The commercial Internet was still in its infancy and was considered part of the information highway. It was only in the mid-1990s that the Internet emerged as the dominant disruptive force in this technological vision. Internet Protocol, the communications standard underpinning the Internet, allowed all sorts of information — text, audio, video — to be treated as packets of data that could be shipped at high speed across cable and phone networks, which were privately operated networks that had on-ramps and off-ramps to the public Internet. As networks became faster, as compression of data got better, as computing power and memory grew exponentially, it became technologically possible and economical to deliver phone, broadcast, e-commerce, Web surfing and e-mail over both the cable and phone networks. The result: network convergence. Suddenly technology was creating competition in these regulated monopolies, forcing regulators to adapt and establish rules that permitted regulatory forbearance when competition in a market was deemed acceptable. For the phone and cable companies, the gloves were off. It was game on. 

Why am I telling you this? Because I’m seeing the same thing happening in the energy sector. Electric utilities and natural gas utilities — in Canada at least — have operated in largely different worlds, each with their own rules and regulations, each with their own regulated monopolies and turfs. Actually, that isn’t entirely the truth. The electric utilities still offer electric hot-water tanks and electric heating, though this is slowly being phased out. But on the natural gas side, offering electricity directly to residential customers just hasn’t happened. Sure, in some jurisdictions there are parent companies that own both a natural gas utility and electric utility and offer services to customers on the same bill. But that’s not the convergence I’m talking about. I’m talking about using a natural gas pipeline network as direct competition against an electric transmission and distribution network.

I got thinking about this more after Bloom Energy announced its Bloom Energy Server. As far as technology goes, I didn’t see this unveiling as a big deal. Solid-oxide fuel cells have been around for decades. Today, there are several companies working on the same thing. What Bloom comes to the party with is good marketing, high-profile financial backing, and a great vision. By calling it an “energy server” it’s drawing parallels to the Internet, which gave us ubiquitous distributed computing, storage and delivery of information. Bloom is aiming to encourage distributed generation — the idea that power is efficiently produced and delivered close to the point of consumption, rather than generated far away from a central plant and transmitted long distances to the consumer. The latter sounds like mainframe computing from the 1970s and 1980s. We know what happened there. And yes, we do have distributed generation today in the form of rooftop solar, on-farm anaerobic digestors, industrial CHP and community wind farms, but for residential purposes there is nothing economical that can supply all our electricity and heating needs 24-hours a day.

An affordable Bloom Energy Server in every home, or something equivalent, would dramatically change the market landscape. It would allow natural gas to provide electricity, heating and hot-water heating with a single energy source, squeezing out the electric utility altogether. And even if it’s not in the home, large Bloom Energy Servers could be situated in the middle of subdivisions. Connected to a larger natural gas pipe, or better, to a local source of carbon-neutral biogas, one can envision district heat and power systems that are complemented by solar or geothermal. Sure, under this scenario, some wires would need to go into the home, but the community would be effectively off-grid. Again, electric utility gets the squeeze.

This changes the game, and presents challenges to energy regulators that have treated the natural gas and electric folks as distinct industries and markets. Suddenly these overlapping turfs mean something. Competition is possible. Regulation is out of date. This is a trend that will increasingly take hold over the coming decade.

K.R. Sridhar, founder and CEO of Bloom Energy, described his vision this way in the company’s first press release: “We believe that we can have the same kind of impact on energy that the mobile phone had on communications. Just as cell phones circumvented landlines to proliferate telephony, Bloom Energy will enable the adoption of distributed power as a smarter, localized energy source.”

I don’t agree with Sridhar. The cell phone analogy doesn’t work, because he conveniently ignores that you still need a natural gas pipeline. Mind you, if a small village in India wants to turn manure and other waste into biogas and use that to power itself, that would work and the Bloom Energy Server would enable it. Also, the fact that the Bloom box works in reverse means you can hook up a wind mill or solar panel and have it generate storable hydrogen, which can be converted back into electricity by reversing the process again. It’s possible, one day, but a lot of things are possible — let’s stick with what’s practical, economical and likely.

Another reason the cell phone anology doesn’t work is because the compelling part of cell phones is that you can carry them wherever you go. Unless Sridhar has plans for a pocket-sized Bloom Energy Server that operates on the sweat from your body, this won’t have the same impact as wireless portable communications.

I think a more accurate comparison is the impact of the Internet and Internet protocol. Before IP the phone networks and the cable networks operated in their own worlds. With IP they now invade each other’s worlds. We’re seeing something similar unfolding in the energy market. We’re seeing energy convergence.

