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The Bloom Energy Breakthrough

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Greening the Power Landscape with Fuel Cells

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Ominous Forecast, Sooner than Planned

Scientists warn that the earth is hurtling towards resource depletion and lethal temperatures ahead of schedule. Unless our course alters, by 2050, fossil fuels and crucial minerals will disappear, and global temperatures will kill one third of animal and plant-life.

The 1997 Kyoto Protocol called on industrialized nations to avert anthropogenic (human-induced) climate disaster by reducing carbon emissions (greenhouse gases). The EU and 37 more industrialized countries pledged to reduce carbon emissions 5-8% from 1990 levels by 2008-2012.

How are we doing? From 1990 to 2013, global emissions, instead of shrinking, surged from 22.7 to 36 billion tonnes.

Climatologists now say that the Kyoto targets are insufficient, and the UN is asking member states to submit aggressive climate action plans by early 2015, in preparation for a stringent treaty to be ratified in Paris at the end of 2015.

How will we meet tougher targets? The EIA (Energy Information Administration) expects global energy demands to rise 44% from 2010 to 2030. Global investment in renewable energy R&D (research and development) peaked in 2011 at USD 317.9 billion, but receded to USD 254 billion by 2013. Without a drastic power-grid overhaul, the relentless demand for energy will produce a cloud of emissions darker than today’s dire forecast.

This Is Our Chance
The cost of implementing established renewable technologies has actually decreased over time, so clean energy is becoming more competitive. Worldwide, half of newly installed power servers are sustainable Since oil prices are expected to more than double by 2030, clean energy will be even more affordable in comparison. But which clean energy?

Seeking the Most Robust, Affordable Green Energy
To date nuclear energy is the cleanest, most inexhaustible energy source, capable of providing the power to sustain continuous economic growth. The caveat, of course, is the meltdown risk. The World Nuclear Association wants to replace fission with fusion energy, which does not result in lasting radioactive contamination and fallout. But safe fusion power depends on breakthroughs in tritium containment and waste management. These are not imminent.

The remaining palette of renewable energy sources includes wind, solar, biomass/biofuel, and hydropower, the last currently providing more than 67% of worldwide renewable output. Hydropower’s disadvantages include: expensive installation, the need for a vast, natural water source, erosion, destruction of natural habitats, earthquake and flood threats, and permanent ecological shifts. Greener, yes; perfectly green, no.

Not on the List: Fuel Cells
A fuel cell is like a battery which runs continuously, with a consistent electrical output. That’s an attractive prospect in a 24/7 connected economy. All other power sources, especially standard fossil-fuel power plants, are subject to power fluctuations and outages. There is no combustion (burning). This is essential, because regardless of the material, combustion produces high carbon emissions and other pollutants.

Until now, however, fuel cells have not been efficient or affordable enough to provide mainframe power. Previous fuel cells required expensive platinum plates and exorbitant, pure-hydrogen fuel to run.

Not the Bloom Energy fuel cell.

NASA Scientist Spins Off Another Breakthrough
Detractors believe space exploration is money pitched into a black hole. Shouldn’t we use those funds to battle climate change, deadly illness and world poverty? In fact, incidental astro discoveries often have profound immediate implications for life on earth. Since landing its first spacecraft on Mars in 1976, NASA has documented over 1,600 space spin-off technologies which have made our lives better. To name just a few: artificial hearts, laser angioplasty, kidney dialysis machines, prosthetics, advanced water purification, infrared cameras and even cordless power tools.

NASA had asked Dr. K. R. Sridhar to create a fuel cell to provide a consistent supply of oxygen for breathing, and hydrogen for power, to be used in its Mars probe, a precursor to the Mars Rover. When the project was cancelled in 2001, Dr. Sridhar decided not to let that research go to waste.

He thought he could reconfigure the cell as a regenerative (self-running) SOFC (solid oxide fuel cell), with an architecture robust enough to supply base-load (primary) power on an industrial scale, and at an affordable price. Big plans!

Auspicious Start
Despite the failure of all previous fuel cells to achieve those goals, Dr. Sridhar was able to persuade power players to back Bloom Energy. Most notable was John Doerr, a member of President Obama’s Economic Recovery Advisory Board and world-renowned venture capitalist at Kleiner Perkins Caufield & Byers, the Silicon Valley firm responsible for launching Google, Amazon, and Intuit.

Investor confidence ultimately amounted to USD 400 million in start-up capital (16 times Google’s start-up), and Bloom Energy began manufacturing and testing its prototypes. To date, Bloom has received over USD 1 billion in investor funding.

What Makes the Bloom SOFC better?
ALL SOFCs contain three basic components: electrolyte, anode, and cathode. In the Bloom fuel cell, instead of platinum, alloy metal conducts electricity between electrolytes. The central electrolyte is ceramic, made from fortified, inexpensive sand-like granules. On either side of the electrolyte are unique anode and cathode coatings, which enable the cell to convert cheap, hydrocarbon fuel (instead of expensive, pure hydrogen) into electricity.

