Debut of promising fuel-cell technology from secretive startup is light on details

Debut of promising fuel-cell tech light on details

SAN JOSE, Calif. — A richly funded clean-energy startup is keeping critical parts of its business plan secret as it launches its first product amid fanfare.

The Silicon Valley company, Bloom Energy, didn’t offer many new details Wednesday about how it plans to make its promising fuel-cell technology affordable enough for regular people to buy for their homes.

That’s an important question because the company’s product — a box of fuel cells that looks like a giant filing cabinet — currently costs $700,000. Corporations are the first customers, but Bloom Energy wants to cut the price to a few thousand dollars and put it in homes.

All CEO K.R. Sridhar would say was that the price cut could take a decade or more as the technology improves, much as computer chips have steadily gotten more powerful and cheaper over the decades.

“We’re very confident we can make the economics work,” Sridhar said.

With around $400 million in venture funding, Bloom Energy is one of Silicon Valley’s most closely watched startups. Since its founding in 2001, it has been remarkably secretive about its technology.

The lack of details even in the official launch Wednesday of Bloom Energy’s first product concerned some experts, who said it’s not possible yet to measure the true cost of generating power using a Bloom box and to determine whether Bloom Energy’s technology is substantially different from other fuel-cell companies’.

“I would try to take a healthy dose of skepticism. What they’ve demonstrated is they have these systems and they’ve been able to deploy them,” said Bryan Pivovar, fuel cell group manager of the Hydrogen Technologies and Systems Center at the National Renewable Energy Laboratory. “There’s nothing I’ve seen out of Bloom that makes me believe there’s anything special about the way they’re putting things together and what their approach is.”

Bloom Energy does claim that its box can produce more energy — with less environmental damage — than other fuel cells on the market because it isn’t reliant on just hydrogen to trigger the chemical reactions that create power. Rather, it can use wind, solar power and whatever else is available, which could vary from community to community.

However, Bloom Energy didn’t offer more details about how that worked, and Pivovar said that using wind or solar would require an extra step to convert the energy into something that could power the fuel cells, which could result in some energy loss. One of the easiest ways to power the Bloom box would be to hook it up directly to a natural gas line.

A key detail Bloom Energy disclosed was the price its customers pay for power generated by their Bloom machines, and how much money they save over buying regular power from utilities.

Bloom Energy said its customers, which include Google Inc. and eBay Inc., pay 9 cents to 10 cents per kilowatt-hour. For power they buy directly from the electricity grid in California, where all of Bloom Energy’s boxes are currently located, the price is 13 cents to 14 cents per kWh, the company said.

The savings are big but there’s a catch. Bloom Energy said its customers are getting a big federal tax credit that amounts to 30 percent of the price of the Bloom box, along with a rebate from California based on how much energy they buy.

The figures suggest that Bloom Energy’s customers might be saving money solely because of the subsidies, not because the power generated by Bloom Energy machines is cheaper to produce.

Bloom Energy didn’t break out what the costs would be without the subsidies. Sridhar said the investment pays for itself in three to five years but declined to provide further details.

The use of subsidies could make the Bloom boxes less economical in markets in which subsidies don’t exist or aren’t as generous. Sridhar said other states and countries abroad have attractive subsidies as well, but added that a key goal is driving the price of the product down enough so that subsidies won’t be necessary.

“We need to get that subsidy in the early days,” he said. “But very early we need to get out of those subsidies. Otherwise we’re not going to the developing world like we want to.”

He said the potential market for Bloom Energy’s technology is so large that the company could thrive even if it stayed in California.

“We can grow as fast as we want and serve California for the next five years and be a multi-billion-dollar company,” he said. “That’s how big this market is.”

Scott Samuelsen, director of the National Fuel Cell Research Center at the University of California, Irvine, said he was concerned that Bloom Energy’s boxes haven’t been deployed long enough to evaluate their long-term reliability.

“Most customers are looking for a minimum of five years solid performance with a new technology,” he said. “We don’t know the minimum. We know almost nothing about the company, almost nothing about the technology, and there are a number of manufacturers around the world doing the same thing. … It’s cause to be cautious and recognize that there’s going to be a path that has to be followed that will take some time.”