BLOOM ENERGY RAISES $150 MIL IN VC, BUT ITS FUEL CELLS ARE TOO COSTLY, ITS NEVER MADE A PROFIT, SO ITS FUTURE IS IN DOUBT

 

Bloom Energy, Kleiner Perkins' first cleantech investment, has raised another $150 million, according to VentureWire, as reported in the WSJ. 

Bloom, founded eleven years ago, builds and sells fuel cells of the solid oxide fuel cell (SOFC) variety. The devices run on natural gas and produce electricity with fewer emissions than a diesel gen-set.

This Round G brings the VC total for Bloom to approximately $800M on a reported valuation of $2.7 billion, a figure which brings it near the 'Solyndra line' of VC totals. At a certain point, the necessity of having to raise more VC becomes looks more like a liability and an indication that something is wrong with a business model.

Previous investors in Bloom have included Advanced Equities, Apex Venture Partners, DAG Ventures, GSV Capital, Kleiner Perkins Caufield & Byers, Mobius Venture Capital, Madrone Capital, New Enterprise Associates, SunBridge Partners, and Goldman Sachs.

Years ago, I obtained some communications from Advanced Equities, believed to be one of the largest investors in Bloom, that predicted a Bloom IPO in 2009.

There is still not a single, pure-play, public fuel cell company that has experienced anything close to profitability. It's difficult to believe that Bloom is anywhere close to being profitable despite the plundering of the Self Generation Incentive Program (SGIP) they enjoyed. Bloom also sells its fuel cells as a service -- a fuel cell PPA, as it were -- to take some of the pain out of the initial investment.

Bloom does have a stellar list of high-profile customers, including Apple, Adobe, and Google.  

Bloom's high headcount, high burn rate, and presumably negative margins, along with a less-than-open IPO market, indicate a rocky road ahead. I would also suggest that Bloom's green credentials are debatable.

Last year, I spoke with Mike Bangs, Adobe's Director of Global Facilities, about his Bloom installation. The firm's two 200-kilowatt units installed at the company's San Francisco site are Bloom's next-generation design and put out twice the power of the previous 100-kilowatt model -- in the same footprint. Those two units provide about a third of the power for Adobe's San Francisco operation. Although Bloom does have a Power Purchase Agreement (PPA) option, Adobe owns these boxes and qualified for the federal 1603 Investment Tax Credit, as well as the Self Generation Incentive Program (SGIP). Between those two generous programs, Adobe estimates that power costs it about $.085 per kilowatt-hour after the incentives. The company has also locked in its price for natural gas for a 10-year term.

Jeff St. John recently posed the question, can Bloom’s fuel cells compete with the natural gas-fired power plants that now serve the grid?

That’s a complex question, involving differences in cost per watt (gas turbines are still cheaper); the cleanliness of emissions (Bloom’s fuel cells are arguably cleaner, though they still emit CO2); the potential to capture waste heat for extra benefit (Bloom’s fuel cells don’t, while other gas-fired systems do); and the extra-complex question of whether or not Bloom’s natural gas-fueled devices are truly a “green” energy source.

Bloom has been working on a 30-megawatt project in Delaware, which could grow to as much as 50 megawatts, and is an order of magnitude larger than Bloom’s biggest projects so far with its California customers.   

Other stationary fuel cell makers like ClearEdge Power and FuelCell Energy make use of their combined heat and power characteristics, while Bloom does not. 

So far, Bloom has been able to ship its product into subsidy-rich regions. The big question is if Bloom can survive when those subsidies recede.

COMMENTARY:   Bloom Energy came out of stealth mode in 2010 to a lot of fanfare, and the company was dubbed as the next big thing in clean energy generation.  Bloom Energy was profiled on a television segment for CBS' 60-Minutes and the company's CEO made a lot of boasts which have yet to be realized.  

 

 

Each Bloom Energy Server costs $750,000, and produces 100 Kilowatts (100,000 watts) of electrical power.  That works out to $7.50 per watt, which is just insane when compared to other proven clean energy sources like solar and wind.  The technology was beta-tested for several years, right under the noses of the clean energy industry.  Clients incude Wal-Mart, Apple, Google, Fedex, just to name a few.  Impressive, but these are large companies with large energy needs, and with the deep pockets needed to pay the startup costs of a new Bloom Energy Server.  

If you are curious about how Bloom Energy's fuel cells generate electricity this schematic should prove helpful.

Click Image To Enlarge

Bloom Energy's fuel cells have more Pro's than Con's, but each 100 kilowatt Energy Server costs $750,000.  That's one hell of a Con.

Click Image To Enlarge

I knew that Bloom Energy had raised a substantial amount of venture capital from a very long list of investors.  The problem with cleantech startups is that they require substantial investments in venture capital, long-term debt from banks or private equity firms or loan guarantees from the DOE.   The latest round of $150 million definitely places right up there with Solyndra.  Let's just hope that Bloom Energy is able to scale its Energy Servers to lower their cost to make them more price competitive with other cleantech energy sources.  If this is not possible, I would not only have to question their business model, but their ability to serve SMB's and residential users.  

Courtesy of an article dated June 8, 2012 appearing in GreenTechMedia

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