Bloom quietly wins subsidies in NY

Bloom Energy has been known to trumpet its big-name clients out West, but the fuel-cell maker quietly has received regulatory approval in New York state for what is expected to be millions in subsidies to install and run its servers for AT&T and the grocery chain Stop & Shop, a review by The News Journal showed.

The New York State Energy Research and Development Authority confirmed that it has awarded subsidies for five fuel cell projects, and of that number, four have gone to Bloom to install its servers at AT&T facilities in White Plains and Queens, as well as a Stop & Shop in Westchester County.

That, along with previously reported contracts in Connecticut, show that the Silicon Valley-based company is extending its dominance of state subsidy programs outside of its home state of California.

Incentives are considered an important, but not the only, factor in Bloom’s ability to create a market for the solid-oxide fuel-cell servers it now is making at its Newark factory, which is perhaps Gov. Jack Markell’s most prominent remaining economic development project.

Exactly how much Bloom will receive for each project in New York under the state’s Renewable Portfolio Standard is not a matter of public record. Fuel-cell companies receive a state subsidy based on each unit of energy produced, under a competitive bid that is under seal, but is likely to total in the millions for Bloom.

Delaware created financial incentives for Bloom to set up its East Coast manufacturing center in Newark in 2011. The state provided for a surcharge on Delmarva Power bills to benefit Bloom in expectation of a robust market for Bloom’s products in this region. The factory opened in 2013, with a goal of hiring 900 workers by 2016; the current workforce there is above 100, the company has reported.

Exactly where those East Coast orders will come from has been unclear. In subsidy-rich California, Bloom has announced that clients like Google, AT&T, eBay and Coca-Cola are using their fuel-cell servers, fetching Bloom and its clients hundred of millions of dollars in financial assistance from that state’s subsidy program.

Outside of California, Bloom has been more quiet about its clients, and incentives are generally smaller. Although Delaware is supporting Bloom’s role in a Delmarva electrical project, it offers no subsidies specific to fuel cells for projects installed elsewhere in this state.

Bloom has announced projects with JPMorgan Chase in Wilmington, Washington Gas Energy Services in Virginia and Urban Outfitters in Philadelphia. Bloom confirmed its involvement with an Apple data center in North Carolina after press reports.

Perhaps the best-known subsidies for fuel cells outside of California are offered in Connecticut, which is home to two competitors to Bloom, FuelCell Energy Inc. and ClearEdge Power.

But last year the Hartford Business Journal reported that Bloom captured 11 of the first 14 subsidy awards issued by utilities in that state, adding up to about 64 percent of the dollar value of the total incentives issued in that first round. The 11 projects were at AT&T and WalMart locations.

In New York, NYSERDA administers the renewable portfolio standard program, and fuel-cell projects can apply under two different formats: smaller customer-sited programs and larger programs known as Main Tier. It is unclear what customer-sited projects Bloom has won, but NYSERDA reported the Main Tier projects in its annual renewables report.

According to the report, as well as requests for information by The News Journal, in the Main Tier, Bloom won a combined 1.58 megawatts of fuel-cell power at a two-part AT&T “Clean Energy Project” at its Hamilton Avenue complex in White Plains, N.Y.; another 530 kilowatt project for AT&T in the Rego Park section of Queens; and 260 kilowatts of power at a Stop & Shop in Mount Vernon, N.Y.

By contrast, the two Bloom electrical projects now in service at two Delmarva Power substations, a utility-scale project feeding the grid with cleaner energy, is a maximum of 30 megawatts, enough enough power for 20,000 to 30,000 homes.

In a recent letter to that state’s Public Service Commission, Bloom officials wrote that New York was moving too slowly in seeking new projects to fund, noting that the last time it issued a solicitation was January 2013.

The previous round of bidding was “undersubscribed,” due to factors like inconsistent federal renewable energy policy, siting and permitting challenges and an overall decline in energy prices, which reduces revenue for renewable generators, said Alan Wechsler, spokesman for NYSERDA. The agency believes reforms are needed in the procurement rules, he said.

“The state remains unwavering in its support for clean energy that will provide New Yorkers with a more resilient, affordable and dynamic energy system,” Wechsler said.

No matter in what state the Bloom boxes are installed, the federal government offers a 30 percent tax credit on the power produced. Observers say that even in the absence of state subsides, this helps make Bloom’s products more competitive in states where grid electricity prices are high.

Incentives don’t tell the whole story, said Bryan Warshay, an analyst with Bloomberg New Energy Finance. Bloom has been able to find traction in markets with high retail electricity prices, or in sectors like data centers that have high reliability needs, he said. “I don’t think any company should stake their growth on the ‘potential’ for new incentives to be passed. Betting on politics is quite risky,” Warshay said.

Chip Bottone, CEO of a FuelCell Energy Inc., a competitor to Bloom, said the subsidy numbers don’t reflect how effective a fuel-cell company is in the marketplace. His company specializes in combined heat-and-power units that are more economical when installed in large sizes, he said.

Although Bloom received the most awards and the most overall subsidies in Connecticut during the first round of the Low-emissions Renewable Energy Credit program, FuelCell Energy received the largest single award, an installation at Hartford Hospital.

Bottone said his company’s device produces electricity that is less expensive than Bloom’s, and often doesn’t need incentives to be competitive.

“These programs are nice, but they should only be used as an enabler to get your business to live without them. If you rely on those incentives forever, they come and they go, but they don’t generate that much volume,” Bottone said.

In an email, Bloom spokesman Bryan Horsey declined to discuss the New York projects, saying: “Bloom currently has installations in U.S. states as diverse as Utah, New York, North Carolina, California and Delaware, plus Japan, each with their own unique market dynamics. We continue to work with our customers and other stakeholders to expand the markets we serve. Doing business in a regulated industry requires Bloom to engage policy makers in every market where we do business.”

Collin O’Mara, secretary of Delaware Natural Resources and Environmental Control, said because energy prices have come down so quickly, that hurts Bloom’s ability to compete without incentives. Delaware’s task force on renewable energy needs to look at what sort of incentives might be available to potential clients of Bloom to install more Bloom boxes in Delaware, he said. But more of the conversations with potential clients currently revolve around reliability, and that was the driver in the JPMorgan deal, he said.

“If your main concern is reliability, and you’re willing to pay a premium for that, the incentive is less important,” O’Mara said.

Contact Aaron Nathans at (302) 324-2786 or anathans@delaware online.com.