HVO for Data Center Backup Market

The hydrotreated vegetable oil (HVO) for the data center backup market was valued at USD 33.15 billion in 2024 and is projected to grow at a CAGR of 14.6% during the forecast period. HVO is a renewable diesel produced by hydrotreating waste vegetable oils and animal fats, enabling it to serve as a drop-in replacement for conventional fossil diesel.

Rising demand for sustainable power solutions and the increasing need for lower-carbon alternatives to traditional fossil fuels are driving the market growth significantly. Numerous data center operators are adopting HVO, including Compass Datacenters, Vantage Data Centers, and ST Telemedia. Data centers, despite consuming the most power, are still committed to achieving net-zero carbon emissions. The biggest data centers, like Amazon and Facebook, are contributing in this direction significantly.

HVO has a slightly lower energy content which means it produces about 2-3% less horsepower than diesel. Performing an engineering study of finely tuned downstream services will register the difference, but the difference is small enough that it’s not noticeable from a user’s standpoint in most scenarios.

The combination of generators and renewable energy sources also enhances overall reliability and environmental friendliness for the data centers. This ensures an uninterrupted power supply, thus reducing the carbon footprint of operations and improving energy efficiency in data centers. The growing demand for renewable energy in data centers is driving market growth.

The HVO market for data center backup is anticipated to expand notably, supported by the increasing demand for sustainable power and a shift toward renewable energy sources. Data centers are pressured to minimize their carbon footprint and operate sustainably. Hydrotreated Vegetable Oil (HVO) has emerged as a viable low-carbon alternative to diesel fuel for backup generators.

Growth Drivers

Increasing demand for renewable energy sources is driving the market significantly towards growth.

Increasing pressure on data centers to reduce their carbon footprint, and increase sustainability is driving growth in the market significantly. The trend of procuring renewable energy to power data centers is growing in many regions and countries. Data centers are among the largest consumers of power, accounting for 1-3% of the world's total energy consumption. Data center operators such as Amazon Web Services, Meta (Facebook), Google, and Microsoft have committed to achieving net-zero carbon emissions.

The demand for cloud computing is inspiring the construction of big data centers worldwide. Increasing demand for huge amounts of power is driving growth in the market. A key driving factor for the market is that these generators do not require an existing power supply to function. In addition, major manufacturers are developing generators with customized capacity due to changing customer requirements. Such systems are equipped with a feature to scale up and down as per the power required by the data centers. In the era of modern battery technology, the demand for lithium-ion batteries is increasing continuously in data centers.

HVO is a promising renewable energy source, but the reality is that the data centers have already invested significantly in diesel-based backup generation infrastructure, such as generators and trucks delivering the fuel.

Although HVO is currently more expensive than traditional diesel, its environmental benefits make it a cost-effective solution in the long term. Support from equipment manufacturers like Cummins and Caterpillar promotes HVO usage in their equipment, facilitating broader adoption in the data center industry. HVO offers superior storage stability, with a shelf life of up to ten times longer than standard diesel. Increasing demand to reduce greenhouse gas emissions is pressing. Its adoption supports initiatives like the EU Green Deal and the UK’s low-carbon energy solutions in data centers. HVO is a drop-in fuel, meaning it can be used in existing diesel generators without modification.

Segmentation

HVO for Data Center Backup Market by Product Type

·         Diesel

·         Gas

·         Others

HVO for Data Center Backup Market by Capacity

·         < 1 MW

·         1 MW-2MW

·         >2MW

HVO for Data Center Backup Market by Tier Standards

·         Tier I & II

·         Tier III

·         Tier IV

By Region

·         Asia-Pacific

·         North America

·         Latin America

·         Middle East and Africa

·         Europe

HVO for Data Center Backup Market by Product Type

Based on the product type, the HVO for Data Center Backup Market is segmented into Diesel, Gas, and Others. Diesel generators are expected to dominate the market and to lead significantly during the forecast period. While diesel remains the most prevalent fuel type, especially in certain regions like the Middle East and APAC, the adoption of HVO (Hydrotreated Vegetable Oil) is growing fast as data centers prioritize environmental sustainability. HVO, a renewable diesel, is gaining traction as a sustainable alternative to fossil diesel.

It's a drop-in replacement for diesel in most engines, offering a cleaner burn and reduced emissions. Natural gas generators are also being considered, especially for their reduced emissions and potential cost savings. Increasing pressure to reduce carbon emissions, and greenhouse gas emissions is the factor behind the significant market growth. The development and refinement of HVO and other alternative fuels are making them more viable options. In essence, while diesel remains the dominant fuel type, HVO is emerging as a strong contender due to its sustainability and cleaner burning characteristics, with gas also gaining traction in specific scenarios.

HVO for Data Center Back-Up Market by Tier Standards

Based on the tier standards, the HVO for the Data Center backup market is segmented into Tier 1 and 2, Tier 3, and Tier 4. Tier 3 segment is the leading one, and is expected to dominate the market during the forecast period due to its cost-effectiveness, and better redundancy in comparison to tier 1 and 2. Tier 3 data centers are built with modular design, which is easy to upgrade.

Regional Outlook

Based on the region, the HVO for the Data Center Backup Market is analyzed into five categories: Asia-Pacific, North America, Latin America, the Middle East and Africa, and Europe. The Asia-Pacific region is experiencing significant growth and is expected to dominate the market during the forecast period. Established markets including China, Hong Kong, Australia, India, Japan, and Singapore are firmly determined towards the reduction of greenhouse gas emissions. Several countries, such as Malaysia, Indonesia, South Korea, and New Zealand, are attracting high investments and are poised to become top destinations in the coming years.

The rapid growth of data centers in the region is fueling market expansion. Countries like Japan, China, South Korea, and Singapore are implementing stricter emission regulations, prompting data center operators to adopt low-emission fuels like HVO. The growing demand for renewable and bio-based fuels is significantly driving market growth.

 National digital transformation programs, such as India’s Digital India, are supporting investments in green-tech data centers. Leading generator manufacturers in the region contribute to market growth. In cities like Tokyo, Mumbai, Jakarta, and Manila, unstable power grids and high-density urban areas require reliable and clean backup power. Countries like Singapore and Japan have already seen pilot HVO deployments in backup generators. The presence of key market players is significantly contributing to the market growth.

In the American Region, the U.S., Canada, and Brazil currently dominate the market share, with the U.S. alone contributing over 52% of the market share in the global data center power sector. Some emerging locations including Mexico, Chile, Colombia, and others are contributing significantly to the market growth. The HVO market is projected to continue growing, driven by factors like increasing focus on sustainability and the development of more efficient HVO production technologies.

Europe has seen significant adoption of HVO, with several companies incorporating it into their backup power systems. Increasing demand for reducing greenhouse gas emissions is the key reason behind the growth in the market of the Middle East Africa and Latin America.

Key Players

·         Caterpillar

·         Atlas Copco

·         Cummins, Inc.

·         Eurodiesel Services

·         Generac Power Systems, Inc.

·         HIMOINSA

·         KOHLER

·         MITSUBISHI MOTORS CORPORATION

·         Piller (Langley Holdings plc)

·         Rolls Royce plc.

·         Other Players