Weekly Update

By the Numbers: What a Bloom Electron Is Worth

Last week, Bloom Energy launched its power purchase agreement business, Bloom Electron, that repositions the startup from fuel cell maker to provider of the power those fuel cells generate. It’s clearly a move to shift technology and price risk away from would-be buyers of Bloom fuel cells and onto Bloom itself. But what is a Bloom Electron worth to Bloom’s customers? And what will those electrons cost Bloom and its financial backers?

Bloom isn’t disclosing terms for 10-year contracts it’s offering customers — including Walmart, Staples, Coca-Cola, Caltech and Kaiser Permanente — though it claims Bloom Electron customers can slash power bills by 5 to 20 percent right away. But to deliver on that promise with money-making margins while paying off its financial backers, Bloom will have to crunch a complicated set of facts and figures to break even. Here are a few:

$700,000 to $800,000. The cost of Bloom’s 100-kilowatt, natural gas-fueled, solid-oxide fuel cell, which equals $7 to $8 per watt installed cost, high compared to distributed power options like solar panels or microturbines, and about 10 times the cost goal set by fuel cell research group Solid State Energy Conversion Alliance. Greentech Media cited an anonymous source that set the per-watt price of one Bloom deal at $12.50 per watt, including warranty. Bloom says its costs will come down as production ramps up.

Eight to 10 cents per kilowatt-hour. The cost of power from a Bloom box — barely competitive against average U.S. commercial grid power rates of 10.2 cents per kWh, but easier to justify against the 13-plus cents per kWh rates in states like California, New England and New York. That price, however, assumes a 30-percent federal tax credit, as well as a $2,500 per kilowatt rebate in California (similar rebates exist in states like New York and Connecticut). Without those benefits, Bloom’s power costs could reach 13 to 14 cents per kWh.

$2.50 versus $4.50. The difference between California state per-watt rebates for fuel cells using natural gas and those using biogas captured from waste sources. Bigger rebates mean lower costs for biogas users, as well as cleaner electricity. But biogas is a rare commodity nowadays, used mainly for on-site heat and power generation. So-called directed biogas, pumped into pipeline networks and “bought” under contract by far-away customers actually using other natural gas sources, could expand the pool of potential biogas users. Indeed, about half of Bloom’s customers now use such directed biogas, including Adobe at its San Jose, Calif. headquarters, where it anticipates power costs of 8.5 cents per kWh.

33 percent by 2020. That’s how much clean power California’s biggest utilities will need by 2020 under the state’s renewable portfolio standard (RPS). As clean power, biogas-fed fuel cells could recognize a value beyond their per-watt generation costs in the 29 states (and counting) with RPSs. Even fuel cells running on natural gas could continue to earn some kind of renewable status, as in Connecticut today, given that natural gas is getting cheaper and more politically attractive as a “less brown” alternative to coal.

24/7/365. How often Bloom needs to run its fuel cells to make them pay off, and to prove to customers that they’re reliable — a big challenge for an untested technology. But it could also be a key advantage for fuel cells as reliable clean power for always-on customers like data centers, as compared to solar panels, which only make power when the sun shines.

$500 million. That’s how much Bloom Energy has raised, including $400 million previously raised and the $100 million reportedly being raised over the past few months. I’m curious to know how much is going to expanding production, and how much is going to support the new financing model, as a measure of how much financial risk Bloom and its investors are taking upon themselves to make the Bloom Electrons model work. Don’t expect Bloom to hand out that kind of information, however — it’s on the financing side that PPA models will be made, or broken.

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Question of the week

Can Bloom Energy deliver on that promise of Bloom Electron and still break even?