A fuel cell project in Delaware is costing residents more than expected and failing to create the jobs it promised after receiving million of dollars in state subsidies.
Delaware awarded $18 million to Bloom Energy in 2011 to construct a 30 megawatt (MW) fuel cell facility in the state, the power from which Delmarva Power & Light agreed to purchase. To pay for construction of the facility, state regulators added a hidden surcharge to customer bills.
At the time, a consultant hired by Delmarva Power & Light told the Delaware Public Service Commission (PSC) that the Bloom deal would cost customers about $1 per month over the life of the 21-year contract, with the cost in 2013 expected to be 35 cents a month. A separate analysis conducted by consultant hired by the PSC pegged the lifetime average at $1.34 per month and $1.20 per month this year.
Both Delmarva Power and Light and the PSC appear to have grossly underestimated the true cost of the project. Residential customers will pay a $3.83 surcharge in September, which is almost 1,000 percent higher than Delmarva’s estimate and more than 200 percent higher than the PSC’s, according to the Wilmington News Journal. If Delmarva’s request of $2.6 million in subsidies for September continues, Delawareans would fork over more than $31 million annually to Bloom.
Bloom Energy’s contract with Delmarva is a bad deal for Delaware ratepayers. The terms of the agreement provide Bloom a certain amount of guaranteed monthly revenue. That means that if electricity prices decline—making it less profitable for Bloom to sell electricity to Delmarva—the customer surcharge tends to rise to compensate. In other words, even if electricity rates drop in the future, customers may still face higher bills because of the terms of the deal struck between Bloom, the PSC, and Delmarva.
Lone Voice in the Wilderness
The Caesar Rodney Institute (CRI) was one of the only organizations to predict that the Bloom deal would cost Delawareans more than the PSC and Delmarva claimed. PSC staff said the deal would cost ratepayers $147.6 million over the life of Delmarva’s contract with Bloom, but CRI testified in 2011 that the true cost would be $500 million or more.
Bloom Energy also promised to create 900 jobs for local residents, but the Wilmington News Journal reports that Bloom has been slow to hire and is behind schedule on production:
Bloom announced that it had started work in the Newark plant in May, making it eligible to tap into more of the millions in Delmarva Power customer surcharge payments. But it’s not clear exactly what the workers are doing there. Bloom has refused to allow The News Journal into the plant to see any work that’s underway.
It’s also not clear to what extent Bloom has kept its promise to give Delawareans the first shot at jobs there. While the company announced that about 60 people work at the plant now, a couple of dozen cars parked outside the plant on a typical summer afternoon displayed a good number of license plates from Maryland, Pennsylvania and New Jersey.
Unboxing Bloom Energy
Like other similar fuel cells, Bloom Boxes combine methane (i.e. natural gas) with oxygen to create an electrochemical reaction that generates electricity and emits carbon dioxide and water. Functionally, this process is no different from a regular natural gas power plant. As IER explained in June, even though the fuel cells are powered by nonrenewable natural gas, the PSC allows Delmarva to count the electricity generated from Bloom Boxes toward the state’s renewable energy requirements.[1]
Bloom Energy touts its fuel cells as good for the environment, but there is evidence that Bloom Boxes actually produce more emissions than advanced natural gas plants. Lindsey Leveen, a chemical engineer, reviewed Bloom’s permit application to the Delaware PSC. Leveen discovered that Bloom’s fuel cells emit 90 times more volatile organic compounds (VOCs) per day than a combined cycle natural gas power plant. As the Environmental Protection Agency (EPA) notes, VOCs are known to cause numerous adverse health effects, including headaches, nausea, and liver damage in humans and cancer in animals.
In addition to increasing VOCs, Bloom Boxes produce more CO2 emissions than advanced natural gas facilities. As Leveen explains, “Buried deep in the permit application, in Table 1 on page 161 of a 163-page application, was the number 884. On that page, under penalty of perjury, Bloom officially told the world that its energy servers emit 884 pounds of carbon dioxide per megawatt hour.” What’s so special about the number 884? According to Leveen, “A brand-new combined-cycle power station from Siemens, GE or Mitsubishi emits only 730 pounds of CO2 per megawatt-hour.” Despite Bloom Energy’s claim to have discovered a breakthrough in fuel cell technology, Bloom Boxes still produce more emissions than the cleanest natural gas plants.
Worse yet, Bloom energy servers are significantly more expensive than advanced combined cycle natural gas plants. Leveen’s calculations reveal that Bloom Boxes cost more than $200 per MWh of electricity delivered to the grid. In contrast, the Energy Information Administration (EIA) estimates that new advanced combined cycle natural gas plants cost $65.60 per MWh. That means Delawareans will pay three times as much for electricity that produces more emissions than technology that does not need lavish subsidies to be cost competitive.
Conclusion
Bloom Boxes are neither as “green” nor “renewable” as the company claims. At their core, Bloom Boxes are small, dirty, expensive natural gas power plants. In addition, Delaware residents are being forced to pay more than was originally expected, while the jobs Bloom promised are failing to materialize.
Bloom Energy claims to have discovered a revolutionary breakthrough in fuel cell technology, but fuel cells are nothing new. Fuel cells have existed for 150 years, yet there has never been a single profitable fuel cell company. As IER wrote two months ago, the onus continues to be on Bloom to prove history wrong.
IER Policy Associate Alex Fitzsimmons authored this post.
[1] Delaware requires utilities to generate 25 percent of their electricity from renewable sources by 2025.
