They’re called “unicorns” — companies that have soared to a $1 billion valuation or higher, based on private fundraising alone. The billion-dollar tech start-up was once the stuff of myth, but now they seem to be everywhere, backed by a bull market and a new generation of disruptive technology, like energy storage. Silicon Valley based Bloom Energy is one from the herd of unicorns in the US today, but is the clean-tech start-up really what it makes out to be.
Founded in Sunnyvale, California, in 2001, Bloom Energy describes itself as “changing the way the world generates and consumes energy”. Claiming that their “Energy Servers are among the most efficient energy generators on the planet; providing for significantly reduced electricity costs and dramatically lower greenhouse gas emissions”.
Bloom produces fuel cells, “Bloom boxes”, to convert natural gas and other fuels into electricity. It installs its power-producing units in office buildings, data centres and other customer locations, signing long-term contracts to supply electricity to the customer.
The company had installed more than 130 megawatts of its units in the U.S., as of August 2014, it said. By comparison, globally, 150 megawatts of fuel cells for all types of uses were shipped in 2013, according to a report by the Department of Energy. This represents significant growth and market share but not quite the trajectory needed to achieve “a unit in every home by 2020” as CEO KR Sridhar forecast in 2010.
Mr. Sridhar suggested he would need $100 million to build the business to scale when he first approached John Doerr, a partner at Kleiner Perkins Caufield & Byers and a Silicon Valley icon, back in the early days of the company. To date, the company has raised more than $1.2 billion from private investors.
In addition to Kleiner Perkins and fellow venture heavyweight firm New Enterprise Associates, numerous individuals also have money invested in the company dating back a few years, through pooled investments in funds organized by the now-defunct brokerage firm Advanced Equities. Those funds are now being managed by Spruce, of Stamford, Conn.
Institutional investors also include Morgan Stanley and Madrone Capital, as well as pension fund managers Alberta Investment Management Corp., of Canada, and the New Zeal and Superannuation Fund. Other backers have included European utility E.ON, DAG Ventures, GSV Capital and Mobius Venture Capital.
Besides a strong investor roster, Bloom Energy compiled a who’s-who of directors. In addition to Mr. Doerr, the company’s board includes AOL co- founder Steve Case, former U.S. Secretary of State Colin Powell and Scott Sandell, a general partner at NEA.
However, despite investor attention, not everyone believes Bloom Boxes are as “green” as the company claims they are. Lindsay Leveen, a former Genentech scientist, the author of a book on fuel cells, and an outspoken critic of Bloom, wonders if the public is being “greenwashed” (made to believe that a technology is more environmentally friendly than it actually is). He says this question is especially important because Bloom’s private technology benefits from a lot of public money.
According to California state data, $230 million or 23.6% of the incentives from the 14-year-old ‘Self Generation Incentive Program’ have benefited Bloom Energy. This is despite the fact that the firm only entered the program seven years ago. In addition to state incentives, the company has also benefited from at least $150 million in federal funds in the last two years.
Incentives are a valuable part of the environmental movement, and through such policies California has become an environmental role model for other states, and nations around the world. So how “green” are Bloom Boxes in reality and do they justify such funding?
The carbon emission rate of the traditional power grid is somewhere between 959 and 1,083 pounds of carbon dioxide per megawatt hour, according to government regulators. Bloom advertises on its website that Bloom Boxes are significantly cleaner, operating with a carbon emission rate of just 773.
In an investigation of Bloom Boxes that have been powering 22,000 homes in Delaware, Bloom Boxes have achieved the 773 emission rate just three months out of a 24 month period. The average emission rate was 823.
Bloom Energy has repeatedly declined to address the results of the investigation directly, but have since commented that “CO2 emissions increase as the boxes age”. Leveen’s response “If the thing emits more carbon dioxide than they say it does then this is greenwashing”.
Energy and climate expert, Dan Kammen founded the Renewable and Appropriate Energy Lab at UC Berkeley, and his work with the Intergovernmental Panel on Climate Change shared the 2007 Nobel Peace Prize with Al Gore. Kammen stated “if Bloom is not achieving its advertised emission rate in the real world, the company should explain why”.
“I don’t think its greenwashing but I do think there’s an onus on the company to explain the difference. If you are receiving public money or private investor money you need to own up to your bottom line” Kammen continued. “You do have a responsibility to explain that difference. It’s not being irresponsible, it’s being an ambassador for an emerging technology”.
Generally, in the field of green or clean technology, born out of the environmental movement, we want to believe that people and businesses are honest, and everyone is working towards a better future. However, as energy storage and other clean-tech sectors move from financial discussions in the tens of millions to the tens of billions of dollars, they will surely be subject to the poor practices as other, similarly sized, business sectors.