Generator Sales in U.S. Surge

Oct 09 - Tribune Business Weekly

Power-hungry Americans, eager to avoid interruptions to their electricity-dependent lifestyles from weather or grid failure, have sparked a surge in generator sales.

"The demand for home standby generators has never been bigger," says Charlie Habic of Gillette Generators Inc., the Elkhart business his father Ray bought in 1972. "Nowadays, people are thinking 'Let's have a fixed, installed generator.' "

The machines were practically unheard-of before 1990, when the choice was between portable generators and industrial-strength equipment Approaching the year 2000, amid anxieties about the grid's readiness for Y2K, manufacturers noticed high demand in the home market.

"The market didn't take off until post-Y2K," Habic says.

"Special product lines were brought to the market that were quiet, aesthetically eye-appealing, natural gas fueled, and with automatic start-stop technology.

"Suddenly, a homeowner could afford back up power, with average installed prices between $5,000 to $8,000 for 3,000 square foot homes. Today the U.S. residential standby market is estimated to be in the $400 million range. Forecasters put this market on an 8 percent growth rate yearly through the next decade.

"We're selling as many as we ran make."

Gillette employees 60 people and has yearly sales of $15 million, says Habic, vice president of marketing in the standby division, who handles distribution, trade shows and international affairs. The company has three plants at its Elkhart headquarters.

The standby line has a diesel group of units powered by John Deere engines, from 15 kilowatts to 150 kilowatts. The company also sells transfer switches, battery chargers, circuit breakers and other equipment.

"We have portable generators, too" he says. "We sell a lot of the U.S. military," as well as the Israeli Air Force.

Part of the demand for home generators comes from the experience of outages resulting from hurricanes, ice storms, extreme heat and other weather-related problems.

"Forty-five percent of the orders we have now are going to the Gulf Coast," Habic says, adding that other major markets include the upscale coastal Northeast and south Florida.

Even inland businesses lost power for a month after Hurricane Katrina, a huge cost in lost business and ruined inventory, such as perishable restaurant food, that a generator could have avoided.

Midwest homeowners are slower to buy into the technology.

"It's a fickle market," Habic says. "You get the postincident sales. People say 'Let's be ahead of this next problem.' "

Part of the demand comes from worries about the condition of the national electric grid, including its susceptibility to terrorist attack and its deteriorating condition, evidenced in a widespread blackout a few years ago.

"Our country's got some problems coming in the next four or five years," he says. "The biggest problem we've got knocking on our door is the transmission line system. Our utility companies struggle to meet demand."

To help, home generators stay in "watch" mode, alert to the power flowing from the grid. When the machine notices that power is no longer coming from the grid, it automatically switches to its own generation and powers the home. When power is restored from the grid, the generator shuts down and puts the house back on the utility provider.

Air conditioners and well pumps for those not on municipal water systems are the heaviest draws on power. While the generator will power the house - not just a single extemion cord or other limited use like some portable generators - owners might consider avoiding running washers and dryers until the grid system returns.

The generators require professional installation, with a poured slab for the equipment, a natural gas line and connections to the home. Retrofits cost about $800 more than installation in homes under construction.

"A lot of people will put them in as they build their home," Habic says. "That's one of our big marketing pushes - to contractors."

A 12-kilowatt, system costs about $7,000 to install in an existing home, about $6,200 to install while a house is under construction. That's ordinarily enough power for a 2,000- to 3,000- square-foot home.

"In the South, we sell 30 kilowatts because the air conditioner loads are a staple," he says.

Increasing use of the Internet could lead to even more demands for electricity, Habic says.

"It's going to take a lot of power to run it," he says. "We just need more power."

Gillette Generators Inc.

1340 Wade Drive

Elkhart, Ind.

1 (800) 777-9639

www.gillettegenerators.com