Distributed Power Generation

# Executive Summary * The Distributed Power Generation (DPG) market is at an inflection point, driven by a structural surge in electricity demand from AI data centers and broad electrification that existing grid infrastructure cannot meet. * Federal policy, particularly the 30% Investment Tax Credit from the One Big Beautiful Bill Act (OBBBA), provides a significant tailwind for technologies like fuel cells, but intense political uncertainty creates substantial risk for the renewable sector. * Chronic grid instability and lengthening interconnection queues are accelerating the adoption of on-site generation and microgrids as businesses prioritize energy resilience and reliability. * A clear bifurcation in financial performance is emerging: companies directly exposed to the data center boom, such as Bloom Energy, are seeing rapid growth, while others face headwinds from macroeconomic pressures or slower legacy markets. * The competitive landscape is defined by technological differentiation, with players competing on fuel flexibility, efficiency, emissions profiles, and speed of deployment. * Significant capital is being allocated towards manufacturing capacity expansion and research and development to meet the unprecedented demand, funded by strong investor appetite for the sector's growth story. ## Key Trends & Outlook The single most significant catalyst for the Distributed Power Generation industry is the unprecedented surge in electricity demand from AI data centers and broad electrification. Global data center electricity consumption is forecast to quintuple from approximately 2% today to 10% of total demand by 2030, necessitating additional generation capacity equivalent to the entire current U.S. grid. This creates a critical need for on-site power that can be deployed in months, bypassing multi-year grid interconnection queues, fundamentally increasing the value of DPG solutions. Companies with data center-ready solutions are seeing explosive growth, with Bloom Energy (BE) reporting a +57.1% year-over-year revenue growth in Q3 2025, directly tied to its positioning as a standard for on-site data center power. Similarly, Generac Holdings Inc. (GNRC) has secured a global backlog exceeding $150 million after formally entering the large megawatt generator market for data centers. This trend is immediate, structural, and accelerating over the next 1-3 years. Federal incentives are a powerful, but volatile, driver of project economics. The "One Big Beautiful Bill Act" provides a 30% Investment Tax Credit (ITC) for qualifying technologies, such as fuel cells, starting in 2026, creating a significant tailwind. Hyliion Holdings Corp. (HYLN) is a key beneficiary, with its KARNO Power Module qualifying for this 30% ITC. However, this support is contrasted by significant political risk, with potential policy reversals creating deep uncertainty for other segments. Sunrun Inc. (RUN) exemplifies the vulnerability to policy shifts, as renewable energy stocks, including Sunrun, declined after President Trump announced his administration would not approve new solar or wind power projects. Chronic grid instability and lengthening interconnection queues are accelerating the adoption of on-site generation and microgrids as businesses prioritize energy resilience and reliability. The U.S. experienced nearly 1.5 billion hours lost due to power outages in 2024, the highest since 2010, creating a clear economic case for backup and on-site power. The primary opportunity for the DPG industry lies in providing reliable, scalable, and fast-to-deploy power for the AI and data center industry, a multi-hundred-billion-dollar market. The most immediate risk is political and regulatory uncertainty, which could dramatically alter project economics and derail growth in specific segments of the DPG market. ## Competitive Landscape The Distributed Power Generation market is fragmented yet features dominant players in specific niches, such as Generac Holdings Inc.'s (GNRC) over 70% market share in the U.S. home standby generator market. Some companies, like Bloom Energy (BE), focus on mastering a single, differentiated technology. Its entire strategy is built on the superiority of its proprietary solid-oxide fuel cell technology, emphasizing its multi-fuel flexibility, high power density, and load-following capabilities as key differentiators for demanding customers like data centers. This approach allows for a deep technical moat and potential for premium pricing, but also entails high research and development costs. In contrast, other players such as Generac compete by offering an integrated ecosystem of products and services. Generac has expanded from its dominant position in home standby generators to offer a full suite of energy technology solutions, including PWRcell battery storage, Ecobee smart home management, and large megawatt generators, aiming to be a one-stop-shop for energy resilience. This strategy allows for capturing more customer wallet share and creating sticky relationships, though it requires managing diverse product lines. A third strategic approach involves companies from adjacent industries, like Liberty Energy Inc. (LBRT), diversifying into power generation. Liberty Energy is leveraging its expertise in managing complex, power-intensive hydraulic fracturing operations to build its Liberty Power Innovations (LPI) unit, aiming to deliver over a gigawatt of power to data centers and industrial clients by the end of 2027. This model benefits from a strong balance sheet and existing operational expertise but may face challenges in brand recognition within the DPG space. The key competitive battleground is currently the data center market, where speed of deployment, reliability, and emissions profiles are the most critical differentiating factors. ## Financial Performance Revenue growth across the DPG sector is sharply bifurcated, dictated by exposure to the AI data center boom versus legacy industrial markets. Companies laser-focused on the AI/data center demand are experiencing hyper-growth as they capture new, large-scale contracts. Bloom Energy (BE) exemplifies this trend with a +57.1% year-over-year revenue growth in Q3 2025. Conversely, companies still heavily weighted towards cyclical industries like oil and gas are seeing revenues decline in line with softening activity in those sectors. Liberty Energy Inc. (LBRT) reported a -17% quarter-over-quarter revenue decline in Q3 2025, reflecting the slowdown in its core oilfield business and reinforcing the strategic imperative behind its DPG diversification. {{chart_0}} Profitability diverges widely based on business model maturity and scale. Established industrial players and service providers command strong margins due to scale and established service businesses. Generac Holdings Inc. (GNRC) exemplifies this with an adjusted EBITDA margin guidance of 18-19% for FY25. In contrast, many pure-play technology companies, particularly in the fuel cell space, are still investing heavily to scale manufacturing and have not yet reached profitability, sacrificing current margins for future growth and market share. Hyliion Holdings Corp. (HYLN) reported a gross margin of $12K in Q1 2025, while Plug Power Inc. (PLUG) posted a gross loss of $(73.86)M in Q1 2025, indicating significant investments in commercialization and scale-up. {{chart_1}} Capital allocation is overwhelmingly focused on funding growth to meet the AI-driven demand surge. The primary strategic priority is capturing the once-in-a-generation demand surge from data centers. Consequently, companies with credible solutions are prioritizing investment in research and development and, most critically, manufacturing capacity expansion to meet this demand. Bloom Energy's (BE) upsized $2.2 billion convertible note offering, explicitly earmarked to double its manufacturing capacity to 2 GW by the end of 2026, is the clearest evidence of this theme. DPG companies are actively managing their balance sheets to fund ambitious growth. Companies are raising significant capital via debt and equity offerings and securing large credit facilities to ensure they have the liquidity to fund capital expenditures for capacity expansion and research and development. Sunrun Inc.'s (RUN) ability to raise over $1.5 billion in non-recourse debt financings in Q3 2025 demonstrates that strong investor appetite exists to fund companies with scalable DPG platforms, despite macroeconomic headwinds. {{chart_2}}