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Summary:

The most talked about company in cleantech in 2010, fuel cell company Bloom Energy, announced Thursday morning that it’s launching an offer for 10-year electricity contracts with no upfront payment for the Bloom Box fuel cell itself, which costs between $700,000 to $800,000.

Bloom Energy’s Sweet Spot: Data Center Backup?

Updated: The most talked about company in cleantech in 2010, fuel cell company Bloom Energy, announced Thursday morning that it’s launching an offer for 10-year electricity contracts with no upfront payment for the Bloom Box fuel cell itself, which usually costs between $700,000 to $800,000. Calling the service “Bloom Electrons,” the product is basically like a power purchase agreement, which are common for the renewable energy sector and utilities.

Bloom Energy, which has raised at least $400 million from investors, is saying that over a 10-year period, it can offer its customers electricity contracts for its Bloom Boxes for a cost less than standard grid power. Bloom says “customers can immediately save up to 20 percent on their energy bills,” and that Walmart, Staples, Coca-Cola, Caltech, Kaiser Permanente and BD have signed up for the program.

Update: According to VentureWire, Bloom has “quietly raised about $100 million more in equity in the past few months . . . according to two people familiar with the matter.”

While Bloom didn’t specify that customers will only save that kind of money in California, or only in states with aggressive subsidies, it seems like the math would work out that way. Lux Research has estimated that the cost of electricity over a Bloom server’s 10-year life is “$0.08/kWh to $0.10/kWh (when running as base-load for 24 hours a day), including government incentives and assuming a $7/mmBTU natural gas long-term contract.” Without subsidies, Lux predicted “electricity would cost $0.13/kWh to $0.14/kWh, with about $0.09/kWh from system cost and about $0.05/kWh coming from fuel cost. Note that this is high compared to average retail U.S. electricity costs of roughly $0.11/kWh.”

Perhaps removing the upfront fee will bring in more customers, though Bloom Energy founder KR Sridhar has maintained that the payback on investment for Bloom Box customers is 3 – 5 years in energy cost savings. Sridhar confirmed to me that the 3 – 5 year claimed payback is with the California and federal subsidy.

If you’re not familiar with the Bloom Box product, it’s a fuel cell that looks like an industrial-sized refrigerator. Fuel cells are kind of like chemical batteries, which combine solutions to create a chemical reaction that delivers electricity. Fuel cells have been under development by hundreds of manufacturers in the consumer electronics and auto industries for decades, but have remained too expensive and have been unable to break into the mainstream.

The nine-year-old Bloom launched last year to much fanfare, at an event with a list of customers like Google, and eBay, and with speeches by its celebrity backers: Kleiner Perkins’ John Doerr and Colin Powell.

The Bloom Box sucks up oxygen on one side and fuel (natural gas, biomass, etc) on the other. Bloom bakes sand and cuts it into little squares that are turned into a ceramic, which are then coated with green and black “inks.” Using a special process, Bloom creates these ceramic discs and stacks them together interspersed with metal plates of “a cheap metal alloy.” The bigger the stack, the more power the Bloom Box will create.

Bloom is having a live press conference to talk more about the announcement at 10:00 a.m. PST at Caltech. Watch it if you want to follow the news.

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  1. Its not terribly surprising that they can produce 10c power with the right mix of incentives. The Sec. 1603-ITC and CA $2500/kW buy the cost down to around $3000/kW. Add the Accelerated Depreciation (which is effectively another 10% reduction in capital costs) and you’ve got a Fuel Cell for just about the price of a recip engine.

    With efficiencies around 48% and gas at $7, you should be able to hit 10c power. Assume the have pretty high leverage for the financing and get a competitive 7.5% interest rate. O&M (including stack replacement somewhere around 60,000 hours) somewhere in the neighborhood of 2c/kWh.

