Bloom Energy: You pay for the juice, not the box

Bloom Energy today launched a service designed to lower the hefty upfront cost of its fuel cells, allowing companies to purchase the power rather than the actual hardware.

With the service, called Bloom Electrons, companies sign on to buy the power generated by Bloom's fuel cells, which reside at customers' locations, for 10 years. Bloom will own and maintain the fuel cells, called Bloom Boxes.

Using this power purchase agreement can save business customers between 5 percent and 20 percent on their electricity costs, according to Bloom. Also, on-site fuel cells, which operate as long as there is fuel, can provide a reliable power source in the case of an outage.

CEO KR Sridhar is scheduled to announce Bloom Electrons at the California Institute of Technology later today. Caltech is one of six large organizations, including Coca-Cola, Staples, and Kaiser Permanente, that have signed on to Bloom Electrons. The company says that the orders represent 20 megawatts' worth of product, or 200 Bloom Boxes that generate 100 kilowatts.

Bloom Energy expects that the Electrons service will open sales of its fuel cells to more organizations because it removes the obstacle of purchasing equipment, which costs about $800,000.

"We see this as a significant step because it's a model we can use here in California, refine it, take it elsewhere in the U.S., and take it to the developing world where there are a lot more capital constraints," said Asim Hussain, director of product marketing at Bloom.

The company will first seek to offer the service in states with high electricity rates where Bloom's technology can compete on price, he said. Altogether, Bloom has over 20 customers.

The model of purchasing on-site power at a pre-set cost is already widely used with solar panels, particularly for corporations. Banks provide financing for the cost of installing the equipment while a third party, such as a project developer, owns and maintains the power-generating system and benefits from subsidies.

For customers, Bloom Electrons provides a stable cost and can contribute to lowering their corporate environmental footprint, according to Bloom. The company calculates that it has provided 40 million kilowatt-hours of energy to its customers so far, eliminating 45 million pounds of carbon dioxide.

The Bloom Energy Server is a solid-oxide fuel cell which generates electricity on site using natural gas piped into corporate campuses as a fuel. The system will also work with biogas, or gas captured from decaying biomass, such as manure, which is a renewable resource.

Steam mixes with the methane in natural gas to produce reformed fuel, which is mostly hydrogen. A chemical reaction occurs between the hydrogen and oxygen in the air to create heat, a small amount of carbon dioxide, and a flow of electrons, or electricity.

There are other solid oxide fuel cell companies but Bloom has managed to make its product more efficient because it reuses the heat from the chemical reaction to produce the steam it needs to run, Hussain said. The Bloom Box runs at an efficiency of 50 percent to 60 percent in converting gas into usable power, he said.

Compared to getting electricity from the grid, the Bloom fuel cell is almost twice as efficient per kilowatt-hour, Hussain said. The company has also contracted with Southern California Gas to get biogas sourced from landfills, which most of Bloom's customers will be using, he added.

Silicon Valley Bank and Credit Suisse worked with Bloom Energy to construct the financing needed for the power purchase agreement. Hussain said that Bloom Energy is now manufacturing one Bloom Box a day.

Updated at 10:05 a.m. PT with additional details.