Fuel cells move closer to the private sector, further from utilities
For those who missed the news that Exelon, a U.S. nuclear power producer, agreed to invest in fuel cell power plants that it plans to install at 75 corporate sites in four states, Bloom Energy will be providing the fuel cells and will use Exelon for the equity financing. AT&T, a previous Bloom Energy customer, is one of the buyers of the 21 megawatts of power outlined in the deal.
While there may have been initial hope that Bloom would be able to forge relationships with utilities to provide on demand power, increasingly the buyer of fuel cell energy is turning out to be corporations with specialty needs. We’ve already seen Bloom Energy go after data centers and provide the power for eBay’s data center in Utah. The nature of fuel cells has allowed that data center to do innovative cost savings things like ditch uninterruptible power supplies (UPS), which altered the design of the data center itself and created space savings.
Importantly, KR Sridhar has noted that some of its customers want “extreme resiliency.” There’s an increasing belief that the gas grid is more reliable than the electrical grid. Fuel cells run on the gas grid, using either natural gas or biogas. For well financed corporations with mission critical infrastructure, fuel cells start to become a consideration because fuel cells allow them to use the grid as backup.
The partnership between Exelon and Bloom will work via Bloom Electrons, the company’s power as a service offering. Similar to other distributed generation industries like rooftop solar, Bloom is finding that no one wants to deal with the hefty up front capital costs of buying equipment. Rather, they’d prefer to buy power as a service over a longer period. It’s unclear what the financing costs are for Bloom and Exelon but I imagine they’re still fairly high given risks related to the customer’s solvency long term, Bloom’s status as a startup, and the relatively short track record of fuel cells.
Still, the most recent deal is a step forward for Bloom Energy, a company that has raised over a billion dollars and is still struggling to make it.