I’ve been thinking a bit about Bloom Energy’s announcement last week that it wants to sell electricity as a service as a way to get its Bloom Box fuel cell into companies. The idea is that Bloom, as part of a service called Bloom Electrons, would sign 10-year power purchase agreements with the customer — i.e. the customer would agree to pay a certain amount per kilowatt-hour over 10 years in exchange for having Bloom plunk its fuel cells into their facilities and produce electricity on-site using natural gas. Bloom would presumably earn back its initial capital investment after a few years and the customer would be guaranteed a stable power rate that, in some jurisdictions anyway, is lower than what they pay today. That is certainly the case in California, where high electricity prices and generous subsidies make this approach a good fit. Bloom also handles all maintenance, another bonus for the customer.

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.

I got my start in mainstream journalism as a technology and telecommunications reporter for the Globe and Mail, a beat I later took on at the Toronto Star and covered for six years before switching to energy. When I first started we were still using the term “information highway” to describe the coming convergence between the telephone and cable companies. Cable companies in Canada had their own networks, their own turfs, and their own regulated monopolies, while the phone companies had the same. The turfs overlapped, but the products and services stayed largely separate. You got cable from the cable guys, and phone service from the phone guys. The information highway threatened to change that, allowing the phone and cable guys to invade each other’s turf and bust through their respective monopolies.

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. (more…)