BY TODD WOODY
Tuesday, March 2, 2010
Bloom Box Thoughts
I would love nothing more than to appoint myself as lead cheerleader for this technology. Except that we are in the snow job stage of corporate disclosure and the SEC is not there to look over anyone’s shoulder as yet.
I think that we can accept that they can produce a neat fuel cell component. So can a lot of other folks, and we can assume that they can at least match industry best practice. The numbers been bandied about may support superior performance but that is best answered by side by side testing which is curiously not been provided. Hell, I will accept manufacturer X. Maybe I missed something, but if I had bragging rights, it is the first thing I would do to bring the boffins on side.
Then we come to the other issue with fuel cell technology. How does one produce ample free hydrogen? The disclosure we have had so far supports only the traditional hand waving laid out by the fuel cell industry. This is not kind, but solar supported tech suggests no more than solar based electrolysis which we know will not fly. And hydrogen from hydrocarbons is a messy job.
So what is the magic?
Fuel cell technology is simple to explain and yet has shown itself to be technically intractable. I do not even want to begin to discuss the science that I have been exposed to covered in those last two paragraphs.
It appears that his argument is mostly that he can produce the cell units cheaply. If he can, that in itself is certainly important and may allow penetration of the industrial market he has targeted. I certainly like the manufacturing method portrayed.
If we can accommodate high temperatures then other issues may become easy. After all, natural gas is mostly methane. High temperature forces separation of the carbon and the hydrogen. If the fuel cell operates at those temperatures, then a lot of bother disappears in the chemistry. The carbon may simply stay on the separation membrane and not interfere with escaping hydrogen.
He claims a large jump in energy conversion efficiency for natural gas. There is still a lot of system heat to deal with that I do not have the answer for yet. It certainly helps explains the presence of a metal layer between the cells as this device is possibly a heat engine running at 800 degrees.
I am sure there is more to come and if third party buyers are happy then cheaper is surely in the cards. The big advantage is extracting twice the power from natural gas which is certainly a welcome development.
Bloom: Thinking inside the box
26 FEB 2010 3:16 PM
BY TODD WOODY
Green tech had its Google moment this week in Silicon Valley when one of the most secretive and well-funded startups around, Bloom Energy, literally lifted the curtain on what it claims is a breakthrough in fuel cell technology: affordable electricity! Fewer greenhouse gas emissions! And that’s all before they throw in the bamboo steamer.
After eight years in stealth mode—until this week, Bloom’s website featured the company’s name and little else—the startup pulled out the stops in a carefully stage-managed media blitz that recalled the high-flying dot-com days of a decade ago. First came a report on “60 Minutes” that got the blogs abuzz along with stories in Fortune and The New York Times.
It all culminated in a star-studded press conference at eBay’s headquarters in
on Wednesday, where California Governor Arnold Schwarzenegger introduced Bloom’s co-founder and chief executive, K.R. Sridhar, and gave him a bear hug before several hundred suits, environmental movement honchos and a bank of television cameras. San Jose
Before Colin Powell, the former secretary of state and a Bloom board member, delivered the benediction, testimonials were offered by Google co-founder Larry Page and top executives from Wal-Mart, eBay, Federal Express, Coca-Cola, and other Fortune 500 companies that had quietly purchased 100-kilowatt Bloom Energy Servers over the past year.
New York Mayor Michael Bloomberg and Senator Dianne Feinstein (D-Calif.), meanwhile, beamed in a bipartisan endorsement via video.
“This technology is going to fundamentally change the world,” the
Democrat declared. California
But is it?
That’s the $400 million question (what some of
Silicon Valley’s most storied venture capitalists have poured into Bloom so far).
With the hype—the apparently brilliant but unassuming Sridhar was compared to Steve Jobs at one point Wednesday—comes the backlash. Almost immediately analysts and competitors began asking hard questions about Bloom’s claims.
And there are some big unknowns. Will the fuel cell stacks last as long as the company anticipates or will frequent replacement undermine the economics of going off the grid, for both Bloom and their customers?
