Another week, another report about the need to enhance the electric power infrastructure in the U.S. with the Electric Reliability Council of Texas, which manages the local grid, estimating that the state would need the equivalent of 30 additional nuclear plants by 2030 to meet its electricity needs. Meanwhile, PJM, the largest electricity grid operator in the US serving 13 states, has received federal approval from the Federal Energy Regulatory Commission to fast-track the review of up to 50 new power plant projects.
Even if building/reopening nuclear plants and deploying new solar/wind capacity are key to tackling the power challenge arising from data centers in the medium and long term, these initiatives are unlikely to come online fast enough to handle short-term extra electricity demand. Accordingly, transitory solutions to fill the gap are necessary, and fuel cells are increasingly standing out in the race to secure short-term power.
Bloom Energy, which already had some data center contracts (notably with Intel’s Santa Clara data center for tens of MW), announced recently an expanded data center power agreement with Equinix, a leading player in private AI infrastructure, with 75 MW already operational and another 30 MW under construction.
This, combined with the massive 1 GW supply agreement with US utility American Electric Power, suggests that fuel cells are gaining wider acceptance in the data center market as they bring many advantages to the table. They can be deployed in just a few months, enabling customers to rapidly meet growing power needs. They represent a reliable and clean source of power as fuel cells can provide 24/7 baseload, are isolated from potential grid issues (they are installed on data center premises) and as they operate on hydrogen, natural gas or blends of these fuels.
Last but not least, fuel cells can offer a competitive power price – e.g. Bloom Energy’s solution is estimated around $0.10/kWh, globally in line with utilities rates in the US.
Data center strength has started to show in Bloom’s revenue and earnings, with the company last week surprising on the upside at the top-line, gross margin and cashflow levels. The 2025 guidance, which points to 19%-25% revenue growth also came well ahead of expectations and, in our view, still leaves material room for upside should the company land new data center/utility contracts.
Plug Power, which stated last year that its solutions are on trial at “three major data center operators” with sales expected to pick up in 2025, could be another play on this theme but appears riskier given its absence of track record in the data center business and weak balance sheet.
