Bloom Energy Stock Not on the Horizon… But is the Technology Viable?

Bloom Energy Stock Not on the Horizon… But is the Technology Viable?

by Investment U Research

An Investment U White Paper Report

In case you aren’t familiar with the Bloom Energy Server, better known as the Bloom Box, let us introduce you to it.

Bloom Energy is a privately held company based in California and is the producer of the Bloom Box. CEO K.R. Sridhar invented the solid oxide fuel cell (SOFC) technology that is used in the Bloom Box while working for NASA’s Mars program.

Let get a quick rundown on how the technology works.

Unlike regular fuel cells that have been around for decades, the Bloom Box is different. It’s a stack of ceramic plates, each coated with two different proprietary chemical mixes (the electrolyte).

Oxygen is fed into one side of the sandwich and fuel into the other (the reactants). The two combine within the cell, and the resulting chemical reaction produces electricity.

The Bloom Box uses a clean electro-chemical process to produce electricity, unlike dirty combustions that are used in most processes today. Of course, it’s up to the user to be totally green, as the user chooses what fuel to feed the box.

Fuel can range from fossil fuels such as natural gas or from green sources like wind, biogas, or solar. You can even feed the box with energy off the grid (much of which is produced by coal).

The Bloom Box separates itself from other fuel cell technologies for four reasons:

  • Materials cost less – Fuel cells use an abundant sand-like powder instead of expensive and rare precious metals like platinum. Also there are no corrosive materials like acids.
  • Electrical efficiency is high - The Bloom Box can convert fuel into electricity nearly twice as fast as other technologies.
  • Flexibility in fuel sources – The system can use both renewable and fossil fuels.
  • Temperature endurance - The fuel cell can withstand temperatures near 1,800°F while other fuels cells would breakdown or need maintenance.

Each Bloom Box size will vary based on the customer, whether power is needed for an office building, a data center, or an average household. And to help avoid enormous initial cost, you can add more boxes as you go.

Bloom Energy Stock

CEO Sridhar calls the Bloom Box a “power plant in a box” and an “energy game-changer.” The question is: Does this actually stack up?

Waiting to Bloom

To date, Bloom Energy has some big customers you might be familiar with.

Among the major companies to use Bloom Boxes: Google (Nasdaq: GOOG), Wal-Mart (NYSE: WMT), FedEx (NYSE: FDX), Bank of America (NYSE: BAC), Coca-Cola (NYSE: KO) and eBay (Nasdaq: EBAY).

In June of 2012, eBay expanded their relationship with Bloom Energy when it announced that it will building a flagship data center with renewable energy as its primary source.

The new data center, which will be completed by mid 2013, will include 30 new Bloom Boxes. The company will use biogas derived from renewable organic waste to power the boxes.

And the electrical grid will only be used as backup, thus replacing large and expensive backup generators that are historically used less than 1% of the year.

This is exactly what Bloom Energy hopes to revolutionize, independency from the grid.

Problems with the Grid

What most people fail to realize is that we’re currently using an alternating electricity gird that has been with us since the late 1890s. And this grid is falling apart.

The Organization for Economic Cooperation and Development (OECD) recently put out a study claiming that the world would have to put up $7 trillion by 2030 to keep our current electricity grid running.

Here in the United States, grids are falling apart, and the same is true for many other countries around the globe.

Unfortunately, we’re in the mist of a global financial crisis so there’s very little cash sitting around to help rebuild the grid system.

At this rate, we will be witnessing an unorganized electrical tango where we will be squeezing every last kilowatt out of existing equipment while fixing or upgrading key components only as fast as they fail.

While it’s too early to tell where the big technological breakthroughs will be, it’s not too early to start looking for them.

And Bloom Energy could be one piece to the smarter grid solution.

So What’s the Price Tag?

Currently the cost of each hand made server is $700,000 to $800,000 And Bloom thinks it can scale the technology small enough – and cheap enough – to power the average home in five to 10 years.

The company hopes to produce a home-sized unit in the future that will cost around $3,000. But you have to remember that unlike large corporations, homeowners would need to provide there own fuel source and a substantial amount of capital just to get the unit rolling.

Is Bloom Energy Stock on the Way?

Back in February of 2010, 60 Minutes did a feature on Bloom Energy. The hype made some outlets state that the company could have an initial public offering (IPO) within days after airing.

There’s nothing wrong with brining national attention to a greener technology that could improve how we consumer electricity. But you have to put rumors and hype aside.

To date, Bloom Energy has received over $400 million in start-up funding.

Just listen to what John Doerr, the billionaire venture capitalist who began backing Bloom Energy in 2001, had to say recently:

The main hurdle facing cleantech is its capital intensity. There is simply more capital required to grow a great green company. It took $25 million and three years to bring Google to an initial public offering (IPO). It'll be nine years before they (Bloom Energy) think about an IPO, even though it has substantial revenues and orders."

Doerr, who backed Compaq, Netscape, Sun Microsystems, Amazon.com, Intuit and Google through Venture Capital firm Kleiner Perkins Caufield & Byers, knows his stuff.

So those hoping to jump onboard an Energy Bloom IPO in the near future shouldn’t hold their breath.

While big name corporations are bringing Bloom Box usage to reality, mass scale production and use in the average household isn’t something we’ll see for years to come.

And right now, Bloom Boxes aren’t profitable without large subsidies. The ones deployed in California take advantage of a 30% federal subsidy and a 20% California subsidy.

In addition, Bloom’s ceramic stacks have to be replaced every five to 10 years, adding to the recurring cost.

Many energy experts feel there isn’t a single technology that’s going to transform the sector.

And while Bloom Boxes can be one piece to fixing grid problems, lower energy costs and providing cleaner energy, it isn’t the total solution.

We wouldn’t bet on Bloom Energy stock becoming a reality any time soon, but you can bet that we will continue to watch their development and report on them here at Investment U.

Good Investing,

Investment U Research Team