What’s the total cost of ownership for customers? Bloom says the energy servers have a lifespan of 10 years and a payback period of three to five years. That’s based on the current price of natural gas—which is one fuel used by the devices—and state and federal subsidies that halve the cost of the machines that sell for between $700,000 and $800,000. Will Bloom be able to scale up manufacturing and continue to innovate to bring the price of the energy server down? Can they be competitive without subsidies?
All legitimate questions. But it’s important not to lose sight of what looks to be some fundamental breakthroughs, not only in energy technology but in the way some major corporate players are embracing distributed generation-placing electricity production where it is consumed.
Fuel cells convert hydrogen, natural gas, or another fuel into electricity through an electrochemical process that results in reduced greenhouse gas emissions.
For decades scientists have sought to create a solid oxide fuel cell that can operate at extremely high temperatures-around 800 degrees C. That increases efficiency and eliminates the need for expensive precious metals and rare earth elements required as catalysts in lower-temperature fuel cells.
The challenge has been to engineer fuels cells that can withstand such high temperatures without cracking or leaking. UTC Power, the leading fuel cell maker, for instance, has spent three decades trying to perfect a cost-competitive and durable solid oxide fuel cell.
Bloom says it cracked the code by using a combination of common materials like sand and proprietary technology.
“What we have today is a very sellable product and that’s why people are buying it,” Sridhar, a 49-year-old former NASA scientist, said as he gave me a tour of company’s manufacturing operations before Wednesday’s unveiling of the Bloom Box.
One side of the building located in a non-descript
Silicon Valley office park resembles a semiconductor clean room. Thin ceramic fuel cells the size of floppy disks shuffle through machines that paint them with green and black inks that serve as the devices’ anodes and cathodes, respectively. Next door, workers assemble 25-watt fuel cells into one-kilowatt stacks that are inserted into a metal cylinder, which in turn is placed into a silver metal cube.
In another area of the office, employees monitor the 30 Bloom Energy Servers in operation at companies around
. On one screen, video of a Bloom Box installed at Google appears along with a stream of data. California
“Customers like Wal-Mart believe in doing the green thing but they absolutely believe in the bottom line,” says Sridhar. “The technology had to pass the muster and the muster simply was the rate of return on the investment.”
As the world’s largest corporation, Wal-Mart alone could be the key to giving Bloom and its many competitors a market to drive down costs and continue innovating.
“We would like to be able to do this at scale,” Bill Simon, Wal-Mart’s chief operating officer, said on Wednesday in San Jose, noting the company had installed Bloom Boxes at two of its California stores. (Wal-Mart on Thursday announced that it is requiring its suppliers to cut 20 million metric tons of greenhouse gas emissions by 2015. As one speaker at the Cleantech Forum confab in
on Thursday noted, Wal-Mart has the heft to set global climate change policy while governments dither.) San Francisco
Sridhar says the Bloom Energy Server generates electricity at 50 percent to 55 percent efficiency, which is about twice as efficient as the overall power grid. Unlike competing systems, the Bloom Box will not repurpose excess heat to warm buildings and water, which can raise the overall energy efficiency of fuel cells to 90 percent. The tradeoff is that installing so-called combined heat and power systems is an expensive and months-long process.
The Bloom Box is plug and play—“power in hours,” as company executives like to say. That removes hurdles from the deployment of widespread distributed generation.
“I’d love to see us have a whole data center running on this at some point when they’re ready,” Google’s Larry Page said Wednesday. “Moving production of energy closer to where it’s used has a lot of environmental benefits and a lot of commercial benefits. It lets you choose your fuel source.”
There’s been much debate about the environmental impact of the Bloom fuel cells. Most will use natural gas and thus emit carbon dioxide, though much less than a typical fossil fuel power plant. If they use biogas—made from methane emitted by cow manure—carbon footprint drops to zero. But to have any meaningful impact, there will need to be a huge ramp up in biogas production .
But distributed generation, even when powered by natural gas, offers other environmental benefits. New transmission lines don’t need to be built—itself a carbon-intensive process—and you don’t lose efficiency by transmitting electricity from a distant power plant.
Rather than judge the Bloom Box unveiled Wednesday as a final product, it’s probably best to view it as the 1.0 version.
