Secretive Silicon Valley fuel-cell startup stirring hopes, skepticism with new product

Secretive fuel-cell startup stirring hopes, doubts

SAN FRANCISCO — A secretive Silicon Valley startup working on a new way to produce cleaner energy is taking the wraps off its product: a huge box of fuel cells that it hopes will allow homes and businesses to generate their own electricity.

The technology from Bloom Energy, already used at major companies such as Google Inc. and eBay Inc., has been the subject of intense anticipation because it promises to produce more power — with less environmental damage — than other fuel cells on the market.

Yet analysts warn that the technology has yet to be widely proven.

“Fuel cells have always held the promise that they’re going to be this huge thing, but so far it hasn’t really materialized,” said Shu Sun, an energy technologies analyst with Bloomberg New Energy Finance. “What we are seeing is some of these fuel cell companies are making inroads into niche industries.”

A 2008 study by his firm found that the fuel cell market would reach $1.5 billion by 2015, primarily in wireless telecommunications, recreational vehicles and midsize “distributed generation,” which refers to fuel cells that would power, say, a block of apartments rather than individual homes.

Fuel cells themselves aren’t new. Scientists have been working on them since the 1800s, and they are used today in the space program, telecommunications and the military. They haven’t caught on widely for residential use largely because of costs.

Even in Japan, where fuel cells are common, their use is limited to powering smaller devices because those cells don’t generate a lot of energy, said Dallas Kachan, managing director of the Cleantech Group, a research and consulting firm.

Kachan said Bloom Energy’s product offers a “glimpse at this possible nirvana” of placing cells that can generate huge amounts of power closer to where the power is being used. Large technology companies could attach them to their computing centers, which can be energy hogs.

For instance, Google said Bloom Energy’s fuel cells are helping to power some of the facilities at the company’s headquarters in Mountain View, Calif. In 18 months, those cells produced 3.8 million kilowatt-hours of electricity — many more times the 16,500 kWh the average U.S. household consumes over that same period.

Kachan said Bloom Energy’s technology is exciting because of the amount of power it can produce and its ability to run on a variety of fuels, including renewable energy sources.

Fuel cells make power through chemical reactions, but they need fuel themselves to work. Instead of only being able to use hydrogen, Bloom Energy cells can use wind, solar power and whatever else is available, which could vary from community to community.

Kachan also was drawn to the cells’ relatively low cost. The boxes that businesses are buying currently cost $700,000 or more, but the company hopes to have the price down to just a few thousand dollars for residential customers.

Bloom Energy, which is based in Sunnyvale, has lured a high amount of venture capital — around $400 million, its co-founder and CEO, K.R. Sridhar, told the “60 Minutes” news show. Bloom Energy declined to make executives or customers available ahead of Wednesday’s formal unveiling.

Kachan said he is “cautiously optimistic.”

“With $400 million having gone to this company, there are some exciting claims, but like everything else out of Silicon Valley, the market will separate fact from fiction, and will prove claims versus reality,” he said.