Last year, fuel cell maker Bloom Energy and Southern Company microgrid subsidiary PowerSecure announced a partnership to bring 50 megawatts of fuel cells to market through upfront financing and power-purchase agreements.
On Wednesday, the partners announced they’ve landed the biggest client yet for that offering, in the form of a 37-megawatt fuel cell deal with data center company Equinix.
Over the next two years, the partners will install Bloom’s solid-oxide, natural-gas-fueled “energy servers” at 12 Equinix data centers in California and New York, with the goal of reducing the company’s carbon footprint, offering it more control over its energy supply, and keeping its electricity bills at or lower their current rates via 15-year power purchase agreements.
It’s one of the biggest fuel cell installations to date, both for Bloom and for the industry as a whole.
The U.S. had about 235 megawatts of large-scale stationary fuel cells operating in the U.S. as of mid-2016, most of them in California, according to a November report from the Department of Energy. But the largest single projects to date are in Connecticut, with nearly 15 megawatts from FuelCell Energy, and in Delaware, where Bloom set the previous record with a 30-megawatt deployment with Delmarva Power to deploy its fuel cells at utility substations.
This week’s deal will put Bloom’s “energy servers” -- self-contained fuel cells, inverters and control systems -- behind the meter at Equinix data centers, where they will provide a portion of each site’s electricity around the clock. The units will be located at seven Equinix data centers in the Silicon Valley, three in the New York area, and two in the Los Angeles area, with the largest single site at 5.2 megawatts.
Bloom, which says it has deployed more than 200 megawatts of its systems, has sold its fuel cells to data centers in the past, for customers including eBay and CenturyLink, as well as one 10-megawatt deal for Apple’s data center in North Carolina.
But the Equinix deal represents the first big project under the PowerSecure partnership, which is aimed at giving its corporate parent, Southeastern utility Southern Company, an entree into the world of owning distributed energy assets.
“The most exciting aspect of this structure is that it allows each party to focus on its core competency,” Asim Hussain, Bloom’s VP of marketing, said in an interview this week. Equinix “wants to operate the most efficient and reliable data centers in the world. We’re providing for that with clean, high-quality electricity…and the financing is coming from one of the largest utilities in the country. That's what really allows distributed energy to scale.”
Bloom’s fuel cells aren’t new to Equinix. Since 2015, the company has been testing a 1-megawatt installation at one of its San Jose data centers, and “it’s exceeded its business case from an efficiency standpoint and a financial standpoint,” according David Rinard, senior director of global sustainability and strategic sourcing.
Based on that experience, “We took a look around the country to see where else it made sense to expand,” he said. Equinix looked for a combination of sites where the fuel cell’s cost of energy aligned with grid power prices, and where local or state air quality regulations barred natural-gas turbines or other combustion-based forms of distributed generation, he said.
He wouldn’t disclose financial details on the power-purchase agreements Equinix signed for that fuel cell-generated electricity. “There are a lot of financial gymnastics that can go into that,” with prices differing from region to region, said Rinard.
But as with the company’s previous sustainability and renewable energy efforts, such as its large-scale purchases of wind power under PPAs, “We essentially want to buy green products that are in parity to grid costs.”
Bloom’s fuel cells still consume natural gas and emit carbon dioxide, making them far from a renewable or carbon-neutral energy source. But according to the partners, the 37 megawatts to be deployed will provide power that is 20 percent to 45 percent less carbon-intensive than the equivalent grid-supplied power. Those figures were calculated using the EPA’s Emissions & Generation Resource Integrated Database (eGRID) for the carbon footprint of the marginal grid power to be supplanted by the fuel cells, Hussain said.
The fuel cell units also met Equinix’s strict requirements for power reliability, a critical issue for a company that hosts massive amounts of internet traffic from data centers around the world. About half of Bloom’s systems deployed as of mid-2016 were being used not just to augment the customer’s continuous energy needs, but also to provide uninterruptible backup power.
While Equinix isn’t planning to replace its existing emergency backup power systems with Bloom’s fuel cells, it has tested that capability at its initial site. “We could look at that at some point in the future,” Rinard said.
Likewise, Bloom and PowerSecure have been testing a combination of fuel cells with battery storage systems to provide both emergency backup and baseload power. While the two haven’t deployed the combo at any sites yet, “We’re in constant evaluation of ways to use Bloom’s expertise alongside ours,” said Eric Dupont, PowerSecure’s chief commercial officer.
Bloom has certainly faced its share of criticism over its cost claims. Its Delmarva power deal came under the most intense scrutiny, since it’s one of the few with publicly available details on surcharges being passed on to the utility’s ratepayers. Those surcharges added up to $130 million over the first four years of the program, according to The News Journal.
It’s also been criticized for using the California’s Self-Generation Incentive Program to cover much of the costs of its fuel cells. The Equinix deployments in California won’t be using SGIP funding. Hussain noted that “there are no state incentives utilized.”
Equinix will be tapping another value from Bloom’s systems at its California locations -- the ability to hedge its electricity costs with natural-gas contracts. The company doesn’t have access to the state’s Direct Access program, which allows a limited number of large commercial power customers to buy electricity outside of utility rate structures. But, said Rinard, “We can enter into long-term forward contracts for gas, which is how we handle electricity purchases in most other jurisdictions.”
Bloom also faced scrutiny over its green claims, with critics contending that it has cherry-picked figures to make its carbon emissions profile look better compared to grid power. It’s also worth noting that Bloom’s fuel cells generate solid waste which had for a time been classified as a hazardous material, although the company says it has resolved that issue through recycling the byproduct.
The company has raised more than $1.2 billion since 2001 from investors including Kleiner Perkins Caufield & Byers, but has yet to find an exit for its investors. Late last year, news reports indicated that Bloom had filed for an initial public offering, using a confidential filing process for companies with less than $1 billion in annual revenues, but we’ve heard nothing since then about any IPO plans.