Bloom Energy’s Carbon-Neutral Claim Relies on Scarce Biogas

Bloom Energy says its fuel cells can be 100-percent carbon free — but that’s only if you run them on biogas. What’s biogas, and where does it come from? And how can Bloom’s customers get ahold of some to make their fuel cells something more than a more expensive, less greenhouse-gas intensive alternative to natural gas-fired power plants?

It won’t be easy. In California, where Bloom is focusing the bulk of its efforts because of a state subsidy, only a small amount of biogas — methane from organic waste — is being prepared to be injected into California pipelines. Among the projects is BioEnergy Solutions of Bakersfield, Calif., which has injected a small amount of biogas from Central Valley dairy manure into Pacific Gas & Electric’s pipeline, PG&E spokesman Denny Boyles said.

Bloom seems to be banking on this so-called “directed biogas,” or biogas put into pipelines, to boost its fortunes. In September, Bloom Energy successfully petitioned the California Public Utilities Commission to count directed biogas for the same incentives the state already gives on-site biogas power generation under its Self-Generation Incentive Program. Those state incentives are added to the federal tax credits Bloom’s customers are claiming to give Bloom’s fuel cells the 8-cents to 10-cents per kilowatt hour power production costs that it has been touting to the media.

Among Bloom’s high-profile customers, eBay will be the first to use 100 percent biogas starting this month, according to Bloom’s Web site. Switching to all-biogas will triple the carbon reductions from the 500-kilowatt system, which cut about 650,000 pounds of CO2 in its first six months of operation, Bloom says. Also, Walmart wants to switch to biogas for its two Southern California stores now using Bloom boxes, according to Bloom’s Web site.

Just how much directed biogas will be available is hard to predict, however. Only a handful of suppliers are now preparing to put it into pipelines in California, according to Tony Leo, vice president of application and OEM engineering for FuelCell Energy (s FCEL), a maker of large-scale, high-temperature fuel cells.

Elsewhere in the United States, a small-scale project in Michigan has been injecting biogas since 2007, though only when prices are good enough to justify not using it on-site, said Norma McDonald, North American sales manger for the Belgium-based biogas project developer Organic Waste Systems. Other projects in Texas, Iowa and Idaho have run into financial problems that have held them back, she said.

Of course, methane is now being captured on-site at landfills, wastewater treatment facilities, food processing plants and dairy farms to generate power. Trash company Waste Management (s WM) is generating enough landfill gas-fueled electricity to power about 160,000 homes, and the nationwide number of landfill gas-to-power projects has grown from 399 in 2005 to 519 last year, according to USA Today.

Most landfill gas, however, is burned onsite to create heat or power engines to generate electricity, McDonald said. That’s because landfill methane is hard to clean up to the levels required for gas pipelines, as trash can contain heavy metals and other unexpected contaminants, she said — California doesn’t allow landfill gas in its pipes, for example.

Far more reliable is the methane produced by wastewater treatment plants’ anaerobic digesters or from the rotting leftovers at food processing plants or breweries, Leo said. Those are the sites where FuelCell Energy has put most of its 9 megawatts of biogas-powered fuel cells now operating in California, including the Sierra Nevada Brewing Co. in Chino, the Gills Onion plant in Oxnard and wastewater treatment plants in San Diego.

Perhaps such on-site sources could fuel Bloom Energy’s fuel cells as well. Coca-Cola is planning to use biogas from its Odwalla juice plant in Dinuba, Calif. to run a 500-kilowatt Bloom fuel cell to provide up to 30 percent of its power needs, Environmental Leader reports.

But getting that biogas into pipes and thence to the eBays and Walmarts of the world might be tricky, McDonald said. Without a higher premium for putting biogas into pipelines, onsite use may be far more attractive economically than selling it — especially when sales are at wholesale prices, but onsite-generated gas replaces gas bought at retail rates, she noted.

Methane is about 30 times more potent a greenhouse gas than carbon dioxide, which means capturing it from cow manure or rotting garbage and burning it is better than letting it float into the atmosphere. (So is flaring it, as many oil wells do today, though that’s still wasteful compared to using it to generate power or heat.) But making capture, transport and use pay for itself is another matter.

Why are fuel cells that use natural gas less carbon intensive than just burning it? Running methane through a fuel cell still releases carbon dioxide, of course, but cuts down on some of the other chemicals that come from burning it, making it cleaner. But the main benefit of fuel cells is their increased efficiency in turning methane into power, compared with smaller gas-fired turbine designs. That’s the factor that gives Bloom Energy the ability to claim that its fuel cells can give customers at least a 40 percent reduction in their carbon footprint — they use less gas per kilowatt-hour of power produced.

To get to that 100 percent carbon footprint reduction, however, you’d have to use biogas — and how much biogas will be out there on the market may well be beyond Bloom Energy’s control.