Perhaps there’s more to this story that wasn’t revealed by 60 Minutes, but there are many companies out there working on this kind of fuel cell so I don’t see what’s particularly special or unique about Bloom Energy. More details are expected to be released on Wednesday, however, so maybe then my questions will be answered.

In the meantime, would someone out there please enlighten me?

Like many secretive Kleiner Perkins investments — EEStor, for example — let’s hope the hype and promise leads to something truly disruptive. Speaking of EEStor, tick, tick, tick… the end of the year fast approaches.

Another company that’s overlooked by U.S. media is Ottawa-based Cyrium Technologies, which just announced record performance from its commercially manufactured multi-junction solar cells, which are based on quantum dot technology. “Cyrium’s first generation solar cells offer efficiencies of 40 per cent or higher together with a nearly constant conversion efficiency for solar concentrations from 200 to greater than 1,000 suns,” the company said. This is a big deal, given that the other “records” touted to date, which range from 40.8 to 42.8 conversion efficiency (these claims are in dispute — see Wikipedia entry), have been limited to the lab. Cyrium, on the other hand, is actually manufacturing limited quantities of its cells for testing by potential customers. And the company isn’t resting on its laurels, either. “Cyrium anticipates its second generation product will reach 43 per cent efficiency within one year and third generation products are targeted to be at 45 per cent within two years,” the company said.

Meanwhile, Montreal-based Enerkem has been granted a permit to commence construction of what it’s calling the “world’s first commercial municipal waste-to-biofuels facility.” The $70 million facility, located in Edmonton, Alberta, will take municipal solid waste that’s left over after recycling and composting and will convert that waste into ethanol using Enerkem’s process. The project is a joint-venture between Enerkem (technology supplier) and Greenfield Ethanol (ethanol producer). “This unprecedented project is set to change the dynamics of the waste and fuel industries by making waste — that would otherwise be landfilled — a resource for transportation fuels,” said Enerkem CEO Vincent Chornet. I know I won’t be the only one following this project closely.

Finally, honorable mention goes to Toronto-based WhalePower, which has just made it as a finalist at the prestigious INDEX international design competition in Copehagen, Denmark. You may recall WhalePower’s new wind-turbine blade design, which is inspired by the humpback whale’s tubercle-line flipper. This bumpy leading edge gives the whale more agility in water. WhalePower has adapted the design to turbine blades, allowing for more efficient capture of wind energy and access to this energy at lower speeds. There are five categories in the Copenhagen competition, and the winner of each category gets 100,000 Euros. Winners will be selected in August and the winning designs will also become part of a touring show through Asia and Europe. WhalePower is competing in the “community” category against some tough competition, including Shai Agassi’s Better Place.

But enough with the bragging Canuck — let’s end on a more negative note. First Ballard Power’s stock-market bubble burst, then it sold off its stake in the automobile fuel-cell portion of its business, and now it’s leaving the residential micro-CHP market. Vancouver-based Ballard announced today it was dissolving its joint-venture with Japan’s EBARA Corporation, which through EBARA Ballard Corp. manufactured, sold, and serviced residential cogeneration systems based on Ballard’s fuel-cell technology. The business case just wasn’t there, said Ballard CEO John Sheridan. With the micro-CHP market now dumped, that leaves forklifts and backup power for telecom towers. You’ve got to credit Sheridan for keeping it focused and realistic, but it’s difficult not to contrast the humbled company of today with the overhyped, overvalued Ballard of 10 to 15 years ago.

It’s not an insignificant problem for fuel-cell makers, which rely on platinum as a catalyst. In fact, Sheridan says depending on the size of the fuel cell platinum typically costs 8 per cent to 25 per cent of the total cost of the product. “It was a big, big worry in my first years in the company,” he told me in a recent interview.

Well, we know what happened in the second half of 2008. The markets went in the toilet. But platinum prices were hit particularly hard, influenced by the downturn in the auto sector. The auto industry is a big purchaser of platinum group metals, which are a key material in catalytic converters used to control tailpipe emissions. As a result of weakness in the auto market, platinum prices since March have plunged more than 60 per cent to the $830 to $850 range. In fact, last week gold prices surpassed platinum prices for the first time in 12 years.

Platinum prices have fallen so fast that platinum producers such as South Africa, which controls about 80 per cent of the global market, have moved to restrict supply to shore up prices. Hmmm… taking a page from the OPEC playbook it seems.

