Last week, fuel cell startup Bloom Energy launched its power purchase agreement business, called Bloom Electrons, that repositions it from being a provider of fuel cells to a provider of the power those fuel cells generate. But what is a Bloom Electron worth to Bloom’s would-be PPA customers — and what will those electrons cost Bloom and its financial backers?
Over at my weekly update at GigaOm Pro (subscription required), I delve into some of the numbers we’ve seen reported on Bloom — costs per watt and kilowatt-hour, federal and state incentives, production ramp-up goals and the other figures that will help determine the margins Bloom will be eking out of its promise to cut customers’ power bills by up to 20 percent. As many observers have noted, Bloom will have its work cut out for it to make its power competitive with grid electricity.
One key question when comparing Bloom’s new business model to the PPA models that have succeeded for solar power is, just how green are Bloom’s electrons? The answer depends in part on whether they’re using natural gas or biogas, which is methane from rotting organic material. More biogas means a greener cast to the electrons Bloom can offer — and pooling biogas contracts en masse could well be a task better suited to a power provider like Bloom Electrons than left to its individual customers. In fact, it could open avenues for Bloom to contract with utilities hungry for green energy resources to meet state renewable portfolio standard mandates.
On that score, Bloom has definitely expanded its use of the greener choice of fuel, mainly by using a tactic that lends itself well to the consolidated, power provider model it’s pursuing. According to a September New York Times article quoting Bloom’s vice president of marketing Stu Aaron, about half of Bloom’s customers in California were running their energy servers on so-called “directed” biogas — biogas pumped into pipeline networks and “bought” under contract by far-away customers actually using other natural gas sources.
That’s a critical fact, because it nearly doubles the rebates those systems get from the state of California under its Self-Generation Incentive Program — $4,500 per kilowatt for systems up to 1-megawatt in size using biogas, compared to $2,500 per-kilowatt for fuel cells that use natural gas. Bloom lobbied the state to extend those more generous subsidies to directed biogas as well — even, as it turns out, if the biogas is being bought from a landfill methane digester project in Pennsylvania.
Pooling those kinds of far-off biogas resources is just the kind of thing a centralized power-delivery entity like Bloom Electrons might be able to do better than its individual customers. Pooling biogas-fuel-cell baseload power into clean power blocks to sell to utilities under mandate to increase their use of renewable resources may well be another path for Bloom Electrons.
The big question right now is, how does biogas’s extra cost outweigh its more lucrative incentives? Adobe uses directed biogas for its Bloom boxes at its San Jose, Calif. headquarters and says it can produce power for 8.5 cents per kilowatt-hour — well under the California average commercial grid power costs of 13.6 cents per kWh. But California’s incentive program for biogas is limited, and it’s unclear if similar incentive programs will take off in other states.
Can a technology that runs on natural gas call itself “green”? Natural gas, for all its carbon reduction advantages over coal for generating electricity, is not a renewable fuel. And while fuel cells avoid emitting pollutants like nitrous oxides (NOx) and sulfur oxides (SOx) because they don’t burn natural gas as do gas-fired turbines, they still emit carbon dioxide as part of the power generation process. Biogas captured from sources such as sewage and water treatment plants, food processing factories and dairy farm manure, on the other hand, would otherwise enter the atmosphere as the even more potent greenhouse gas methane.
Maybe Bloom doesn’t need biogas to keep its green reputation, however. After all, we’re seeing lots of stress on natural gas as a necessary stepping-stone fuel between the world’s reliance on coal and growth of truly renewable energy sources like solar, wind and geothermal power. With political pressure on to support fuel cell adoption as a cleaner alternative to gas-fired turbines, gas-fed fuel cells could continue to earn some kind of renewable status, as in Connecticut today, for years to come.
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Image courtesy of Bloom Energy.