Bloom is obviously betting that low-cost natural gas, thanks to the shale-gas boom, is going to be around for awhile. And the model is not unlike what we see today with many solar projects — a developer such as SunEdison, for example, will sign long-term projects at no upfront cost to the customer, which pays for the electricity it receives, not the equipment on its rooftop. The difference is that Bloom has to factor in the future cost of natural gas.

It will be interesting to see the uptake, and wouldn’t it to be nice to see this tested out in Ontario? Companies such as Enbridge should be kicking the tires on this, not sitting back and waiting to see what happens.  Bloom says it eventually expects the Bloom Electrons service to represent half of its revenues, and that doesn’t surprise me.

Now, one question: is this a green energy offering? Kind of. Burning natural gas onsite for electricity production (if you capture the waste heat) is more efficient than burning it in a power station and transmitting long distances via wires. Burning natural gas in a Bloom Box instead of a standard microgeneration system is even more efficient and eliminates nearly all smog-forming emissions. But having a Bloom Box in a community or a large building, such as a data centre, opens up the possibility of using biogas instead of natural gas. There are other benefits as well, if not green in nature. The Bloom Box can sell surplus electricity to the grid, creating a kind of distributed backup system that makes the grid more stable.

Bloom still has a lot of work ahead of it, and it’s not the only fuel-cell maker heading in this direction, but it’s at least trying to be creative and its high profile is getting people thinking how we can do things differently, and that’s a good thing.

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.