Fuel Cell Reality Check: A Blooming Solution at Caltech?

The “Bloom Box” may be moving one step closer to affordability at Caltech — but is it even close to tipping point for the mass market?

Bloom Energy

Caltech needed more generation capacity to meet the demands of its energy-intensive research.

Sunnyvale-based Bloom Energy made a big splash in 2010 when it came out of stealth mode – on the CBS program 60 Minutes no less – and announced its high-efficiency fuel cell, spawned by a NASA project for Mars. It has earned an impressive roster of clients including Google, eBay and Walmart.

But beyond the inevitable skeptics, the really big catch? “Bloom Boxes,” as the fuel cells have been dubbed, have a price tag of around $700,000. Hardly affordable for all but the largest companies with plenty of cash.

Yet California Institute of Technology, the private research university generally known as Caltech, had twenty Bloom Boxes installed on its Pasadena campus in 2010. Each box now produces 100 kilowatts of electricity for a total of two megawatts capacity; or 17% of the university’s electricity demand.

Here’s where the affordability play comes in. Instead of buying the boxes outright and incurring a hefty up-front cost, Caltech signed up for the Bloom Electrons Service, a power purchase agreement to buy power at a predictable price for the term of the contract (usually ten years). John Onderdonk, Director of Sustainability Programs at Caltech wouldn’t divulge its pricing or term details but said, “It is more cost-effective than the power we would otherwise purchase from the grid.”

And cleaner, too. The fuel cells are fed with directed biogas – methane captured from landfills, a low-carbon renewable energy source and, as Onderdonk explains, this source is preferable to energy from the local utility which gets about 60% of its power from a coal power plant in Utah.

State and Federal incentives accruing to Bloom Energy smoothed the way for the agreement, and these incentives allowed Bloom to provide the university with a lower rate than its local utility charges, Onderdonk confirmed.

So, why did Caltech feel compelled to pursue a clean energy solution to its increasing energy needs? Part of the answer lies in California’s existing climate legislation. Onderdonk explained that Caltech is committed to reducing its greenhouse gas emissions in accordance with AB 32, the landmark climate change legislation which puts in place a series of caps and market mechanisms to reduce total greenhouse gas emissions to 1990 levels by 2020. But the impetus goes beyond the State of California.

“It is important for us that our administration and operation of campus reflect the world-class research into climate change and sustainable energy technology that is occurring on the academic side of the organization,” the Sustainability Director added.

“If it’s not affordable, it’ll be the niche market — it’ll be a Tesla. We need it to be a Honda Civic.”

Onderdonk also says the Bloom solution resonates with Caltech’s NASA connection.

“The fundamental technology in the Bloom fuel cells was originally conceived as part of NASA’s mission to Mars,” explains Onderdonk. “So we felt a connection to the technology given our involvement with operating the Jet Propulsion Laboratory for NASA.”

In addition, like any climate-minded organization, Caltech is also pursuing the low-hanging fruit of the energy equation: energy conservation.  Beyond its Bloom Boxes and 1.3 megawatts of photovoltaic solar, the university pursues an aggressive program to implement energy conservation in its existing buildings and construct new buildings that maximize energy efficiency. “All energy conservation projects are funded through a revolving loan fund, whereby capital is borrowed from our ($1.77B) endowment and utility savings are reinvested back into the endowment,” Onderdonk explained. “This model is unique in the nation and we are currently getting about 30% [return] on those projects.”

A 30% return? That’s the kind of yield that would make any fund manager swoon, especially in this challenging economy.

As for Bloom Energy, it’s staying tight-lipped about its returns and still has some challenges to overcome before its Bloom Boxes start blossoming in the backyards of homes and commercial buildings all over the world – the bold vision of cofounder and CEO of Bloom Energy, KR Sridhar, the former NASA scientist.

The key to mass market adoption remains affordability. As Sridhar told me in a 2010 interview. “If it’s not affordable, it’ll be the niche market — it’ll be a Tesla.  We need it to be a Honda Civic.”