A drilling tool with power generation includes an outer housing and a driveshaft located at least partially within the outer housing and configured to rotate with respect to the outer housing via bearings located between the driveshaft and the outer housing. The drilling tool also includes an electromagnetic power generation device. The electromagnetic power generation device includes a coil and a magnet located within the housing. One of the coil and the magnet is coupled to the housing and the other is coupled to the driveshaft. Relative movement of the driveshaft with respect to the coil generates electrical power.