Fuel Cells Gain Ground in Data Centers as Hydrogen Backup Stalls

Data center operators hunting for alternatives to conventional diesel generators are finding the landscape sharply divided: fuel cells running on natural gas or biogas are moving toward commercial scale, while hydrogen-based systems remain largely confined to pilot projects and niche deployments.

Hydrogen backup: infrastructure and cost remain decisive obstacles

Several vendors already offer hydrogen-capable engine systems. Innio Jenbacher, for instance, markets units that can blend hydrogen with natural gas for outputs up to 10 MW, and offers dedicated hydrogen-only units up to 1 MW, with 3 MW models in development. The company secured an order from NorthC Datacenters in the Netherlands for six dual-fuel engines that use on-site hydrogen for brief outages and fall back to natural gas for extended events. The Netherlands has invested in repurposing roughly 300 km of existing natural gas pipeline for hydrogen distribution, giving the country a structural advantage over most markets.

In the United States, the picture is less encouraging. Major engine manufacturers have not pursued hydrogen systems aggressively, and outside industrial facilities such as refineries, hydrogen is neither widely available nor economically competitive. The US Environmental Protection Agency removed a proposed hydrogen co-firing requirement from its 2024 greenhouse gas standards for power plants — an earlier draft had envisioned blending rising hydrogen volumes into natural gas generation by the mid-2030s — leaving no federal mandate in place.

"Hydrogen was excluded due to its production being expensive and the fact that the US has limited infrastructure to produce, transport, or store it," said Megan Reusser, technology manager at Burns & McDonnell.

BloombergNEF CEO Jon Moore noted in March 2026 that investment in hydrogen peaked in 2023, signaling that the near-term growth trajectory has flattened.

Fuel cells: natural gas variants approaching scale

Strip hydrogen out of the equation and fuel cells look considerably more viable. In April 2026, Bloom Energy expanded its agreement with Oracle to support up to 2.8 GW of solid oxide fuel cell capacity, targeting higher-density AI workloads that require rapid power deployment. Bloom has announced additional arrangements with Equinix and Compass Datacenters, and a $5 billion strategic partnership with asset manager Brookfield to accelerate behind-the-meter capacity at AI-focused facilities.

Microsoft has been the most visible advocate for hydrogen fuel cells specifically: a 3 MW system developed with Plug Power in Latham, New York, kept a data center running for two days in a demonstration intended to prove the technology could substitute for diesel. A smaller pilot with Irish utility ESB delivered up to 250 kW at Microsoft's Dublin campus. Additional deployments are underway or completed in California, Wyoming, North Carolina, Utah, and Texas, with Bloom Energy and Ballard Power Systems among the primary vendors.

NorthC installed what was described as Europe's first 500 kW hydrogen fuel cell backup system at its Groningen facility in 2022, but the installation has attracted few imitators despite Dutch policy support.

Renewable diesel and what scales next

Renewable diesel — produced by processing waste fats and oils — is chemically interchangeable with petroleum diesel and approved for use by major engine manufacturers including Caterpillar and Cummins. It can cut lifecycle emissions significantly compared with conventional diesel, and Microsoft committed in 2020 to eliminating standard diesel from its facilities by 2030. The rapid expansion of AI infrastructure has led some operators to reassess those sustainability timelines, however, and renewable diesel supply and pricing keep it a secondary option rather than a mainstream replacement.

Across all four technologies examined in this series, natural-gas and biogas fuel cells appear best positioned to grow in the near term, particularly as behind-the-meter solutions that can be brought online faster than grid connections for new AI campuses. Hydrogen systems will likely advance in geographies with existing supply infrastructure or strong policy incentives, but broad adoption is a longer-range prospect. Operators will almost certainly deploy a mix of solutions rather than a single replacement for diesel, with local energy markets and permitting environments shaping which technologies take hold where.