The pressure will be on Bloom to build cleaner and cleaner versions of its fuel cell if they are to be placed in cities and, as the company predicts, in backyards one day.
For instance, Bloom has patented and tested a next-generation fuel cell that would tap solar electricity from a rooftop array to produce hydrogen that could be stored and used to generate electricity at night or when the sun does not shine.
“That’s the killer app,” said Sridhar.
As he noted Wednesday, “Why clean? Is it because you’re an environmentalist? Because of regulation? No. For energy to be distributed it also has to be clean.”
I am adding this comment from a energy industry pro to add some additional insight.
AN OPEN LETTER TO JOHN DOERR
I want to congratulate you and all your colleagues at Bloom Energy. Both for putting on a great show over the last several days, but more importantly for having the fortitude necessary to make it to this point. I am sure that you and KR are acutely aware that you are standing on the shoulders of many good technologists from the past.
Welcome to the energy business.
I've been in the business, oops, space -- both clean and not so clean -- for almost four decades. I have to admit that I am a technology junkie and wouldn't make a good VC, since I never met an energy technology or energy technologist that I didn't like (well, almost never).
But I'd like to talk to you a little like a "Dutch Uncle," since you and Bloom are entering what is really new territory for you, but old and familiar to me.
First, the technology is not really all that disruptive. As a matter of fact, when Clayton Christensen published his first book (1997), he spoke at a local angel investors group in Palo Alto. He mentioned that someone told him "fuel cells were a new, disruptive technology for the energy business." He looked a little sheepish when I told him that fuel cells had been around forever. Yes, the technology sizzles (metaphorically, I hope), but there are other ways to get where you say you are right now.
For instance, a 650-kilowatt Caterpillar genset fueled with natural gas and backed up by a 500-kilowatt diesel genset and all the necessary electric panels costs under $1 million. Home Depot had four similar systems operating from 2004 to 2006 around New York City. Gas prices were about $6.50/Mcf (Mcf = 1000 cubic feet) at the meter and the cost of generation was about 10 cents per kilowatt-hour. Home Depot didn't purchase any power from ConEd and saved $30,000 per year (about 10 percent) for each of the stores. Last year, natural gas prices in California to commercial customers ranged from about $6.00/Mcf to about $9.50, so the old-style gensets are still in the mix to the right customers.
Each of the Home Depot units cost about twice what you say your customers pay for each of the Bloom Servers, with all the "price supports." The gensets use about 60 percent more natural gas per kilowatt-hour. But each of the units at The Home Depot produced more than six times the amount of electricity as each of the Bloom Energy Servers. You can spend a lot on natural gas for the savings in capital costs.
So the Bloom Servers really don't provide such a big disruption in the business of distributed power, and maybe not all that much of a technology disruption.
They do seem, at least from the outside, to be providing some substantial improvements in fuel cells. It used to be that the size of solid oxide fuel cells had a tough time going below about 250 kilowatts because of the sizing of the steam reformer -- that's the thing that takes the fuel and chops off the hydrogen from the methane or hydrocarbon molecule. It sounds as though you have pushed that along pretty well.
I thought General Powell hit on some really good points.
Developing countries need power. KR can tell you that the gensets that Caterpillar and others supply are a ubiquitous part of life in most of these countries. At least ubiquitous for the elites. There is a fantastic after-market for refurbished gensets from the U.S. and Europe into these countries. So here again, you'll run into some obstacles at the pricing points you currently have. That's not to say that the Bloom Energy Server can't contribute. Since the fuel cell is more forgiving with respect to the type fuel, the generation of biogas and biofuels in developing areas could be huge. At the right price.
The military already has some pretty good substitutes. The M1 battle tank has a 1,500 hp (that's about 1.2 megawatts) gas turbine engine. They're expensive and use a lot of fuel. But they're also not much bigger than your box and they have 12 times the output. More importantly, the Army can have kids with a high school diploma fix them in the field with a small tool kit.
Now for the markets.
About 90 percent of all commercial buildings have access to natural gas. This compares to about 70 percent of all residential buildings (though there are 70 million of them). Both of these markets are really, really, really big. Lots of opportunities.
But it's puzzling from what you said on 60 Minutes -- that you find this to be an electric utility play. Yes, it replaces the need for big power plants. But it uses natural gas. Let me say that again.
