California’s Cold Shoulder to the Bloom Box
In a November report, the California Public Utility Commission (CPUC) found Bloom Boxes were too expensive and released too much carbon dioxide to qualify for a lucrative rebate program. Now, at the recommendation of staff, the CPUC is considering ending incentives for the technology.
For years, energy aficionados have been watching the development of the Bloom Box (now called the Bloom “Energy Server”). Touted as a power plant in a box, the solid oxide fuel cell technology was promoted as a clean, reliable, affordable source of distributed power generation. The Bloom Box combines oxygen and natural gas (or biogas) inside a fuel cell, causing a chemical reaction that creates electricity. There is no combustion and no power lines needed (however a fuel source is needed and there are still emissions).
Organizations like Google, Coca-Cola, FedEx, Walmart, eBay, NASA, Honda, and other big names, became customers. Even big energy companies, like Exelon, dipped their toes into the technology. Bloom Energy, which produces the technology, has a powerhouse governance team in place too. Prestigious board members such as AOL founder Steve Case, Kleiner Perkin’s wiz John Doerr, and former U.S. Secretary of State Colin Powell are all at the table.
California ratepayers have offered a lot of help to Bloom. California’s Self-Generation Incentive Program (SGIP) provides incentives to support behind the meter distributed energy resources. According to the CPUC report, between 2012-2015, natural gas-based electric fuel cells (i.e. the Bloom Energy Servers) have drawn 40% of the SGIP program funds per year. Others report this amounts to $400 million.
In 2015, the CPUC issued a staff proposal meant to modify the SGIP program to better achieve program goals and to implement changes required by Senate Bill 861 (2014) and Assembly Bill 1478. One of the improvements was tightening the greenhouse gas limits (or factors) that help determine technology eligibility. The previous 10-year average factor was 379 kgCO2/megawatt hour, with the recommendation to tighten to 350 kgCO2/MWh through 2016, decreasing annually to 337 kgCO2/MWh by 2020. Staff also recommended adding optional cost-effectiveness criteria.
The CPUC’s report found that electric fuel cells emitted 351 kg/MWh, just exceeding the updated eligibility thresholds for 2016 and exceeding the longer term requirements. The report also found that technology did not pass the forward-looking, societal resource cost test, indicating the costs of implementing are greater than the benefits due to high capital costs.
California’s decision about Bloom Box eligibility for the incentive program is still pending. Excluding the technology from California’s rebate program is not an indictment of the technology’s ability to perform or deliver value – such as improved conversion efficiency, reduction of certain criteria pollutants, grid reliability, energy security, and water savings. However, it raises important questions about the technology’s value proposition as a low-carbon resource and its ability to further penetrate the critical California market in absence of long-relied upon SGIP rebate support. From 2001 – 2015, electric fuel cells have enjoyed 29% – 53% of the SGIP rebate value.
Last week, GSV Capital Corp sold its remaining shares (valued at under $3 million) in Bloom Energy at a loss estimated to represent a 42.7 percent drop in valuation. Bloom Energy has raised over a billion in start-up capital and was expected to issue and IPO in 2013 or 2014. Continuing questions about the company’s profitability have been raised as a reason for the IPO stall.
If the CPUC ends SGIP subsidies to Bloom’s fuel cell, it may not matter much…as long as the company moves swiftly on the path to profitability. Key to this will be continually reducing the cost of its Energy Servers that are about $7-$8 per watt (2011 estimates), which to Bloom Energy’s CEO’s admission requires subsidies to be economical.
