AEP to Offer Faster Power for Data Centers With Bloom Fuel Cells

American Electric Power Co. will use Bloom Energy Corp. fuel cells to supply data centers, providing a quick solution to add power as the utility industry struggles to meet rising electricity demand.

Author of the article:

Bloomberg News

David R. Baker

Published Nov 14, 2024  •  1 minute read

A power substation in Austin, Texas, US, on Friday, Aug. 25, 2023. Texas narrowly skirted a statewide power emergency yesterday after unexpected rain brought temporary relief from record heat, but despite Thursday's wet respite triple-digit temperatures are expected for days to come. Photographer: Jordan Vonderhaar/Bloomberg Photo by Jordan Vonderhaar /Bloomberg

(Bloomberg) — American Electric Power Co. will use Bloom Energy Corp. fuel cells to supply data centers, providing a quick solution to add power as the utility industry struggles to meet rising electricity demand.

AEP has agreed to use up to 1 gigawatt of Bloom’s fuel cells, which generate power through an electrochemical reaction rather than combustion. Fuel cells can be installed far faster than upgrades to the electric grid, giving AEP a new way to supply artificial intelligence data centers that require as much power as entire towns.

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After decades of stagnant growth, utilities are facing a surge in electricity demand from data centers, new factories and electric cars. But building new power plants and upgrading the electric grid takes years, leaving utilities few good options for addressing short-term growth. 

“These fuel cells will help provide data centers and other large customers with the power they need to quickly expand in our regulated footprint as we continue to build infrastructure to deliver reliable energy,” said Bill Fehrman, AEP’s chief executive officer, in a statement Thursday.

Agreements are now being finalized with the first customers, who will cover all the costs of the projects, according to AEP. Financial terms of the deal with Bloom Energy weren’t disclosed.

Although Bloom’s fuel cells run on natural gas, they can switch to hydrogen if that fuel becomes more broadly available and affordable. When running on hydrogen, they produce no greenhouse gas emissions, giving data center operators a way to meet their climate goals. 

The deal is a “big win for Bloom,” according to Evercore ISI analyst James West. The agreement “validates Bloom’s fuel cell offering and provides incremental momentum to fuel-cell adoption as a solution, while the grid infrastructure build out continues to be burdened with over-regulation and permitting issues,” he wrote.

—With assistance from Janet Freund.

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