    You can produce the same results using a highly efficienct recip engine — the caveat is that to get efficiencies comparable to the fuel cell, you need a big engine (think 4MW+). Wartsilla and Mitsubishi both make models that can hit 46-47% efficiency. For smaller systems (1-2MW range) you can expect 42-43% efficiency from engine builders like Jenbacher and MWM/MAN. The financials come out just about the same if you have a favorable spark spread with $7 gas.

    The emissions from the engine (lean burn with SCR) will be about the same as what you’ll get from the Fuel Cell’s reformer…

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    1. Stack replacement of 60,000 hours. Where did you get that from? And what is the cost /kw of recip engine in your model? $3000/kw or more like $800/kW?

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      1. Stack replacement will probably be somewhere in the 60-80k hour range, unless these SOFC units are really poorly built. Talk to any of the guys at UTC about their Purecell units and they’ll tell you 80k run-hours before stack replacement. So I went with 60k. If you’ve got a better more reliable number, then throw it out there – but don’t just come up with a snarky reply if you don’t have better info.

        Sure – the capital cost for a recip engine can get as low as $800/kW – if you want to buy an incredibly inefficiency CAT or Waukesha (try 35-38%)… you’ll pay a premium for engines that can get efficiencies into the 42%+ range. And that $800 figure you site is the equipment cost – that doesn’t include any installation, BOP, etc. $3,000 is on the high end, but you wont do much better than $2,000/kW…and thats for the bigger systems.
        You certainly won’t get any financial backers for a project if you go tell them that you can get the equipment for $800/kW.

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      2. Bilsko,

        Is UTC SOFC system? What are the operating temps for UTCs system?

        I had asked you about your data point, for a specific reason, and it is obvious that you have no clue about Bloombox stack life. The extrapolation that you have used shows lack of technical understanding on your part.

        How much is the cost of a Jenbacher engine with BOP and installation costs?

        As far as the installation costs go. The cost of installing a 2 MWatt recip engine is going to be far cheaper than installing 20 x 100kW Bloom Boxes. Yup, this cost will vary as the size of the engine goes up, but again, just throwing a $2000 or for than matter $3000 figure is naive. There has to be a context and comparison.

        http://aeepnwc.org/images/meeting/091808/aee_presentation_091808_garrett_smith_rev_1.pdf

        http://cambodia.usembassy.gov/media2/pdf/economic_utilization_of_biomass_and_municipal_waste_for_power_generation.pdf

        And BTW, you seem like a dump VC, biz dev, MBA guy from your level of discussion.

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      3. Nope. The UTC is a PAFC unit. Operating temps are around 400F. Much lower than the 1100F+ temps that the SOFC must operate at. But you knew that already, didn’t you?

        So, what is the stack replacement interval for the Bloombox?

        We’ll just have to disagree on the installed cost for a recip project. Just so you know ,The Western Energy Systems pdf you sent lists installed costs for a recip project at $900-$1,200, *after incentives*. I don’t disagree that 1x2MW engine is cheaper than 20×100 fuel cells. I don’t even like fuel cells, but I am being realistic about the price of a recip-based CHP system (perhaps you’re talking engine only and I’m talking engine+SCR+Heat Exchange+Switchgear…? I mean, really, why else would you install the engine if you weren’t using it in CHP mode)

        I have enough project experience and have drafted enough 30% design budgets to know what realistic numbers are for a recip project.

        And enough with the snide ad hominem attacks. It doesn’t do anything to improve the tenor of the conversation.

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  2. So this is NOT a renewable energy source ?!
    you feed the bio/natural gas and it generates electricity at little more efficiently (48%) ?! Was that all the fuss about ?!

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  3. Bilsko,
    If you nix the SCR & Heat Exchanger, you can get the cost of a perfectly good small recip to the point where you can provide electricity to most big box retailers (350-650kW) — think Home Depot, Costco, WalMart etc. There are loads of them paying 15¢+. Bloom’s challenge is to find firm supplies of methane for 10yrs and to have residuals on the leasing of the units so that they can get the yearly lease payments to about the cost of the methane (per kWh).(Ok, maybe 1.2 times the methane costs).

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