In this paper, a novel method to detect the partial demagnetization in air-cored permanent-magnet (PM) Axial-Flux generators is proposed. Its principle is to monitor a speed-normalized fault detection signal. This signal depends only on the demagnetization severity, as it was extracted using a flux-sensor with a span that negates the induced voltage under balanced conditions. The generator has been designed for marine renewable applications working under variable speed conditions rending PM health monitoring under nonstationary conditions imperative. Initially, a mathematical equation for the electromotive force (EMF) is derived under partial demagnetization conditions with the aim to extract the frequency components related to the fault. To estimate the demagnetization severity, an approach was developed based on the magnetic flux monitoring, which penetrates throughout the sensor. A 3-D finite-element model of the installed winding in the generator is employed to verify the proposed method under steady and variable speed conditions.