You can't fault a company for using government subsidies, politics, and politicians to their advantage. Corporations are in the business of maximizing shareholder value and whatever they do, within the bounds of the law, is fair play. Oil and gas companies have done it for a century. Now greentech companies are doing it and they are becoming adept at the game.

Bloom Energy (although debatably greentech) is a high-profile fuel cell manufacturer, and the firm is using all of the tools at its disposal -- including, in this case, California's SGIP subsidy --  to advance its business.

The SGIP (Self-Generation Incentive Program) is a subsidy established by California's PUC to support existing and emerging distributed energy resources -- providing one-time, upfront rebates for distributed energy systems installed on the customer's side of the utility meter.  Qualifying technologies include wind turbines, fuel cells, and associated energy storage systems.

Bloom and its customers received $218.5 million in subsidies in 2010 from the SGIP, dominating the program, according to an article in the Sacramento Bee. A total of $327.7 million was awarded by the program in 2010. As we noted in January, total subsidies can climb to $8.25 a watt when biogas supplements and all federal and state programs are added.

The CPUC claims that these funds benefit all ratepayers whose utilities have a reduced need to invest in expensive transmission and distribution infrastructure.

As of December 31st, 2008, the SGIP had over 1,299 on-line projects and over 337 megawatts of rebated capacity. Bloom is not the only fuel cell firm to avail themselves of this subsidy -- ClearEdge Power, Fuel Cell, and UTC Power have gotten their share, as well.

Utility customers pay for the program through a charge on their electric bills. PG&E's residential customers pay about $5.00 per year, industrial customers pay an average of $3600 per year, according to the CPUC. The fees generate more than $80 million per year.

From the same article: PG&E filed a petition late last year, asking that the CPUC suspend payments, pending a revision of rules to better disperse the money across different technologies. John Doerr of Kleiner Perkins intervened and called the head of the CPUC. The article continues, "The program is supposed to expire again this year. Bloom is involved in an effort to extend it.  Lobbyist Lenny Goldberg, who represents The Utility Reform Network, a consumer group, said the main reason the program is being extended is that Bloom "sucked up all the money," leaving little for other producers."

The bottom line is that Bloom followed the rules and won subsidies that were available for its technology and customers. The numbers are surprisingly large. According to the spreadsheet at this link, Bloom has had $452 million worth of eligible projects through the SGIP that are completed, reserved, or under review. That's certainly enough revenue to base an IPO on, providing there's a road to profitability and the SGIP isn't going away anytime soon.

The technology's price per watt ranges from $5.00 to $18.00, although the figure $8.57 per watt pops up a lot.

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A refresher on Bloom Energy:

The Bloom Energy fuel cell is powered by natural gas and $500 million in cash from Kleiner Perkins Caufield & Byers, NEA, et al.  

Natural gas fuels the Bloom Box with low-carbon emissions and efficiencies in the range of a natural gas genset. After incentives, Bloom claims its server generates power for 9 cents to 11 cents a kilowatt hour, a calculation that includes fuel, maintenance and hardware expenses.

Bloom's 100-kilowatt solid oxide fuel cell (SOFC) sells for about $700,000 before incentives and the company will have shipped units to marquee customers such as Walmart, Google and FedEx.  That's a significant amount of revenue for a young company, possibly on the scale to get to an IPO in 2011.  An SEC filing for a proposed IPO would reveal how much the Bloom Box costs to build versus its selling price.

As a public service we provide an updated list of the top three profitable publicly-held fuel cell firms:

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Here's a review of the fuel cell industry in 2010.