Wet stacking is a condition in diesel engines in which unburned fuel passes on into the exhaust system. The word "stacking" comes from the term "stack" for exhaust pipe or chimney stack. The oily exhaust pipe is therefore a "wet stack".
This condition can have several causes. The most common cause is idling the engine for long intervals, which does not generate enough heat in the cylinder for a complete burn. "Idling" may be running at full rated operating speed, but with very little load applied. Another is excessive fueling. That may be caused by weak or leaky injectors, fuel settings turned up too high or overfueling for the given rpms. Cold weather running or other causes that prevent the engine from reaching proper operating temperature can cause a buildup of fuel due to incomplete burn that can result in 'wetstacking'.  
In diesel generators, it is usually because the diesel engine is running at only a small percentage of its rated output. For efficient combustion, a diesel engine should be run under at least 60 per cent of its rated power output.
It is detectable by the presence of a black ooze around the exhaust manifold, piping and turbocharger, if fitted. It can be mistaken for lubricating oil in some cases, but it consists of the "heavy ends" of the diesel fuel which do not burn when combustion temperature is too low. The heavier, more oily components of diesel fuel contain more stored energy than a comparable quantity of, say, gasoline, but diesel requires an adequate loading of the engine in order to keep combustion temperature high enough to make use of it. Often, one can hear a slight miss in the engine due to fuel buildup. When the engine is first placed under a load after long periods of idling and wetstacking, it may blow some black exhaust out as it burns that excess fuel off. Continuous black exhaust from the stack when under a constant load is also an indication that all the fuel is not being burned. 
- Burl Donaldson, Patent Assigned to New Mexico State University Technology, Feb 1, 2005, Patent US6848419
In order to avoid failures from either type of wetstacking, the conventional advice is that the engine should never be operated for extended periods of time at less than half-load. In order to assure that the engine operates at a load of at least 50%, artificial loads are sometimes applied... Wetstacking also occurs when solid carbon or nonvolatile liquids accumulate along the cylinder wall or in the piston ring grooves and inhibit expansion and sealing of the ring against the cylinder wall. The cylinder can become glazed which further contributes to poor charge air compression heating and poor combustion of fuel. The performance of the engine continues to deteriorate until charge air compression heating is no longer sufficient for the engine to operate.
- Tawanda Hove, Dept. of Mechanical Engineering, University of Zimbabwe, Zimbabwe, Henerica Tazvinga, Dept. of Electrical, Electronic and Computer Engineering, University of Pretoria, South Africa. Journal of Energy in Southern Africa • Vol 23 No 4 • November 2012
It is already well known that when the diesel engine is operated for long periods at a partial load, a condition known as ‘wet-stacking’ occurs (Donaldson, 2005). This is mainly attributed to incomplete combustion of fuel when the engine runs at low operating temperature. This results in reduced fuel efficiency and, simultaneously, shortening of engine operating life, and the time interval between routine maintenance calls.
- Volt Master America, Engine Driven Generator Set Owner’s Manual, publication number 2593-CON, Revision 05/2009
Operating the engine without an electrical load for prolonged periods of time (one hour or more) will eventually cause damage to the diesel engine (sometimes called wet stacking which is NOT covered by the engine manufacturer’s warranty) or damage to the rings, fuel oil entering the lubricating oil and excessive vibration. Breaking in the diesel engine can require 5 to 10 hours of operation. It is extremely important to have electrical loads of at least 25% to 50% of the rated capacity of the generator’s nameplate rating to have the valves properly seat.
- Gus Wright, Fundamentals of Medium/Heavy Duty Diesel Engines, Jones & Bartlett Publishers, 2015 ISBN 128406705X page 234
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