Taxpayer and ratepayer subsidies, coastal zone permits and crony capitalism spell big trouble
By Lindsay Leveen
In November 2011, BloomEnergy applied for permits to build an energy center in a Delaware protected coastal zone area. The center would employ solid oxide fuel cells powered by natural gas and housed in casings that look like huge boxes – Bloom Boxes or “energy servers.”
The application raised alarms among Delaware citizens worried that they were being handed a Pandora’s Box of unwelcome rate hikes and other surprises. They have watched the First State of the Union (Delaware) examining the first state of matter (solid, as in solid oxide fuel cells), and discussing matters of state with heavyweight “venture” capitalists who have superb connections from both sides of the political aisle, as they sought rubberstamp approvals for special tax treatment, electricity rates and environmental permits, for a supposedly “green” technology.
Solid oxide fuel cells have been around for fifty years. Bloom claims it has improved their performance through proprietary breakthroughs in materials science. Perhaps. However, Bloom has provided few details about how its fuel cells actually work, raising doubts that its servers can perform as claimed.
Bloom’s 163-page application and public statements are replete with techno-speak, questionable calculations and outright misinformation. Meanwhile its black box technology remains shrouded in mystery, accompanied by unjustified boasts about energy, CO2 and pollution savings, calculated to persuade politicians and utility commissioners to provide big taxpayer and ratepayer subsidies.
An adequate analysis of Bloom’s claims is a bit complex. But it is essential for understanding how companies like Bloom befuddle and bamboozle insufficiently informed citizens and politicians.
Page 6 of the application claims Bloom’s Red Lion Fuel Cell Installation will utilize 235 BloomEnergy ES-5700 Energy Server fuel cells, to generate up to 47 megawatts of electrical power for the PJM East Coast wholesale power market electrical grid. Each fuel cell “has a base load electrical output of 200 kilowatts, with a maximum natural gas usage of 1.32 million Btu/hr (i.e., 1,282 SCFM at 1,030 Btu/SCF heating value),” it says. [SCFM means standard cubic feet per minute]
However, at this rate of fuel use, a Bloom Box would be less than 1% efficient – suggesting that Bloom meant each server needs 1,282 SCF per hour – a careless error. Correcting Bloom’s sloppy math reveals that each server will actually burn 1,467 SCF per hour – an even higher fuel usage rate.
Then, buried deep in the application Table 1 (page 161) reveals that each Bloom box emits 884 pounds of carbon dioxide per megawatt hour of electricity (MWHE) generated. That means each Bloom server needs 7,555,600 BTUs to generate one MWHE, giving it a conversion efficiency of only 45 percent.
That is far lower than the “over 60% efficiency” figure that a BloomEnergy marketing director presented to a NASDAQ reporter, and another Bloom executive conveyed to a 60 Minutes audience in February 2010. It’s far lower than what Bloom presented to the IRS and California Franchise Tax Board, when the company sought large tax credits for customers that install Bloom Boxes.
Bloom’s application also asserts that Delaware’s air will be much cleaner with its servers generating 47 megawatts . However, 235 Bloom boxes would cost the same as one 350-MW combined cycle natural gas generator, which would be 53.3% efficient, using the same natural gas fuel.
That means the same taxpayer/ratepayer investment that Bloom wants for its Red Lion Installation could get Delaware 7.4 times more clean electricity, if the money were spent on a CC gas generator.
Table 2 (page 161) says 235 “clean” ES-5700 Servers would emit 22.56 pounds of volatile organic compounds (VOCs) per day. But even paint booths in Delaware auto body shops are prohibited from emitting more than 15 pounds of VOCs per day. Moreover, if the same amount of power had been generated by combined cycle gas turbines, only 0.249 pounds of VOCs would be emitted daily. That’s 90 times less pollution!
As to “protecting against dangerous global warming,” Bloom servers emit 1.2 times more CO2 per unit of electricity than a Siemens, GE, Mitsubishi or Alstrom combined cycle gas turbine.
It gets stranger still. During a June 2012 hearing in Delaware, Bloom’s general manager assured Delaware citizens under oath that “no hydrogen sulfide is used or produced in the process.” But why then did Bloom ask California agencies for money to train Bloom Box operators to handle this hazardous gas safely? Either the training was superfluous or mandatory, or the GM was not properly informed.
These errors and misleading claims make Bloom’s application seriously flawed, and possibly fraudulent, if not corrected. But perhaps the biggest problem is yet to come.
Because of the Bloom servers’ low efficiency and high capital cost, Delaware citizens will pay Bloom over $200 per megawatt hour of power delivered to their PJM grid. But in January 2012 the US Energy Information Agency said the projected “levelized” cost of electricity over the next 30 years from advanced gas-fired combined cycle power stations would be $65.50 per MWH.
In other words, Bloom plans to charge First State citizens three times the $65 rate, for dirtier power.
Talk about a carbon tax! How long will Delaware families, businesses, hospitals, schools and churches be able to survive with those electricity rates? How did Bloom Energy pull off this boondoggle? Well …
One Bloom director (John Doerr) had the sitting President of the United States over for dinner, and has an ex-Vice President of the USA (Al Gore) as a business partner. Another director (Colin Powell) was formerly Secretary of State and Chairman of the Joint Chiefs of Staff. The current Vice President (Joe Biden) hails from Delaware. And they are all good friends of Delaware’s “ultra-green” Governor (Jack Markell) and Secretary of Natural Resources and Environmental Control or DNREC (Collin O’Mara).
Bloom claims it has two independent directors: Colin Powell and Silicon Valley gadfly TJ Rodgers. However, Rodgers has said he has directly invested money in Bloom. He also works with Bloom and has castigated Warren Buffet for suggesting that the government should invest in “shovel ready” projects, rather than companies like Bloom. Colin Powell is a Strategic Advisor to Kleiner Perkins, which is a major investor in Bloom. In reality, Bloom has no independent board members.
It has been reported that Bloom raised $150 million recently through Advanced Equities, a company that is under active Securities Exchange Commission investigation, with some reports saying the SEC is examining AE’s efforts to raise capital for Bloom, back to 2009. Now the SEC will need to investigate more recent capital raising endeavors, to factor in the above information on efficiency, emissions, hazardous materials, and lack of independent directors.
The Chinese refer to this brand of corporate rent seeking as guanxi (connections). Americans might call it crony-corporatism on steroids. Less charitable types might suggest that Delaware’s new motto should be: “We don’t tolerate corruption. We insist on it.” Whatever the name, it has worked – up to now.
It proves the right Delaware political connections can get Bloom the electrical connections, subsidies and rates it wants – even when it submits thermodynamic hogwash in a permit application seeking to convert a protected ecological habitat into a huge, expensive, inefficient, polluting power station that will send electricity prices skyrocketing. Yes – the same DNREC approved Bloom’s permit on May 4, 2012!
But as John Paul Jones said, “We have not yet begun to fight!” And the fat lady has yet to sing.
Lindsay Leveen is a chemical engineer who studied thermodynamics in graduate school at Iowa State. He blogs at www.GreenExplored.com and explains complex science issues in lay terms. His easy-to-read eBook on energy and sustainability is available at http://www.amazon.com/dp/B0070YIZWY