How Bloom Energy Blew Through Billions Promising Cheap, Green Tech That Falls Short

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The Forbes Investigation: How Bloom Energy Blew Through Billions Promising Cheap, Green Tech That Falls Short

https://www.forbes.com/sites/christophe ... 30abdd3e5f



As wildfires raged last October, more than a million northern Californians suffered through blackouts, their electricity cut in order to reduce the likelihood of high winds sparking new conflagrations. In smoke, KR Sridhar smelled opportunity. His company, publicly traded Bloom Energy, sells fuel cells—steel boxes that generate electricity using natural gas. The boxes, which it calls energy servers, emit a nearly pure stream of carbon dioxide, a major greenhouse gas, but they are supposed to make much less of it than traditional power plants and do so without generating lots of smog ingredients like nitrogen oxide and sulfur oxides.


Even better, Bloom’s units get their fuel via underground pipelines unaffected by the Diablo winds that threatened California’s high-voltage wires and led to the power outages that Sridhar considers intolerable in any modern society, let alone in Silicon Valley.

“Every time there is a disaster your power price is going to go up, because somebody has to pay for the damage,” Sridhar says. “That is the catalyst for change.” Bloom is capitalizing on the outages by wooing potential customers in fire-risk zones to protect against grid failure with Bloom-powered “microgrids,” like its 26 so far in California, which carried customers through last year’s blackouts.


But, like other fake-it-till-you-make-it techies, Doerr and Sridhar acted like Bloom already had it all figured out. In a TV interview with Leslie Stahl on 60 Minutes in 2010, they touted Bloom boxes as the future of clean, green power generation. “The Bloom box is intended to replace the grid—it’s cheaper than the grid, it’s cleaner than the grid,” Doerr told Stahl. At a press conference soon after, Sridhar told reporters that the box could deliver power at “9 to 10 cents per kilowatt-hour.”

“This technology is a nonstarter in most of the country, where Bloom is competing against real renewables like solar and wind.”

But that wasn’t entirely true. Bloom insists it did sell some power that cheap, but only after applying generous subsidies and operating at a loss. (A Kleiner Perkins spokesperson says it’s common to sell at a loss to build market share.) It confirms its unsubsidized cost in 2010 was 19 cents per kwh. Now, after a decade of R&D and plunging natural-gas prices, it still costs about 13.5 cents per kwh to build, install, service and fuel these boxes. Subsidies like the lucrative federal investment tax credit knock off a bit more—1.5 cents in California. This might appeal to customers paying more per kwh in some high-price states. But the national average for retail power is 10 cents and falling, says Ed Hirs, a fellow at the University of Houston and energy advisor to tax consultancy BDO. “This technology is a nonstarter in most of the country, where Bloom is competing against real renewables like solar and wind that have come down the cost curve far faster,” Hirs says. “Add in batteries and you can achieve similar reliability at far lower cost, with no carbon emissions.” Los Angeles has entered into a 25-year agreement to buy solar-plus-battery power at 2 cents per kwh.




If there is a silver lining to this story, it is that there are plenty of places in the world with dirtier air than California where people may be interested in what Bloom is selling. In Japan, the company has partnered with SoftBank on several installations; in South Korea, it recently built its first “Power Tower”—a four-story structure with open sides, stacked with its boxes, and it is now exploring, with Samsung, how to use the boxes to power ships.

Sridhar insists that Bloom’s prices will keep going down while its resiliency goes up. He draws inspiration from satellite pictures of the world at night, which hang on the walls of Bloom’s offices. The bright lights amid the darkness represent the vast majority of the world’s population. “The other 2 billion are basically out of grid and out of luck,” he says. “What drove me to start the company is the same” as what drives him now: to feel “like I have made a dent.”