Data Centers Prompt U.S. Engine Manufacturing Buildout

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Written by Eric Funderburk for IIR News Intelligence (Sugar Land, Texas)

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Summary

U.S. engine and generator manufacturers are seeing a spike in demand, in large part from the backup and baseload power needs of hyperscale data centers. The uptick in demand is warranting U.S. plant construction and expansions.

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Rapidly Escalating Demand

Six hundred forty-five diesel generators for one data center complex. That number has raised the eyebrows of North Carolina regulators and residents of the state's Richmond County as Amazon has applied for permits for 588 permanent emergency backup diesel generators and 57 temporary units that would provide power until its new data center campus' connections to the grid are completed. And that's for one data center.

Industrial Info Resources data show more than $322.5 billion worth of U.S. data center construction presently underway, and an astounding $4.3 trillion worth of U.S. data center projects in some stage of planning or engineering. These numbers grow even more on a global scale, and most of these new data centers will need some form of backup or baseload power generation, which engine manufacturers are stepping up to the plate to provide. Engine and generator manufacturers such as Caterpillar and Rolls-Royce are reaping the bounty of this exploding segment of the market and are expanding production at U.S. facilities through various construction projects.

For the most part, previously constructed data centers have had a backup generation component, fueled especially by diesel and also natural gas. With scrutiny over data centers' environmental footprints growing, cleaner natural gas-fired equipment is increasingly making its way into data centers, although as Amazon's plans for North Carolina show, diesel generation is still very much in the cards. In addition, data center developers increasingly are arranging for captive behind-the-meter baseload power at their facilities, which is primarily gas-fired. Many of the engines suitable for data centers can provide either backup or baseload power.

It's certainly not a bad time to be an engine/generator manufacturer, and multiple companies in the U.S. are expanding production for their engines, driven largely by the data center market.

U.S. Engine Manufacturing Activity

Industrial Info Resources is tracking at least $1.4 billion worth current and future U.S. construction activity related to engine manufacturing outside of the automotive industry.

While many of the plants currently under construction will manufacture engines and generators that can be used for a variety of purposes including mining and manufacturing, most of the plants will manufacture models that are suitable to power data centers, and this is the primary driver of current U.S. non-automotive engine construction.

Caterpillar, for example, in 2024, when data center power demand began escalating rapidly, broke ground on a 325,000-square-foot expansion at its engine-manufacturing plant in Lafayette, Indiana, that was squarely aimed at the data center market. Once the expansion is completed later this year, the addition of new equipment will begin, bringing the total project value to $725 million. The new machines will be geared for the production of Caterpillar's 3500, 3600 and C175 series engines, all of which can be used to provide power for data centers and are fueled by varying combinations of diesel and/or natural gas.

The U.S. subsidiary of German engine manufacturer INNIO in July broke ground on an expansion of its Waukesha, Wisconsin, plant, with the data center sector squarely in its sites. The expansion actually was prompted by an unnamed data center developer that wanted more than 200 of the company's Jenbacher J624 model gas-fired engines. The Waukesha site also manufactures the smaller Jenbacher J620 model engine, which can reach full load in less than minute and is very suitable for backup power purposes at data centers.

Other Construction

Rolls-Royce subsidiary MTU American Incorporated is gearing up for a data center-driven expansion at its plant in Graniteville, South Carolina. Construction is soon to start on a 37,000-square-foot building addition to boost MTU's production of the data center-friendly Series 4000 engine to 2,500 units per year. The MTU Series 4000 is a gas-fired engine capable of providing baseload or backup power and is heavily deployed at U.S. data centers, although specific facilities are left largely unnamed for security and trade reasons. After the first phase of construction is completed in late 2027 at the South Carolina plant, another potential expansion is on the books should the market warrant it (which by all indications it will), adding another 22,000-square-foot building along with necessary equipment.

Future Expectations

Data center construction is escalating throughout the U.S., prompting Caterpillar and other power-component manufacturers to increase their engine and generator offerings. With the U.S. data center market going strong and not much of an end in sight, more projects to help provide power for the facilities are expected, whether on a smaller behind-the-meter or backup scale, or from large utilities shoring up their generation in the face of rapidly escalating demand. Multiple engine makers are expected to continue upping production to fulfill these needs, leading to further additions and expansions and possible new facilities.

Key Takeaways

• Manufacturers of engines and generators are seeing a strong demand from data center developers.
• Multiple engine makers across the U.S. are expanding their plants in order to help fill the demand for both baseload and backup power needed at data centers.
• With data center construction on a strong trajectory in the U.S. and across the world, the demand for data center power components and infrastructure is expected to grow along with the buildout of these facilities.

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).