Why datacenter giant Equinix is buying a bevy of Bloom fuel cells

Bloom Energy
The 1-megawatt installation of Bloom Energy Servers at one of Equinix's data centers in Silicon Valley.

By several measures, the deal trumpeted this week by Equinix, one of the world's largest Internet colocation providers, and Bloom Energy, the scrappy fuel cell company that had its "60 Minutes" moment way back in 2010, is a whopper.

And it underscores why the market for this technology is alive and well as a "corporate sustainability" strategy, even though other renewable energy procurement strategies might pencil out as cleaner onsite options

The arrangement — made possible through a 15-year-long power purchase agreement financed by the PowerSecure subsidiary of utility Southern Co. — calls for the installation of Bloom's solid-oxide energy servers at 12 Equinix data centers in the United States, at sites in California and New Jersey.

The fuel cells will go online between latest 2017 and 2019. The deal actually builds on a pre-existing relationship: Equinix has been experimenting with fuel cells since 2015. After these installations, it will support an aggregate of 40 megawatts of distributed capacity — the biggest commitment so far by any Big Data center provider to fuel cell technology.

For perspective, as of April, Bloom had deployed more than 200 MW in capacity. There are only a handful of projects where the total capacity is more than 20 MW.  

"We've been looking at alternate distributed power sources for a number of years, for quite a long time," said David Rinard, senior director of global sustainability and strategic sourcing for Equinix. When asked to comment on his company's experience-to-date with the Bloom technology, he noted: "It's been running seamlessly. It met our business case assumptions, and in many cases exceeded them."

To be clear, the fuel cells won't replace the existing power at these sites. Rather, the installations will run parallel to the grid, relieving the "day-to-day" stress on the local utilities through the contracts negotiated by Southern Co. and Bloom on behalf of Equinix.

As you might expect, the press release describing the deal talks up the corporate sustainability angle — which has become a high-profile priority across the Internet and cloud computing sector, one that inspired the Greenpeace "Clicking Clean" report earlier this year.

Equinix, which earned a respectable "B" grade in the NGO's analysis, is among the most highly ranked data center operators. It has made a commitment to use 100 percent renewable energy, and reached the 43 percent mark at end of 2015. It has used a combination of strategies to get there, including purchase agreements for that cover 225 MW of wind energy in Oklahoma and Texas.

Technically speaking, this new deal is another step in the right direction. The Bloom servers, which generate energy through an electrochemical process using air and natural gas, produce power that the company says is 20 percent to 45 percent "cleaner than the equivalent utility-provided, natural gas-powered generation." The installations will avert approximately 660,000 tons of carbon dioxide emissions and save 87 billion gallons of water over the lifetime of the project, according to estimates provided by Equinix.

The bigger benefit to the data center company, however, relates more to reliability and resilience, according to experts. 

"There is no immediate operational or financial benefit, as these fuel cells will be net additions to already existing mission-critical data center facilities with diesel generators and uninterruptible power supply (UPS) systems safeguarding customers' IT systems," said Daniel Bizo, senior analyst for the data centers and infrastructure team at 451 Research. "However, longer term, it is possible that Equinix will at some sites adopt fuel cells for primary energy generation. This would allow for them to eliminate generators, UPS systems and associated switchgears (major reduction in capital) while increasing energy security. That is an attractive vision."

The deal is also indicative of the much larger role that utilities are playing in helping facilitate distributed energy installations, said Adam Forni, a senior analyst with Navigant Research. "Fuel cells are strong in cases where you have a high cost of electricity, you want a very efficient source of power — a very carbon-efficient source of power — and you want it onsite," he said. 

The financing provided by Southern Co., which prevented Equinix from dipping into its capital expenditure budget, was instrumental in enabling the contract to happen, according to Rinard. "We spend a fixed amount on expansion [each year] and reserve our money for that," he said. "We are not in the business of owning or operating an electricity supply."

It's worth noting, for example, that Excelon subsidiary Constellation was at the center of another recent Bloom deal — an 800-kilowatt community microgrid in Hartford, Connecticut, that links a local library, elementary school, senior center and health facility. The motivation there was primarily resilience.

Market projections for fuel cell technology remain solid for applications where the intermittency of solar and wind power is problematic. Another advantage is that they are relatively small and easy to install, compared with onsite solar, noted Bizo.

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