AT&T to install Bloom Energy fuel cells

Silicon Valley’s high-profile fuel cell company Bloom Energy has scored its first deal with a telco: AT&T (s T). On Tuesday, AT&T said it plans to install 7.5 MW of Bloom’s fuel cells, which it calls Bloom Energy Servers or Bloom Boxes, at 11 AT&T offices in California, including Redwood City, San Jose and San Diego. AT&T will use the fuel cell power for administration offices, data centers and facilities that house network equipment.

Nine-year-old Bloom Energy sells an industrial-sized fuel cell (which looks like a large refrigerator) that uses a chemical reaction to produce electricity. The Bloom Boxes suck up oxygen on one side and fuel (usually natural gas or biogas) on the other side, and produce power on-site for companies in a more efficient and less carbon-intensive manner than using the grid (depending on what fuel the company uses).

Bloom Energy, which has drawn in at least $400 million in venture capital money from investors like Kleiner Perkins over its lifetime (and reportedly more than that), attributes the secret sauce of its Bloom Boxes to ceramic discs stacked together and interspersed with plates made of a metal alloy. Bloom Energy CEO K.R. Sridhar originally came up with the idea for the Bloom Box after developing a device for NASA that would be able to create oxygen on Mars and decided to reverse the process.

So far Bloom has done much of its business within California, because California offers fuel cell installers significant subsidies. Companies with a lot of operations in California like Google (s GOOG), eBay (s EBAY), Adobe (s adbe), and Kaiser Permanente, have taken advantage of the state subsidies to deploy Bloom’s boxes in an effort to reduce their carbon footprints and gain some green cred.

Telcos are no strangers to using fuel cells for their base stations in remote regions. For example, Sprint (s S) is doing a 250 fuel cell test for backup power for its network in the U.S. using a Department of Energy grant, and Vodafone (s vod) spinout P21 is testing mobile telecom backup fuel cells in Europe.

AT&T’s 7.5 MW fuel cell deal, or roughly 75 Bloom Boxes, is a large one for Bloom. Each Bloom Server provides 100 kW of power each, and costs between $700,000 and $800,000 before subsidies, so AT&T is likely spending in the $50 million range before subsidies for this carbon-reducing tactic. (I’m double checking on these figures with Bloom and will update if needed). 7.5 MW of power can provide 62 million kilowatt-hours (kWh) of energy per year, which is enough to power 5,600 homes per year.

Bloom has also been aiming to sell its fuel cells to utilities, though this is a harder market to crack. While the company announced a tentative huge deal with utility Delmarva Power & Light in Delaware, that deal is contingent on certain regulations. However, utilities generally report that they aren’t so interested in fuel cells.

Bloom’s other new strategy to garner business is selling fuel cell power as a service, in much the same way that solar companies sell solar power: Make a 20-year deal with a fixed rate for power, but with no, or little, upfront cost for the fuel cell.