Hyliion's KARNO Generator Masters Diesel, Eyes Critical Power Markets

AUSTIN, TX – February 18, 2026 – Hyliion Holdings Corp. has announced a significant technological leap, successfully operating its innovative KARNO generator system on diesel fuel. The milestone, achieved at the company’s Cincinnati facility, confirms the system's fuel flexibility beyond gaseous sources and positions it as a formidable new solution for energy-resilient power in mission-critical sectors, including defense and data centers.

During the trial, the KARNO system not only ran effectively on the conventional liquid fuel but also exported power to the grid while meeting the stringent Tier 4 Final (T4F) emission standards—all without the complex and costly after-treatment hardware required by traditional diesel generators. This achievement signals a potential paradigm shift in distributed power generation, promising reduced complexity, lower operating costs, and enhanced reliability for essential industries.

“Operating on liquid fuels meaningfully expands our addressable market and strengthens energy resiliency for customers, including supporting our upcoming deployments in defense applications where diesel is the preferred fuel,” said Thomas Healy, Founder and CEO of Hyliion, in a statement. “In other mission-critical environments like data centers, the KARNO Power Module will be able to seamlessly switch to onsite diesel if primary fuel sources like pipeline gas are disrupted or unavailable.”

A New Standard for Critical Infrastructure

The successful diesel test directly addresses the urgent power needs of two rapidly growing sectors: national defense and data centers. For the military, which relies heavily on diesel due to its established logistics and energy density, the KARNO generator offers a compelling advantage. The US military microgrid market is expanding rapidly, with projections suggesting annual spending could reach $1.4 billion by 2026 as the Army pushes toward its goal of deploying a microgrid at every installation by 2035. Hyliion has already delivered a 200 kW KARNO generator to the U.S. Navy for evaluation, underscoring the technology's potential in demanding defense environments where fuel flexibility and low maintenance are paramount.

Simultaneously, the world's data centers are grappling with an unprecedented power crunch, fueled by the explosive growth of artificial intelligence and the increasing strain on public grids. The global data center power market is on a steep upward trajectory, with some estimates projecting it to surpass $70 billion by 2034. For these facilities, where uptime is non-negotiable, the KARNO system’s ability to use pipeline natural gas as a primary fuel and instantly switch to on-site diesel during a disruption offers a new layer of unparalleled energy resilience.

Redefining Emission Compliance

Perhaps the most disruptive aspect of Hyliion’s announcement is the KARNO system’s ability to meet the EPA’s strict Tier 4 Final emission standards without external after-treatment. Traditional diesel generators rely on a suite of complex components—including Selective Catalytic Reduction (SCR) systems, Diesel Particulate Filters (DPF), and a constant supply of Diesel Exhaust Fluid (DEF)—to scrub pollutants like nitrogen oxides (NOx) and particulate matter from their exhaust.

These systems add significant cost, complexity, and maintenance requirements. By eliminating them, the KARNO generator not only simplifies operations but also sidesteps a critical failure point; conventional Tier 4 generators are often designed to shut down if their after-treatment systems malfunction, a risk that mission-critical facilities cannot afford.

This capability stems from the generator's fundamental design. Recent determinations from the EPA have clarified that the KARNO Power Module is not regulated as a traditional internal combustion engine. Instead, it is classified as an external combustion system, which subjects it to more streamlined local air permitting requirements. This regulatory distinction validates the novelty of Hyliion's approach and provides customers with a clearer, more efficient path to deployment.

Inside the Fuel-Agnostic Technology

At its core, the KARNO generator represents a departure from the 150-year-old internal combustion engine. It generates electricity from heat using a process rooted in the principles of the 200-year-old Stirling thermodynamic cycle. Rather than igniting fuel inside a cylinder, the system uses an external thermal reactor that employs a flameless, low-temperature oxidation process to generate heat.

This heat is then applied to a sealed chamber containing a working fluid, causing it to expand and contract. This action drives a piston assembly through a linear electric motor to produce electricity. The entire system has only four moving parts and is hermetically sealed, drastically reducing the maintenance and potential for downtime associated with conventional engines.

This unique architecture is what makes the generator truly fuel-agnostic. Because the core power system only requires a source of heat, it can operate on a portfolio of over 20 different fuels—from hydrogen and ammonia to propane and natural gas—without requiring any hardware modifications. The intricate components that enable this efficiency, such as advanced heat exchangers, are produced using 3D metal additive manufacturing. This advanced fabrication technique allows for complex internal geometries that would be impossible to create with traditional methods, boosting the generator's overall efficiency to levels potentially 20% greater than leading generators on the market today.

Bridging the Energy Transition

With its ability to run on everything from conventional diesel to zero-carbon hydrogen, the KARNO generator is positioned as a pragmatic bridge technology for the ongoing energy transition. Companies and organizations can deploy the system today using readily available fuels like natural gas or diesel, securing their power needs while retaining a clear pathway to a lower-carbon future. As renewable fuels like green hydrogen and ammonia become more accessible and affordable, the same KARNO unit can transition seamlessly, protecting the initial investment and future-proofing the asset.

This flexibility is a key selling point for industries navigating the complex balance between immediate operational needs and long-term sustainability goals. It allows for decarbonization at a pace dictated by infrastructure and economics, rather than forcing an all-or-nothing leap.

Hyliion has stated its plan to incorporate diesel fuel capability into customer-deployed KARNO Cores beginning in 2026. While the company remains an early-stage enterprise navigating the challenges of scaling a new technology, it ended the third quarter of 2025 with a solid cash position of over $160 million. The recent technical milestones and favorable regulatory classification have significantly de-risked its path to commercialization, positioning the KARNO generator to become a key player in the future of clean, flexible, and scalable electricity generation.