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Thursday, July 19, 2018

ANALYSIS/OPINION:

Bloom Energy plans to go public on the New York Stock Exchange in late July. For a green energy start-up backed by the big Silicon Valley venture firm Kleiner Perkins Caulfield & Byers, Bloom has had a bumpy 16 years reaching this milestone. The financial and energy media have covered Bloom’s self-inflicted controversies, which are hardly over.

The public vaguely remembers and little understands even the spectacular green project failures that cost investors and taxpayers tens of billions, largely because they are rarely presented in everyday terms.


But that is changing as the public becomes more aware of Bloom’s involvement in the D.C. swamp, crony deals and pollution problems. That could ordain Bloom as an example of deep-rooted green energy corruption — and launch resistance against these programs.

Bloom customers include America’s most prestigious corporate brands. AT&T, Google, eBay, Apple, Amazon, Staples and others have helped Bloom cultivate a well-polished image, enhanced by ads extolling the companies as virtuous early adopters of climate-protecting green energy technologies. Contradictions to this narrative are obscured but abundant.

Bloom survives on federal and state subsidies. Its S-1 Registration Statement states: “Our business currently depends on the availability of rebates, tax credits and other financial incentives.”

Ideally, subsidies enable new technologies. But government entities decide which technologies deserve largesse, at what levels and under what terms. This makes subsidies highly political, and subject to shifting political circumstances.

For example, after years of dependence, Bloom lost its 30 percent federal investment tax credit (ITC) in late 2016. Sales plummeted.

But with Kleiner Perkins, other lobbyists and senators like Tom Carper, Delaware Democrat, and Chuck Schumer, New York Democrat, promoting Bloom’s virtues, Congress reinstated Bloom’s ITC in the 2017 tax bill and even made it retroactive. Bloom rebounded and the IPO was feasible. The swamp delivered.

Bloom makes solid oxide fuel cells that use an electrochemical reaction to convert natural gas into electricity at the customer’s site. On-site generation is called “distributed” or “behind-the-meter” energy. It eliminates costs, complexities and inefficiencies associated with long-distance transmission and distribution from large power plants, which lose about 7% of their generated electricity over power lines.

Distributed energy users avoid that power loss and, proportionally, the costs of maintaining utility transmissions lines. But the fixed maintenance costs are divided among smaller groups of users, causing electric rates to rise proportionally.

Solar panels on the rich family’s roof (distributed energy) are proportionally paid for by the worker who installed the subsidized panels. By installing Bloom technology, Apple benefits, but its employees and customers’ communities experience rising electric bills. These households cannot afford to play the fuel cell game. They just pay for it.

These and other factors were exposed in Delaware, where Bloom cut a sweet deal in 2012. For $12 million, a $1/year land lease for a factory and a 21-year arrangement for selling Bloom-generated electricity — all courtesy of state ratepayers and taxpayers — Bloom agreed to build a factory and bring 900 high-paying, allegedly clean-energy manufacturing jobs to Delaware.

To date, Bloom has created only 277 Delaware jobs; the rest are in India. Bloom was penalized $1.5 million for missing its jobs target. This was peanuts considering that Bloom has received $190 million under the electricity sales agreement, which has 16 more years to go.

Billions of taxpayer dollars subsidize wind, solar and other green projects like Bloom. These projects are complex and never explained or displayed in a homeowner’s electric bill. However, in Delaware Bloom’s costs are prominently displayed on every monthly electric bill, along with solar and wind costs.

Consumers (and voters) are increasingly upset, as they realize that Bloom’s original forecast of $0.70 per household has ballooned to $5.00 a month, and still rising. Bloom under-delivered on jobs by 70 percent and underestimated costs by 700 percent.

Bloom electricity is sold to the grid via Delmarva Power, acting as Bloom’s agent. Since Delmarva is a utility, regulated by the Public Service Commission, Bloom’s monthly PSC performance reports are also public.

Performance transparency became a problem when a Delaware think tank hired chemical engineer Lindsay Leveen to analyze Bloom’s monthly reports. Six years of data confirm significant efficiency decreases as units degrade. Maintenance and operational costs increase and are passed along to consumers.

Moreover, the U.S. Environmental Protection Agency found that Bloom’s units generate hazardous wastes and fined Bloom $1million. The dispute is currently in the courts, creating another awkward situation for the “green tech” company.

Then North Carolina’s environmental regulators fined Bloom customer Apple Computer for multiple violations regarding hazardous wastes at Apple’s server farm near Charlotte, N.C. Apple claimed Bloom was responsible; Bloom said it was Apple’s problem.

Bloom won the dispute, and Apple paid the state a $40,000 fine, without admitting wrongdoing. It’s reasonable that every Bloom customer has a similar inconvenient problem.

Bloom’s bigger difficulty may be that Mr. Leveen is outraged by the deceptions he’s uncovered. It was Mr. Leveen who alerted Tar Heel environmental regulators about Bloom and Apple. He’s also approached state and federal regulators, media and others with his data and findings in Bloom’s IPO documents.

The convergence of these issues could arouse the public with implications beyond Bloom’s IPO. It could cause introspection into the green energy industry and the swamp that enables it. Green energy promoters may be in for a bumpy ride.

• Clint Laird focuses on energy issues with The Caesar Rodney Institute. Paul Driessen is the author of books and articles on energy, climate change and economic development.


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