On-Site Power

While the grid catches up to demand, AEP secures up to 1 GW of fuel cells for data centers, large energy users

The customer-sited fuel cells will be required to meet the interconnection rules of the local operating company and will be designed to not send any energy back to the electric grid.
While the grid catches up to demand, AEP secures up to 1 GW of fuel cells for data centers, large energy users
Bloom Energy's solid oxide fuel cells (Credit: Bloom Energy)

American Electric Power (AEP) is offering large customers, particularly data centers, a custom solution to support their energy needs with fuel cell technology.

AEP has an agreement in place to secure up to 1 gigawatt (GW) of Bloom Energy solid oxide fuel cells for data centers and other large energy users who need to quickly power their operations while the grid is still being built out to accommodate demand. AEP calls it the largest utility fuel cell technology initiative in the nation.

“AEP worked with customers to develop a solution to power rapidly-growing demand in our service territory,” said Scott Blake, a spokesperson for AEP. “Fuel cells were identified as the right choice for our customers, and we have experience working with fuel cell installations previously. They are flexible and can be used in a variety of circumstances.”

Solid oxide fuel cells are typically used for auxiliary power, electric utilities, and distributed generation. Their advantages include high efficiency (a lower heating value of 60%), fuel flexibility, combined heat and power (CHP) capabilities, and hybrid/gas turbine cycle capabilities, per the U.S. Department of Energy (DOE). However, they also suffer from high temperature corrosion and breakdown of cell components, long start-up times compared to other forms of generation, and a limited number of shutdowns.

AEP expects commercial load to grow an average of 20% annually over the next three years, driven by data center development. The company is in the process of finalizing the first customer project agreements. Discussions are taking place with several other customers about using this technology to provide additional power to their sites while AEP makes the needed grid investments for the long term. All costs for the fuel cell projects will be covered by the large customers under a special contract.

“The rapid increase in energy demand is a challenge that AEP is tackling by finding innovative solutions to meet the unique needs of our customers,” said Bill Fehrman, AEP president and chief executive officer.

AEP has previous experience using Bloom Energy’s fuel cell technology to power customers. Initially, the projects will rely on natural gas, however, the technology has the potential to use hydrogen as an alternative fuel. 

“Fuel sources will be determined by the characteristics of the customer’s site, and while the fuel cells are capable of using hydrogen now, the availability of fuel will determine what is used,” said Blake.   

The customer-sited fuel cells will be required to meet the interconnection rules of the local operating company and will be designed to not send any energy back to the electric grid. AEP said it will work with regulators to secure the necessary approvals needed for these projects.

AEP is facing 15 GW of projected load growth from data centers by 2030, the utility said on its second-quarter earnings call over the summer. For perspective, AEP’s systemwide peak load at the end of 2023 was 35 GW. The utility serves 5.6 million customers in 11 states through its subsidiaries and has the country’s largest transmission system. According to a study published by EPRI in May, data centers could consume up to 9% of U.S. electricity generation by 2030 — more than double the amount currently used.

Last month, AEP Ohio filed a settlement agreement over a proposed data center rate structure that drew pushback from big tech names like Google, Amazon, Microsoft and Meta. This agreement, which is subject to review and approval by the PUCO, requires large new data center customers to pay for a minimum of 85% of the energy they say they need each month – even if they use less – to cover the cost of infrastructure needed to bring electricity to those facilities. The original proposed rate structure would have imposed a 10-year commitment to pay for a minimum of 90% of the energy customers say they need each month.

The agreement also creates a sliding scale that is meant to give small and mid-sized data centers more flexibility. It requires data centers to provide proof they are “financially viable” and able to meet those requirements, as well as to pay an exit fee if their project is canceled or unable to meet the obligations outlined in the electric service agreement contract. The requirements would be in place for up to 12 years, including a 4-year ramp-up period. The agreement also outlines a process to end the moratorium on new Central Ohio data center agreements.

The case began in May 2024, when AEP Ohio filed a proposal to reconcile the costs of infrastructure improvements required for Ohio’s growing data center industry. In direct testimony to Ohio’s Public Utilities Commission in August, several individuals, including consultants and tech employees, opposed AEP’s request, arguing that the new rates would be “discriminatory” and “unreasonable.”