Ironically, the auto sector was once Ballard Power’s biggest customer and shareholder. But now, with the company focused on back-up power and industrial mobility (i.e. forklifts), the Vancouver-based fuel-cell developer is benefitting from the auto sector’s woes. Sheridan said the company, since the plunge in prices, has purchased a large amount of platinum supply and locked in at the dramatically lower prices. This should help the company over the next year or two as it gets into higher volume production.

UPDATE: It was reported yesterday that Chinese engineers have come up with a way to use nickel as a catalyst in fuel cells instead of platinum, but many years of work would be needed to even determine if such a catalyst could truly replace platinum. More details at MIT Technology Review.

Obviously, it doesn’ t help that oil has fallen back to the $80-a-barrel range. And obviously, some projects will be squeezed more than others given the “flight to quality” we expect to see. Already we’re seeing some hesitation from U.S. politicians about placing a value on carbon or advancing cap-and-trade schemes. The same discussions are taking place in Europe, and much more passionately. Nobody yet is talking about completely abandoning such things, but there is talk of delays — and this is a concern (see this post in the WSJ’s Environmental Capital).

This is also on the minds of big industry. To repeat the words of GM vice-chairman Bob Lutz, who last week described a scenario in which the automaker’s Volt electric car could hit a brick wall:

“Let us say that over the next 18 months the world goes into a major recession, car sales and fuel use drop dramatically, the steel companies produce less steel and therefore less energy, China finds its main export markets drying up, so they are into a contraction … And at the same time Canadian tar sands come onstream, and coal-to-liquids come onstream. All of a sudden there is a reduction in primary demand in petroleum plus all these additional new supply sources. Oil drops to $25 a barrel and we’re looking at gas pump prices at $1.25 a gallon. I personally don’t think that’s going to happen, but that would be a dramatic event for the Volt because everybody would say, ‘Ha!, why should I bother?”

Only a week later exactly what Lutz described began to happen. Now, we still have $80 oil and gasoline at $3 a gallon, but that has happened in just a month! What Lutz describes was an 18-month horizon. And GM is hurting real bad. Let’s hope we’ve reached bottom, or close to bottom, and that the Volt emerges from the carnage mostly unscathed.

I should emphasize that green or clean technology isn’t just about fighting climate change and saving polar bears. It’s about energy security, becoming more competitive, and creating the economy (and jobs) of the future. In this sense, one could argue the need now is even greater to move in that direction. As California governor Arnold Schwarznegger said at the Solar Power International conference in San Diego on Monday night, “We must not give in to those that say that environmental goals should take a back seat until our economy comes back. It’s backwards thinking and just plain wrong.”

I couldn’t agree more. Problem is, backward thinking has a track record of ruling the day when people start to panic. People become selfish, inward looking, and more nebulous concepts like “climate change” get pushed to the margins. Personally, I don’t think we’ll see a repeat of the 1970s, when the eventual collapse in oil prices led (in North America, at least) to an all-out abandonment of conservation and renewable energy. The reason is because we saw what commitment to such programs did in Japan, parts of Europe and Scandinavia. We know, in retrospect, that it paid off in the long run for these countries to stick with the program, and resist the flight to consumption and excess.

Let’s hope we learn our lesson this time around. I’m convinced, on the whole, that we have.

For the forever-emerging fuel cell industry, this is a major deal. “The 10,000-unit volume will enable significant cost reductions and this new low cost, natural gas fuel cell product will be an important enabler for the acceleration of product adoption in other stationary power markets,” said Ballard CEO John Sheridan, who as former president of Bell Canada appreciates more than most the potential of using fuel cells in the telecom industry.

The first 1,000 units will be delivered in 2009, with the other 9,000 delivered the following year. Ballard is right to focus its energies on the stationary power market, given the tremendous need for energy storage on both a small and large scale. It seems like only yesterday when I was enjoying lunch with former Ballard chairman and CEO Firoz Rasul talking about the mass-market availability of fuel-cell cars in 2010. Oh, how naive I was back then. I remember chatting with the head of Canada’s fuel cell association as he talked about the importance of going after automobile fuel-cell applications first, because “once we get that right everything else flows from there.”

Um, not exactly. What I’ve learned since then is that fuel cells will play a growing role in a greener economy, but it won’t be “the” economy — i.e. the Rifkin hydrogen economy. And it won’t, despite the crazy lectures from Honda, be in the passenger vehicles most people drive. Too much has happened in the cleantech world since that lunch with Rasul, and the hydrogen infrastructure problem isn’t any closer to being solved five years later. At the same time, if deals like the one with ACME and Idatech help a company like Ballard lower production costs of stationary fuel cells, there’s a greater chance we could see these devices in our homes and businesses and integrated in the smart grid in a not-so-distant future.