Bloom Energy's Pay-As-You-Go Model Works (If You Get the Subsidies)
Bloom Energy has turned to the trusty pay-as-you-go business model, a move that promises to expand its footprint and finally shows it's serious about making its overhyped power-plant-in-a-box more affordable and accessible.
Until now, Bloom Energy's reach has been limited to a small circle of companies like Google (GOOG), Walmart (WAL) and eBay with coffers deep enough to throw down $800,000 upfront for a single Bloom 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.
Enter Bloom Electrons, a new program announced Thursday, 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.
Subsidies for profit
Sridhar claims that customers using the service can immediately save up to 20 percent on their energy bills under the program. It sounds good; and it is. With one very large caveat: subsidies are what makes this work.
Bloom Electrons is not a new concept. It's a essentially a power purchase agreement, a common arrangement often struck between utilities and renewable energy projects such as solar or wind farms. It's even used on a smaller scale, with homeowners now able to pay a monthly fee to lease solar panels and buy that energy.
But there's a reason Bloom Energy is employing this model: It works. That doesn't mean it's accessible to the average Joe, or even a small business quite yet. But it gives existing customers like Walmart and Coca-Cola an incentive to add even more Bloom boxes, and it opens up that once limited customer base to non-profits and mid-sized companies that use all of their existing capital to fund core business operations.
More than 200 systems -- enough to power 20,000 homes -- have been ordered under the Bloom Electrons program. New customers include Caltech and Kaiser Permanente, according to Bloom, which clearly timed the announcements of the program and its new customers for greater impact.
Sridhar has maintained that customers can expect to be paid back on their investment in three to five years. But that return on investment is only feasible with both California's $2,500 per kilowatt subsidy and a 30 percent federal government tax credit.
A quick cost breakdown
Each 100 kw box costs between $700,000 to $800,000, or $7,000 to $8,000 per kilowatt -- without subsidies. That's about 10 times more expensive than what experts believe fuel cells should cost if they are going to compete unsubsidized with the traditional grid, according to Wired's report earlier this year.
Lux Research figures without incentives, electricity generated from the Bloom boxes would cost $0.13 kilowatt per hour to $0.14/KWh. That's $0.03/KWh more expensive than the average retail U.S. electricity costs, according to Lux. Bloom Energy has claimed that when incentives are included the total lifecycle cost of electricity over 10 years is $0.08 kilowatt per hour -- cutting the cost for its customers nearly in half.
Photo from Bloom Energy
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