentations, it noted that the two states have the “largest addressable market opportunities within the U.S. for home standby generators.” It also noted that both states have seen their power grids falter, and that will “accelerate demand” for backup power systems.
The punchline here is obvious: what’s good for Generac is bad for America. That’s not a slam on the company. It’s providing a product consumers want. But homeowners all across the country are spending large sums of money to assure reliable electricity – a friend of mine in Houston is spending about $12,000 for her whole-house generator – that would be better spent on other things, such as education, a new vehicle, or saving for retirement.
Generac’s profits are a reflection of our failing electric grid. If America wants to stay a world leader, it must have a robust grid that delivers cheap, abundant, and reliable electricity 24/7/365. Consumers shouldn’t have to rely on Generac for that.
Robert Bryce is the host of the “Power Hungry Podcast,” executive producer of the documentary, “Juice: How Electricity Explains the World,” and the author of six books, including most recently, “A Question of Power: Electricity and the Wealth of Nations.” Follow him on Twitter: @pwrhungry.