Can KR Sridhar’s Bloom Energy compete against solar and wind power
A decade ago, San Jose California based Bloom Energy was widely viewed as having an edge among the hundreds of companies around the globe, competing in the potentially multi-trillion dollars market for clean, cheap electricity generation systems.
With sharply rising global electricity demand, while the impact of greenhouse gases worsen, “We face a global challenge to design, build and retool the electric infrastructure to combat climate change and also expand economic opportunity,” K.R. Sridhar, founder, chairman, and chief executive states on the Bloom website.
The company’s electro-chemical fuel cells are steel boxes which convert natural gas into electricity, with high heat but no combustion. Called servers, the boxes do emit carbon di oxide. But their emissions of nitrous oxide, sulfur di oxide and other harmful smog particulates are negligible, since there is no combustion, according to the company.
The servers, which can be based on a customer’s site, are scalable to lift electricity generation to meet rising demand. For dense, urban locations, Bloom offers Power Towers, which are servers stacked vertically similar to city parking structures. The servers can also operate with biogas and hydrogen, if such fuels can be accessed.
In 2008, Bloom’s first commercial 100 Kilo Watt servers were sold to Google. At that time, the expectation was that the electricity generated by the $800,000 servers would be both cleaner and cheaper than that produced by the traditional power companies.
With servers in operation at Google and elsewhere, the company got sizeable funding from major venture capital firms as well as wide media attention. In 2010, for instance, CBS News’ 60 Minutes broadcast a story describing Bloom as tackling “the Holy Grail” of generating cheap, clean electricity.
But the cost of electricity generated by a Bloom server was competitive only because of large subsidies from the Federal and California governments, according to a 2010 study by Seattle City Light. It is a public electric utility owned by Seattle, which is carbon neutral largely due to its use of hydropower.
Part of the reason for Bloom’s higher cost is due to the need to replace its servers every five years. This is because the fuel cells, which operate at 1000*C, or 1800*F, deteriorate and lose efficiency. “We choose to end the useful life of our servers when we reach a fuel efficiency of 45 percent,” Sridhar states on the company’s website. In addition, Bloom’s operational costs are dependent on the price of natural gas.
Using gas also causes Bloom’s servers to emit carbon di oxide compared to zero emissions from wind, solar, water, and nuclear power plants. Back in 2010, the Seattle City Light study found that a Bloom server emits 773 pounds of carbon di oxide per megawatt hour; traditional natural gas power plants emit 1,314 pounds; and coal plants 2,117 pounds.
In 2020, Sridhar was paid $6.9 million in salary, bonus and stock awards. In 2018, the year the company went public, he was paid a total of $51 million, including in stock options. Over the years Sridhar has been selling Bloom’s stock he received as compensation; most recently in June he sold shares worth about $1 million. He continues to own about $8 million of stock and has been granted an additional 2 million shares as options which have a market value of about $40 million.
Bloom’s technology evolved from work performed by Sridhar for a National Aviation and Space Agency (NASA) Mars Exploration program. His team built a fuel cell capable of producing air and fuel from electricity generated by a solar panel, with the vision of one day being able to support life on Mars.
Sridhar realized that the technology could be used to efficiently and cheaply produce electricity on earth with lower carbon dioxide emissions; carbon emission is the major cause of climate change. So, in 2001, he founded Bloom Energy, with venture funding. In all, Bloom raised a total of $826 million in various venture funding rounds, according to Crunchbase; including from Khosla Ventures, run by Vinod Khosla.
Prior to founding Bloom Energy, Sridhar was Director of the Space Technologies Laboratory (STL) at the University of Arizona where he was also a professor of Aerospace and Mechanical Engineering. Under him, STL won several U.S. Government contracts to conduct research and development for Mars exploration and flight experiments to Mars.
Sridhar serves as a strategic limited partner at Kleiner Perkins Caufield & Byers and as a special advisor to New Enterprise Associates, which are both venture funds.
He received his bachelor’s degree in Mechanical Engineering from the University of Madras, now called NIT, Trichy, India; a master’s degree in Nuclear Engineering and a Ph.D. in Mechanical Engineering, both from the University of Illinois, Urbana-Champaign.
In July 2018, when Sridhar took Bloom Energy public, expectations for the company remained high, with the stock jumping 30% on its first day of trading.
The company has been losing money since inception, with accumulated losses totaling $3.2 billion, as of the quarter ended June 2021. In 2020, it had a $179 million pre-tax loss on $794 million in revenues. It’s long-term debt and liabilities total $868 million and it has a negative net worth of $22 million.
Bloom is funding operations by borrowing money and issuing stock. Sridhar raised some of the capital “on the back of false statements,” according to a Forbes report.
Today, about 700 Bloom servers have been installed, including at IBM, Intel, Adobe and other major companies. Apparently, clients in the U.S. use Bloom’s servers, not because it is cheap or cleaner, but as a stable, reliable source of power, especially in California where power supply from the utilities has been hit by wildfires.
Bloom faces intense competition from solar and wind power operators, who are benefitting from more efficient and cheaper battery storage technology. This enables them to offer stable and reliable electricity even when there is no sunlight or wind. Also, with falling equipment and operating costs, the price of solar and wind energy in the U.S. is far cheaper than that of using a Bloom server, without subsidies.
Bloom sees hydrogen fuel as a way to compete against solar and wind companies in terms of both cost and zero carbon emissions. It offers 300 Kilo Watt, 16-ton steel servers which use hydrogen as a fuel and hence have zero carbon di oxide and smog emissions. While some customers are using them, their costs are higher than that of Bloom’s natural gas servers, given the large amounts of electricity required to break up water molecules to produce hydrogen.
In July, Bloom launched an electrolyzer for producing hydrogen from water. The “electrolyzer is expected to produce hydrogen at a lower price than any alternative on the market today,” Bloom CEO Sridhar said in a statement.
The company sees wide application for its electrolyzer: hydrogen can be produced at higher electrical efficiency by using excess heat from steel, chemical, cement, and glass factories; and the hydrogen required to power high-temperature furnaces at these factories can be produced on-site, using Bloom’s electrolyzers, eliminating transportation and distribution costs.
Wall Street expects Bloom to prosper as seen from its $3.5 billion stock market valuation. Apparently the expectation is that Bloom will continue to get federal and state subsidies in the U.S. and that demand for its hydrogen servers will rise, as costs drop.
In a post on Bloom’s website, Sridhar says, “To combat climate change successfully, the connection between global population, GDP growth and increasing carbon emissions has to be broken.”
While Sridhar’s goal is noble, Bloom Energy will likely continue to face a long, rough road to profitability.
