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Why Southern Company and Bloom Energy Are Combining Fuel Cells and Batteries

One of the biggest utilities in the U.S. and a Silicon Valley tech company are combing the latest in energy technology to sell a system that can both generate and store electricity onsite at a building.

Southern Company and its subsidiary PowerSecure announced on Tuesday morning that they are buying 50 megawatts of fuel cells from Sunnyvale, Calif.-based Bloom Energy.

Fuel cells are devices that generate energy through a chemical reaction commonly using natural gas. Unlike solar panels, fuel cells can create electricity around the clock, not just when the sun shines.

Bloom Energy has sold these boxes—and the energy they generate—to large retailers and tech companies like Home Depot HD 0.68% , Walmart WMT 0.11% , Apple AAPL 0.72% , eBay EBAY -0.60% , and Google GOOG 1.21% .

Under the new deal, PowerSecure is packaging Bloom Energy’s fuel cells with Lithium-ion batteries and electrical infrastructure, so that the electricity generated by Bloom Energy’s fuel cells can be stored and used by a customer when needed. Southern Company plans to sell the tech to corporate and industrial customers under long-term contracts.

The partnership and sale is a big deal for 15-year-old Bloom Energy, which reportedly has quietly and recently filed for an IPO. The company has about 200 megawatts of fuel cells installed around the world, so a 50-megawatt pipeline is substantial.

The tech union could also possibly help Bloom Energy continue to access certain incentives, like a California subsidy that more recently has pivoted toward batteries and away from fuel cells.

During a press conference about the new deal, Southern Company’s CEO Thomas Fanning called the partnership “a fascinating development,” and said it’s about being able to sell tech for the customer premise. Unlike Southern Company’s traditional model of transmitting electricity from a coal or gas plant many miles over the power grid to a customer’s building, fuel cells and batteries place the energy infrastructure right at the customer’s buildings.

Bloom Energy CEO K.R. Sridhar compared how energy technology is becoming more “distributed,” to how computing and telecom infrastructure have previously moved from centralized systems to distributed systems. On a call with Fortune, Sridhar said the new energy storage and fuel cell systems would be customized for customers, calling the energy that they’d create and store “designer electrons.”

Retailer Home Depot plan to use the new fuel cell and battery combo. Health provider Kaiser Permanente is possible interested in the energy storage option, but is deploying 30 megawatts of fuel cells using project financing provided by Southern Company.

Read full article at Fortune