Page 104 - Forbes - USA (March 2020)

then came to the U.S. to get his Ph.D. in mechanical engi- build, install, service and fuel these boxes. Subsidies like
neering. He later worked at the University of Arizona’s Space
Technologies Lab, building an oxygen-generating machine
for NASA’s missions to Mars. When the Mars Polar Lander
crashed in 1999, his project was canceled. Undeterred, he
worked to more or less reverse that
technology, to turn methane and oxy-
gen into carbon dioxide and electricity.
In 2001 Sridhar cofounded the com-
102 pany that became Bloom and soon met
John Doerr, the legendary billionaire
venture capitalist who got rich funding
N
O infotech companies such as Amazon,
I Google and Sun Microsystems. Doerr’s
A T
G firm, Kleiner Perkins, put about $60
I million into Bloom and still owns close
T
S
E to 14% of it after selling roughly half its
V stake in the past year. Other long-term
N
I investors include venture shop New
E
H Enterprise Associates, Kuwait’s sover-
T eign wealth fund and pension funds in
Canada and New Zealand.
B y 2008, Sridhar had True Believer
installed Bloom’s Famed venture capitalist John Doerr has stood
by KR Sridhar, even granting him voting proxy
first boxes at Google,
where Doerr is a long- over his firm Kleiner Perkins’ now 14% stake.
time board member. There were problems
from the start. Those initial machines were hand-assembled,
Sridhar recalls, in a hobby shop at Moffett airfield in Santa
Clara County, rather than on today’s automated assembly
line. A former Bloom executive claims that those early boxes
had to be monitored 24/7, and that internal modules stacked
with hundreds of 4-by-4-inch fuel cell wafers needed to be
swapped out a couple times a year, at $225,000 a pop. Anoth-
er complication of these Rube Goldberg devices was the fil-
tration systems—metal canisters filled with pebbles of solid
catalysts that separate sulfur compounds and other contami-
nants from the methane gas. According to the same execu-
tive, the first time technicians went to empty the canisters,
they simply sucked out the used catalyst with a Shop-Vac and
ended up spreading a rotten-egg smell across the neighbor-
hood. Bloom called the executive’s account “hearsay.”
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 gen-
eration. “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 report-
ers that the box could deliver power at “9 to 10 cents per
kilowatt hour.”
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 spokes-
person 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
F O R B E S . C O M
the lucrative federal investment tax credit knock off a bit
more—1.5 cents in California. This might appeal to custom-
ers 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 reliabil-
ity 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.
Bloom is a long way from being
able to offer such pricing, though the
technology is getting better. Whereas
its earliest boxes lasted fewer than
two years before they needed to be
gotten the lifespan up to nearly five
replaced, today Bloom claims it has
years. What would be more impres-
sive: if it could make money. So far
the firm has chalked up more than $2.7 billion (and count-
ing) in cumulative losses. In the nine months through Sep-
tember 2019, Bloom posted a net loss of $195 million on
$668 million in sales.
Bloom has gotten help covering its losses from the resi-
dents of Delaware, where energy company Delmarva Power
is eight years into a 21-year project with Bloom. In 2011 Del-
aware’s General Assembly voted to allow Bloom to qualify
for its renewables program, even though its units don’t run
on renewable fuel. For this perceived green benefit, Del-
marva’s 300,000 Delaware customers are on the hook to
pay a monthly tariff equivalent to about 16 cents per kwh
for the output of 123 Bloom boxes. Delaware also handed
out $12 million in grants to Bloom. State records show that
in the 12 months ending May 2019, Delmarva forked over
$34 million to Bloom’s operating company for electric-
ity that it sold to the grid for just $9 million. As a further
slight, Sridhar promised 900 jobs at its Delaware plant in
2012, but so far only 340 of those have materialized. Ac-
cording to Bloom, the project was intended to meet a series
of economic development and energy policy goals, and was
expected to cost more than wholesale.
t least Bloom’s tech is cleaner than the
A average power plant, though, right? Not
always. When the boxes are new, they
run at optimum efficiency, converting
nearly 65% of their methane fuel into KIM KULISH / CORBIS / GETTY IMAGE
electricity and emitting 679 pounds of carbon dioxide per
megawatt hour. This compares to overall U.S. power-sector
emissions of 914 pounds per mwh as of mid-2019, accord-
ing to Carnegie Mellon’s Scott Institute. It’s also better than
M A R C H 2 0 2 0