Bloom Energy, the Silicon Valley fuel cell maker with an estimated $800 million in VC and backers like John Doerr, T.J. Rogers and Colin Powell on its board, hasn’t let legal challenges set it off stride.
On Thursday, the San Jose, Calif.-based startup landed a 6-megawatt project with eBay, which wants 30 Bloom “energy servers” to back up its data center. EBay is one of several Fortune 500 clients, including Google, Adobe, Coca-Cola, FedEx and Wal-Mart among them, that have been testing out Bloom’s solid-oxide fuel cells in sub-megawatt scale in California since 2010.
It’s the biggest data center project to date for Bloom, which created a new business line dedicated to data center backup earlier this year. This spring, Apple revealed it was buying 4.8 megawatts of fuel cells from Bloom to back up its Maiden, N.C. data center.
In the meantime, Bloom’s biggest single project, a 30-megawatt installation with Delaware utility Delmarva Light & Power, remains under attack in the courts. On Wednesday, nonprofit legal advocacy group Cause of Action filed a lawsuit accusing Delaware Governor Jack Markell and the Delaware Public Service Commission of unconstitutionally setting up a deal in which Bloom agreed to build its fuel cells in the state, and got exclusive financial and regulatory benefits in return.
Notably, the lawsuit (PDF) included FuelCell Energy as a plaintiff. The Danbury, Ct.-based fuel cell maker argues that it’s being shut out of Delaware by terms in the state’s renewable portfolio standard law, rewritten last year, which favor fuel cells built in-state. The problem is that Bloom is the only company that qualifies, it argues.
The lawsuit argues that this violates the Constitution’s Commerce Clause, which demands fairness in economic activity between states. (It also claims that Delmarva’s plans to charge customers about $1.34 per month for the project violates the equal rights of ratepayers in the state).
A FuelCell Energy spokesman provided the following points via email:
· "The State of Delaware issued a sole source contract for up to 30 megawatts of stationary fuel cell power generation without a public bidding process. We believe this unfairly burdens the Delaware ratepayers."
· "We are participating in this action out of the belief that healthy competition supports the best interest of the ratepayer, the larger renewable energy industry and the future of clean energy."
· "We wish to ensure there is no precedent set for transactions of this nature in other U.S. states. We feel that granting contracts only to companies with manufacturing operations in Delaware violates the Commerce Clause of the U.S. Constitution. "
· "Based on the report submitted to the Delaware Public Service Commission, the cost to ratepayers is approximately 22 cents per kilowatt-hour before renewable energy credits (RECs). FuelCell Energy’s stationary fuel cell power plants provide power for substantially less."
· "We are not suing for monetary damages."
· "We are not suing Bloom Energy."
Publicly traded FuelCell Energy has set a goal of reaching profitability at a yearly shipment rate of 80 megawatts to 90 megawatts of its molten carbonate stationary fuel cells, as compared to 56 megawatts in 2011 and 22 megawatts in 2010. Of course, it also receives incentives to help it increase revenues for some projects.
FuelCell Energy is also a bit bigger than Bloom, with a 120-megawatt deal with Korea's POSCO Energy, a service agreement with utility Southern California Edison, a joint venture with Fraunhofer IKTS and a partnership with Spain's Abengoa. Noteworthy competitors include ClearEdge, a startup with a combined power-and-heat fuel cell, and a 50-megawatt deal with an Austrian renewable power developer, as well as with other stalwarts in the business like United Technologies and Ballard.
Then again, Bloom’s $800 million in VC and purported valuation of $2.7 billion must be compared to FuelCell Energy’s market capitalization of $169.1 million as of Thursday, down from $179.1 million as of April 30.
As for Cause of Action, the nonprofit group doesn’t disclose its funders, but a glance at its website shows that it has been publicly backed by right-wing advocates like Andrew Breitbart and Newsmax. According to a Wednesday news announcement, Cause to Action was put onto the case by Delaware-based think tank the Caesar Rodney Institute, which says it connected it with Delmarva ratepayer John Nichols, who had opposed the Bloom project (along with CRI) at hearings last year.
Bloom Energy did not respond to phone calls requesting comment on Wednesday. Here's our coverage from yesterday:
Bloom has been working on its Delaware deal, one of its biggest, for more than a year. In October, Delmarva received approval from the state commission to bill customers for the financial support to install 30 megawatts of Bloom's natural gas and biogas-powered fuel cells in the state. The deal included Bloom building a factory for its fuel cells, which Bloom broke ground on in April.
Cause of Action’s lawsuit accuses the state of creating a “system of discriminatory eligibility requirements, subsidies, and energy-portfolio-standards multipliers that benefit Bloom,” when it rewrote its renewable portfolio standards act in late 2011. Cause of Action has also filed two Freedom of Information Act requests to examine public comments and economic studies submitted in support of the tariff.Amber Abbasi,
chief counsel for regulatory affairs at Cause of Action, said in a Wednesday interview that Delaware's law provides rules and incentives that provide an unfair level of assistance to fuel cells built inside the state, a violation of the Constitution's Commerce Clause. Bloom will be the only fuel cell maker in the state when it opens its factory. Abbasi also said that the law's financial impact falls unfairly on Delmarva ratepayers instead of all the state's residents, violating the Equal Protection Clause.
Delmarva plans to raise more than $100 million over 20 years to help finance the project, which equates to a $1.34-per-month surcharge on customer bills. Delaware is also providing $18 million in state incentives, and the project is seeking a federal cash grant for renewable power projects. The total costs to Delmarva ratepayers is expected to be about $133 million.
Bloom has raised a massive amount of money to support its business of building solid-oxide fuel cells that run on natural gas or biogas to generate electricity. Earlier this month, the company raised a Series G round of $150 million to bring its total VC investment to about $800 million. Whether its business, along with the fuel cell industry at large, can thrive without generous government subsidies is another question.