Bloom Energy's Next Big Business Move: Breaking Into the Utility Market
Fuel cell maker Bloom Energy has slowly and methodically expanded its business since it first came out of stealth mode in February 2010. Now Bloom Energy is taking a big leap to Delaware in a preliminary, but potentially huge deal with a Delmarva Power and Light utility and plans to build a factory.
This isn't Bloom's first foray out of California and it's not the first deal with a utility (it has three small-scale deals with Tennessee utility EFB and California utilities PG&E and Southern California Edison). But it's by far and away the largest, and if approved by state regulators will mark what I consider is Bloom's real entrance into the utility-scale market.
Moving out from early adopters
Until earlier this year, Bloom Energy's reach has been limited to a small circle of companies like Google (GOOG), Walmart (WAL) and eBay, all of which had coffers deep enough to throw down $800,000 for a single Bloom "energy box." But CEO KR Sridhar has always pushed the potential of the Bloom box -- a parking lot-size container filled with fuel cells that can power 100 American homes -- as an affordable power source. Bloom had started to scale up its installations, notably its large commercial installation with software giant Adobe. Check out this animation to learn how the Bloom box works.
And then in January, the company expanded its business model with Bloom Electrons, a program that allows customers to lock in electricity rates for 10 years without having to pay the upfront cost of the box. Bloom manages and maintains the system, and the customer pays for only the electricity it consumes. The pay-as-you-go program, as I've written before, really only works with subsidies. And for now, it really only makes sense for large companies with deep pockets like Coca-Cola or Walmart.
The subsidies are going to continue in Delaware, in large part because Bloom plans to build a manufacturing plant at the site of the former Chrysler factory that will create 900 high-tech jobs. Another 600 jobs could be added through co-located suppliers.
In return, Bloom Energy will receive a nice little lift from the state and support from the University of Delaware, which owns the old Chrysler site. The state plans to offer an $11.25 million conditional grant for the job creation and $6,250 for each job co-located to the site by suppliers. The state also has offered to pay 3 percent of Bloom's total capital expenditures up to the first $50 million of the company's total spending.
Under the agreement with the utility, Bloom would supply 30 megawatts of power capacity over 21 years. The cost to residential taxpayers for Bloom's fuel cell power will be less than $0.70 a month, according to the governor's office.
The crux
Bloom Energy's Delaware expansion plans aren't a done deal yet. There are some considerable obstacles, notably that state lawmakers will have to pass legislation that would allow the use of fuel cells under Delaware's renewable energy mandates.
But Bloom energy has been in this position before and managed to get what it wanted because states with renewable energy mandate are feeling the pressure and a looming deadline. California regulators OK'd utilities use of fuel cells last year, although they have to powered by biogas in order to meet the state's renewable energy standards.
Photo from Bloom Energy
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