Bloom Energy Serves up Electricity; will Corporate America follow? - By Doug Mohney

Views and Opinions on Green IT (Jan 27 2011)

1. 

   Fuel cell manufacturer Bloom Energy is going into the service business. The company is now going to sell energy as a service -- shades of cloud computing -- rather than simply sell its fuel cells, er Bloom Energy Servers to corporations.   Bloom says customers can immediately save anywhere from 5 to 20 percent on their energy bills and is bragging that it has over 20 MW and 200 new systems on order under the new program.

   More specifically, customers will be able to "lock in" their energy rates for 10 years by buying power from Bloom;  it will manage and maintain (and own) the systems on customer sites, with customers only paying for the electricity (cloud computing resources) consumed.   Net wins for customers include not having to shell out $750,000 to $800,000 per server up front -- one big whopping CapEx chunk right there -- having maintenance dealt with by Bloom directly, and not have to worry about getting a decade of reliability out of the box. 

   The green aspect to all this is that a Bloom Energy Server generates less carbon by processing natural gas in a fuel cell reaction rather than burning it to drive a generator.  Pump in biogas -- say, methane from a landfill - -and energy production is effectively carbon neutral.

   Buying/locking in power isn't anything new under the sun. The solar panel industry also a power purchase agreement business model; customers lock in for lower rates across a long period of time -- with solar we're talking 20 years -- and simply buy electricity at a fixed rate while the service provider/management company owns, handles, and maintains all of the equipment.

   Credit Suisse and Silicon Valley Bank are providing the financing for the program, so assuming Bloom's cost to crank out a box these days is around $500,000, it's about an $100 million or so deal in financing on the initial announcement of 200 new systems. 

   It's an interesting way to scale up because Bloom can start buying from suppliers in bulk -- thereby driving prices down on the boxes, and further lowering costs -- as well as purchase natural gas at a discount because it will be the buying agent for 200 (and growing, one presumes) Bloom Energy servers around the country.   Further, the cost of getting a loan these days is about as good as it's going get, so the more deals Bloom can sign up now, the better.  

   Bloomberg New Energy Finance estimates that, between long term natural gas contracts and various government incentives, Bloom can generate power at about 7 cents per kilowatt hour over 10 years -- cheaper than the average U.S. commercial rate of about 10 cents per kWh.  But the business model only works

   Another interesting point is the 10 year lock-in for electricity pricing.  If you can save "x" on your energy bill today and lock into that rate for 10 years, it's a pretty safe bet to save money since it's a safe bet in most parts of the country that power prices are going to go up year-over-year, bit-by-bit.    And it is a more favorable deal than solar panels because the corporation gets that cheaper power on a 24x7 basis on a shorter lock in period of a decade -- rather than two on a solar buy.

   So far, big businesses are on-board.  Existing Bloom Energy server owners Wal-Mart, Coca-Cola, and Staples have signed up for the service plan while new customers  CalTech and Kaiser Permanente have signed up for 2 MW and 4 MW respectively. 

   -->

   -->

   Bookmark or Share this article

Login to comment.