Dive Brief:
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American Electric Power has signed an agreement to purchase up to 1 GW of solid-state fuel cells from Bloom Energy, according to an announcement released Thursday. If fully realized, the deal would nearly double the total fuel cell capacity Bloom Energy has deployed.
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AEP plans to use the fuel cells to provide power to data centers or other large commercial energy users who need to get power to their operations more quickly than the grid can be built out, according to a company press release.
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Market analysts had mixed reactions to the deal. Jefferies analysts questioned whether AEP will ultimately purchase the full 1 GW, while Morningstar called the deal “a potential gamechanger for Bloom.”
Dive Insight:
AEP is set to build what it described Thursday as “the largest utility fuel cell technology initiative in the nation” following its deal with Bloom Energy.
The utility has already purchased 100 MW of Bloom's solid oxide fuel cells, which require a fuel such as natural gas, biogas or hydrogen but produce electricity from that fuel without combustion. AEP expects to order more fuel cells under the agreement in 2025 as it finalizes discussions with an undisclosed number of customers about deploying fuel cells to support mounting electrical demand while it continues to expand its transmission infrastructure, according to the company's Thursday press release.
All costs for the fuel cells will be covered by special contracts designed for large customers, and the fuel cells will not be designed to send energy back to the electric grid, according to AEP.
AEP has previously used Bloom Energy fuel cells to provide on-site generation for customers at more than a dozen locations, and the utility's experience with the technology is what led AEP to launch its new fuel cell program, according to company spokesman Scott Blake.
“Across the AEP footprint, we have 20 GW of new load expected to come online by the end of the decade,” Blake said in an email. “In some areas, we need to rely on solutions like fuel cells to provide power to customers as we make enhancements to the transmission grid. With up to 1 GW of fuel cells available to us, we can meet those needs without impacting our other customers.”
Bloom Energy has to date deployed 1.3 GW of fuel cells, which company executives said earlier this month could be particularly attractive to customers such as data centers because they can be brought online in as little as six to nine months. The deal with AEP came about following routine conversations with the utility about industry trends and business opportunities, Bloom Energy Chief Commercial Officer Aman Joshi said in a statement to Utility Dive.
“The inflection in power demand, in part due to data centers, is leaving utilities and technology companies scrambling for energy sources,” Brett Castelli, an equity analyst at Morningstar, wrote in an analyst note published on Friday. “With possible new nuclear power plants not online until the 2030s, natural gas turbines taking three years from time of order to delivery, and connection to the grid multiple years in some cases, Bloom's 24x7 solid oxide fuel cells are well-suited to solve near-term power needs.”
However, Castelli noted that shares of Bloom Energy were potentially overvalued following a nearly 60% surge in the company's stock price on Friday. Analysts at Jefferies expressed greater skepticism.
“We don't see much value to the announcement beyond the core 100 MWs,” an analyst note from Jefferies states. “As such, we see reaction as overly robust to what is basically another key but not transformational incremental datacenter add.”
