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Friday, February 26, 2010

Clean vs. semi-clean

Exploding out of stealth mode after 10 years and $400m of VC, Bloom Energy got great press Wednesday (at least here in Silicon Valley) on both TV and written form on the front page of the Merc.

Of course, it didn’t hurt that CEO K.R. Sridhar got to unveil his new technology earlier in the week on 60 Minutes. The company has done a great job of PR. Apparently Kleiner Perkins partner Al Gore has been whispering its praises for years.

For its rollout, the TV cameras came because it was able to attract A-list celebrities like Colin Powell (a Bloom Energy advisor) and the Governator (who will come for anything at the intersection of two of his passions — green and jobs).

The company has also lined up an A-list bevy of customers for its industrial fuel cells like Google, Coca-Cola, eBay, Wal-Mart and Bank of America. I assume this is because natural gas is becoming ever cheaper, and because in the Banana Republic of California you never know when the state is going to screw up electricity generation. (Conveniently, taking these industrial users off the grid would reduce PG&E’s overall electricity load would make it easier to meet its RPS quotas.)

However, what is puzzling to me is why this is trumpeted as “green” or “cleantech.” Like all fuel cells, the Bloom cells would produce pure water if fed hydrogen, but when fed hydrocarbons, will produce CO2 with the water. Before global warming became a concern, this would have been a big plus over burning the gas (which produces other pollutants like nitrous oxides), but now of course CO2 is the driving concern when it comes to environmental impact.

Sure enough, Fast Company has run the numbers to compare the CO2 output of the fuel cells with other alternatives:
Bloom's device generates electricity at 50% to 55% conversion efficiency. In comparison, solar generally produces power at between 10% to 15% efficiency. But unlike solar panels, the Bloom Energy Server produces CO2 as a byproduct. According to the Energy Collective, "CO2 emissions when running on natural gas would be just under 0.8 pounds/kWh, which compares favorably to electricity from central station coal-fired plants (2 lbs/kWh) or natural gas plants (roughly 1.3 lbs/kWh) and the national average for on-grid electricity (around 1.3-1.5 lbs/kWh)." If the box runs on landfill gas or biogas, it produces net zero carbon emissions.
So from a “green” standpoint, using a fuel cell to convert the natural gas produces about 40% less CO2 than burning, which of course is a good thing.

So that’s half the equation: what about the other half? The Achilles heel of renewable energy generation is high upfront capital costs. Wired notes that each “Bloom Energy Server” generates 100kW and costs about $700-800k. Various estimates say that the capital costs range 9-10¢ a kW-hr.

A couple of savvy GreenTech Media readers do the math and suggest that the servers will never be cost effective against a simple natural gas boiler. (As readers note, relevant unresolved questions also include the useful lifespan of the fuel cells, and how quickly the firm can improve its manufacturing efficiency.)

So is it worth paying more (or paying government subsidies) for a more expensive way of converting natural gas to electricity for slightly less CO2 output? From an economic standpoint, clearly not. How about from an environmental standpoint? I suppose it depends on the environmental impact of the extra cost — materials costs, transportation costs, commuting by engineers etc.

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