Non-Stop, Green Power
Hydrocarbon fuel is injected into the fuel cell on one side, oxygen on the other, and after the initial heat ignition, the fuel cell begins a regenerative chemical process that produces electricity (power). The electricity byproducts, heat and water, are recycled back into the fuel cell, sustaining the entire process. That means that a Bloom Energy Server, made up of stacked fuel cells, generates consistent, uninterrupted electrical output over a lifespan of more than 15 years.

When natural gas is used, the carbon byproduct is 32-50% lower than standard, fossil-fuel power plants, and 66% lower than coal plants. Even better, when biofuel is used, the Bloom Energy Server is carbon neutral, meaning that it adds zero greenhouse gases to the environment: perfection.

Preserving Another Dwindling Resource: Water
Worldwide, we use four times as much water as we did forty years ago. Rising global temperatures also create more violent storms. These increase run-off from nitrogen-laden farmlands, polluting fresh water sources. To date, most purification methods involve fossil-fuel burning, and scientists predict that in 20 years even developed countries will struggle to obtain fresh water.

Coal plants use over a million gallons of water per 200kW, natural-gas plants about 650,000 gallons.

Because the Bloom Energy Server recycles water, it requires only a single, 240-gallon water injection to start.

Dirty Data Cloud: Bloom’s First Customers Clean Up
Greenpeace reports that data centers use up to 2% of global electricity (3% in the USA). Mostly run on fossil fuels, they produce a corresponding share of emissions.

Fittingly, Bloom Energy’s first two customers were eBay and Google. In 2009, eBay installed five Bloom servers on its San Jose campus. Nine months later, CEO John Donahoe told a newscaster that those small boxes had generated five times as much power as eBay’s 3,000 rooftop solar panels, and saved eBay USD 100,000 in electricity costs.

And as of September 2013, eBay’s new technology headquarters in Salt Lake City has set a benchmark for hi-tech firms, installing 30 Bloom Energy Servers for all of its primary power. eBay expects a 49% reduction in emissions, and virtually no power outages, which translates to a more reliable online presence and infrastructure, better business.

With uninterrupted, self-generated power on site, the average Bloom user reduces basic electricity costs by at least 20%, and no longer has to pay for a back-up power source, since the regional grid becomes the back-up source. Not only that, but eBay’s 30 Bloom Energy primary power servers take up less space than their former, diesel-fueled, carbon-fuming, backup servers.

Calling for More Bloom Servers
Bloom was honored with the 2013 Supplier Sustainability Award in Alternative Energy by AT&T, a Bloom client since 2011. The evidence shows that the Bloom fuel cell has realized Dr. Sridhar’s vision; and backorders are mounting, including one from California’s largest power company.

To keep up with these requests—and to fulfill its ultimate mission to put green energy in Africa, and a USD 3,000, family-sized Bloom box in every home—the company must transition from producing one hand-made server per day, to mass production. That should also reduce the purchase price per server, currently USD 700,000 to 800,000. Although, clients who can’t afford to wait for the three- to five-year return on investment already have the option of a lease.

A Maturing Bloom
Bloom’s board member, General Colin Powell, former National Security Advisor and Secretary of State, believes the Bloom Energy Server will be an essential contributor to global energy conversion. John Doerr told NBC in a 2011 interview that the new-energy industry could be the most lucrative of this century. Now, Bloom Energy needs another capital injection for bold expansion. Watertight risk transfer is the key to accessing the growing pool of institutional renewable investors.

New Energy Risk: Born for the Task
Tom Hutton takes the renewable challenge seriously. As former Director of XL, CEO of White Mountain Re, and founding CEO of RMS (Risk Management Solutions), he also understands the risk coverage institutional investors need. He founded NER (New Energy Risk) in 2011 to serve as a risk assessor and intermediary between clean-energy innovators and insurers.

Mr. Hutton believes he can help innovators reduce financing costs by applying rigorous, data-driven, risk-management methodologies, combined with tailor-made insurance. His mission is to use these solutions to enable clean-energy development on an unprecedented scale.

The Last, Crucial Risk Transfer
Before the paint was dry on the NER door, Bloom Energy came knocking, seeking a risk-transfer solution for new institutional investors. Mr. Hutton and his network of engineers, risk analysts, and actuaries consulted with Bloom scientists to examine the technology and evaluate the risks. NER brought the finished risk assessment to several insurers, including XL. So far, XL has been the only one to respond with a policy. Our Complex Accounts team devised an exclusive, long-term, product performance, risk-transfer strategy. It satisfied investors, and was priced to enable Bloom to take the next, pivotal step in their mission.

The New Power Landscape
Now NER is seeking additional insurance collaborators to help facilitate Bloom’s expansion, as it enables some of the biggest power producers and consumers in the USA and beyond to convert to clean energy. Bloom Energy will play a major role in greening the power landscape, and helping to reverse our fate on this planet.

 

Pierre-Yves Loertscher  is the Regional Underwriting Manager for XL Group’s Complex Accounts, International Casualty. With 20 years of casualty underwriting experience, Mr. Loertscher designs, develops, and implements XL’s complex-liability products, addressing the unique risk-transfer needs of clients in groundbreaking projects.

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