It uses natural gas.
Not all customers have the same company deliver natural gas and electricity. Probably half the customers have to write two checks each month. One bill going to the electric company and one to the local gas distribution company. Even where gas and electric service is provided by the same company, they are hardly the same when you view them from inside the organizations. There aren't many CEOs in these companies who got their start on the gas side of the business. Certainly, HR in these companies should check with legal to see if there could be any discrimination lawsuits. The cultures tend to be very different. I had a friend start out on the gas side of his company and later became the COO of the electric side. He said he always had a better time on the gas side of the business than the electric side.
Please don't take that to mean that people who run electric companies are strange. They are not. It's just that the businesses are different. Electric companies are the most difficult business in the world to run. Their customers want electricity when they want it. That very instant. And they can't really put any product into inventory (at least not very easily).
As far as your comments about locating Bloom Servers at electric substations, boy, it's been a long time since I heard that. In the early 90s, it was one of the mantras of the distributed generation crowd. It never really took off much. You don't really find many gas mains close to electric substations.
So let me come back around to the beginning. The Bloom Energy Server looks like a really neat technology. It isn't, at this point, something that's going to knock the market on its ear. But that's how the energy business works. You've got something that you can take to the market and have at least an even chance of being heard. That's all you really need. That and patience.
You should have a clear shot at the commercial market.
The residential market is different. If you can get KR to rework the insides of the box to be able to serve the variations in electric, space conditioning, and hot water that residential customers need, then the sky's the limit. Even if you have to pair it with one of TJ's [T.J. Rogers--ed.] solar panels.
But look to the natural gas side of the business and to the current HVAC market -- including companies like York, Trane, etc. -- to install the systems. They know that market cold.
Talk to the people in the gas transmission and supply side. I'm sure Aubrey McClendon at Chesapeake will take your call and can tell you how to make it happen.
You're going to have a blast making the business work.
And just one more thing...
Remember, above all, this ain't the Web.
Rich Hilt / Menlo Park, CA
In the '70s, Rich was involved in Corporate Energy Management at a $2 billion Fortune 100 Company with annual energy costs of $100 million. He crawled over industrial boilers, slogged through nasty chemical plants, and changed light bulbs in manufacturing facilities. To help increase operational efficiency, he set up a reporting system to measure and track energy consumption and match that against plant output. He created a corporate awareness campaign to better communicate the importance of reducing energy use to the average employee.
In the '80s, Rich worked for the natural gas industry in Washington during the industry's period of deregulation. He helped build and run a strategic policy analysis group to position the industry for a more competitive environment. This group became an important player in D.C. energy policy discussions, contributing to: the debates on coal gasification; early information on how increased use of carbon would effect world energy use; the expansion of natural gas into the electric power industry; the impact of proposals for the Clean Act Amendments of 1991; and the potential contribution energy technologies would have on the economy and the environment.
In the '90s, Rich tried to do the same for the electric power industry. He worked to redirect the strategic position of the Electric Power Research Institute in preparation for the industry's deregulation activities. After leaving EPRI, he continued to address industry policy direction, by writing several special studies that were published by McGraw-Hill. Some of the studies were used by states in developing information on the impact that deregulation would take and on the legislation the ensued. He provided benchmarks for the industry that were useful in measuring both operational and financial performance.
Later, he and several other EPRI expats formed BrightLine Energy, which focused on the opportunities that arose from the deregulated environment. He was involved in writing business plans for a variety of energy related startups, including one for a unique microturbine business model.
In the first years of the 21st century, Rich helped found a company providing energy to "big-box retailers." He worked on the Smart Grid (before it was too smart) in the marketing department of CellNet Data Systems.
He was a cofounder of Arare Ventures -- first time VCs focused on CleanTech -- that morphed into LiveFuels, an algae-to-biofuels science-based startup. Afterward, he tried to "jump the chasm" by proposing to develop a 1,000 hectare algae farm in Chile. Just as the financial markets collapsed.
His educational background is in engineering, economics, and public policy. Rich is always looking to help out in greentech to atone for his past sins. He can be reached at email@example.com.