Tecogen: unlocking explosive growth in data centre power

Tecogen: unlocking explosive growth in data centre power

  • 18.03.2025 09:44
  • livewiremarkets.com
  • Keywords: Data Center Power, AI

Tecogen offers gas-powered chillers that provide both cooling and electricity for data centers, solving grid power issues and boosting revenue in co-located facilities. Partnering with Vertiv expands their reach, positioning them for rapid growth amid rising demand for efficient energy solutions.

Nvidia ServicesBEsentiment_satisfiedMSFTsentiment_satisfiedAMZNsentiment_satisfiedNVDAsentiment_satisfiedEQIXsentiment_satisfiedDLR/PLsentiment_satisfied

Estimated market influence

Tecogen

Positivesentiment_satisfied
Analyst rating: N/A

Tecogen is a company that provides gas-powered chiller systems for data centers, which helps in both cooling and power generation. Their technology reduces grid dependence and offers lower cost power.

Bloom Energy

Bloom Energy

Positivesentiment_satisfied
Analyst rating: N/A

Bloom Energy's report highlights the growing need for on-site power solutions in data centers and their deal with AEP shows demand for fuel cells.

Microsoft

Microsoft

Positivesentiment_satisfied
Analyst rating: Strong buy

Microsoft has agreements to restart nuclear generators, showing their commitment to on-site power solutions.

Amazon

Amazon

Positivesentiment_satisfied
Analyst rating: Strong buy

As a hyperscaler, Amazon is exploring on-site power generation to meet data center needs.

Google

Positivesentiment_satisfied
Analyst rating: N/A

Similarly, Google is part of the hyperscalers seeking on-site power solutions.

Solaris Energy Infrastructure

Positivesentiment_satisfied
Analyst rating: N/A

Provides mobile gas generation solutions to hyperscalers.

APR Energy

Positivesentiment_satisfied
Analyst rating: N/A

Another provider of mobile gas-powered generation solutions.

NVIDIA

NVIDIA

Positivesentiment_satisfied
Analyst rating: Strong buy

Their Blackwell chips increase data center efficiency and heat, driving demand for cooling solutions.

SemiAnalysis

Neutralsentiment_neutral
Analyst rating: N/A

An independent research company that provides insights on semiconductor and AI industries.

Equinix

Equinix

Positivesentiment_satisfied
Analyst rating: Strong buy

A major co-location provider benefiting from Tecogen's solutions to sell more power at premium prices.

Digital Realty

Positivesentiment_satisfied
Analyst rating:

Another co-location provider that can increase revenue with Tecogen's technology.

NextDC

Positivesentiment_satisfied
Analyst rating: N/A

A co-location provider benefiting from increased power capacity and sales opportunities.

Vertiv Holdings (VRT)

Positivesentiment_satisfied
Analyst rating: N/A

Partnership with Tecogen to distribute their solutions, leveraging Vertiv's extensive market reach.

TSS Inc.

Neutralsentiment_neutral
Analyst rating: N/A

A company used as a valuation comparison point for Tecogen.

Context

Analysis of Tecogen in Data Centre Power Market

Market Context

  • Data Centre Growth: U.S. data centre construction is surging due to AI, cloud services, and high-performance computing demands.
  • Grid Bottleneck:
    • Existing power: ~25GW as of end-2024.
    • Announced developments: +20GW in 2024.
    • Grid interconnection delays: Multi-year backlog for new data centres.
    • Utilities often provide only a fraction of requested power.

Tecogen's Solution

  • Gas-Powered Chilling:
    • Dual functionality: Cooling and electricity generation.
    • Cost-effective power: ~$0.12/kWh (vs. grid ~$0.05/kWh).
    • Reduces grid dependence, enabling higher data centre capacity.
  • Fuel Flexibility: Operates on natural gas or electricity via "Hybrid-Drive" technology.

Strategic Partnerships

  • Vertiv Partnership:
    • Vertiv: $8B annual revenue, supplies thermal management to ~1/3 of global data centres.
    • Benefits: Expanded distribution and market reach for Tecogen.

Valuation & Growth Potential

  • Current Valuation: Market cap ~$55M.
  • Revenue Upside:
    • Single medium-sized data centre contract could double revenue.
    • Gross margin: ~45%.
    • U.S. data centres: 5,500 today, projected to grow to 10,000 by 2028.
  • Investment Thesis:
    • Potential valuation rise to $200M with two successful contracts.
    • Exponential growth possible with wider adoption.

Risks

  • Execution Risk: Success of Vertiv partnership and market execution.
  • Competition: Emerging competitors or alternative solutions.
  • Technology Adoption: Rate of industry uptake for gas-powered chillers.
  • Gas Price Volatility: Impact on cost-effectiveness.
  • Regulatory Changes: Potential environmental policy changes.

Conclusion

  • Investment Opportunity: Tecogen's unique technology and Vertiv partnership position it to address critical power and cooling challenges in the data centre market.
  • Upside Potential: Significant growth driven by AI proliferation and data centre expansion.
  • Risks Acknowledged: Execution, competition, adoption, gas prices, and regulations.

Tecogen is well-positioned to benefit from the growing demand for efficient, reliable, and cost-effective power solutions in the data centre sector.