Clean hydrogen fuel has long been deemed the Holy Grail of decarbonizing industry. Bloom Energy Corporation (NYSE: BE) is an American hydrogen company taking part in revolutionizing how the world is generating and consuming energy.
We talked to Ravi Prasher, Bloom Energy CTO who explained how Bloom’s technology is helping to scale clean hydrogen, how the company’s partnerships are driving it towards broad international expansion and what is Bloom Energy’s role in making re-electrifying clean hydrogen a possibility in the future.
What does Bloom Energy and its main product portfolio offer the decarbonization industry?
Bloom Energy was founded over 20 years ago by KR Sridhar, with the single vision of making clean and abundant energy affordable for everyone in the world. To achieve this, Bloom Energy was the first company to successfully commercialize the solid oxide platform, which powers the company’s two main products: solid oxide fuel cells and solid oxide electrolyzers.
Bloom’s fuel cells work by providing always-on power for high energy users by using a non-combusting chemical reaction to convert a fuel source into clean electricity. Bloom’s fuel cell, also known as the Bloom Energy Server™, is fuel agnostic as it can run on hydrogen, biogas, natural gas and other future fuels such as ammonia or methanol.
For example, we have a dairy farm customer where we are running the fuel cells on biogas captured from cow waste. Bloom’s fuel cells were recently recognized by Frost & Sulivan as the market leader in the stationary fuel cell market, and because they’re non-combusting, they are 99% emissions free and, in most applications, are significantly cleaner than the energy grid.
How do Bloom’s solid oxide electrolyzers produce hydrogen? Could you please elaborate on the technology process of H2 production?
The Bloom Electrolyzer® takes two inputs – electricity and water – to produce hydrogen through a high-temperature electro-chemical reaction also known as electrolysis, very similar to our fuel cells. Physics dictates that high-temperature electrolysis is significantly more energy efficient in producing hydrogen than low-temperature alternatives.
The electrolyzer consists of an anode, a cathode, and an electrolyte, which is a solid ceramic material. The anode and cathode are made from special inks that coat the electrolyte and facilitate the electrochemical pathway to produce hydrogen. The electricity supplied drives the chemical reaction that splits the input water at the molecular level to create hydrogen and oxygen as outputs.
Because Bloom’s electrolyzer is built on our high-temperature solid oxide platform, it delivers efficiencies 25% to 30% better than that of lower temperature technologies, such as PEM and alkaline electrolysis. Bloom’s efficiency has been proven in our own testing and via independent sources such as the U.S. Department of Energy’s Idaho National Lab.
Electricity cost is the dominant cost in carbon-free hydrogen (e.g. green or pink) production. Therefore, hydrogen produced from Bloom’s electrolyzer will be significantly cheaper than the low-temperature alternatives.
What is the current scope of deployment for Bloom Energy’s high-efficiency electrolyzer that you just described?
Bloom is gearing up to significantly increase the production of our high-efficiency electrolyzers. Late last year, we opened our first dedicated production line for electrolyzers at our Newark, Delaware assembly plant in preparation for large commercial orders. Analysts have noted that with a 2GW electrolyzer manufacturing capacity, Bloom has the capacity today to be the largest manufacturer of electrolyzers in the world.
Approximately three-quarters of applications for low-carbon intensity hydrogen are high-temperature downstream processes and projects, making them a good fit for Bloom’s technology, as it operates at high temperatures. Considering this along with the continuing U.S. federal investments in hydrogen, we are expecting rapid growth for our electrolyzer business.
Bloom has completed a series of early demonstrations modeling a variety of use cases, from intermittent feeds with our partners SK Ecoplant in Korea to concentrated solar with Heliogen, to testing with a simulated nuclear feed with the US Department of Energy’s Idaho National Labs, among others.
We are deploying 10MW of SOEC with LSB Industries, an ammonia producer in Oklahoma; working through the pre-FEED process on a green ammonia project in Stephenville, NL, Canada (the World Energy GH2 project), where solid oxide’s ability to use waste heat from ammonia synthesis has secured a place in the project; and pursuing many other commercial opportunities globally.
Can you please explain more about Bloom’s carbon capture system?
One of the biggest challenges in carbon capture from conventional power generation technologies such as natural gas combined cycle power plants based on combustion is the presence of a large amount of nitrogen in the exhaust. Therefore, the concentration of CO2 in the exhaust is very low and the volume of the exhaust gas that needs to be processed is very high. This results in a significantly higher cost of carbon capture.
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The beauty of the Bloom fuel cell is that the exhaust from the anode side where the electrochemical reaction takes place to convert chemical energy into electrical energy is completely free of nitrogen. The reason for this is that the solid oxide electrolyte only lets oxygen ions to go through while completely blocking the nitrogen.
Bloom systems have been modified to seamlessly integrate downstream carbon capture technology to process the anode exhaust and separate out a very pure stream of CO2 for a significantly lower cost of carbon capture. The carbon dioxide can then be permanently sequestered or used for industrial purposes.
As we know, currently the energy requirements to produce green hydrogen are higher than the energy generated from burning that hydrogen itself. Do you think it’s feasible for this technology to evolve so that re-electrifying green hydrogen would finally make sense?
Seventy to eighty percent of the cost of hydrogen essentially depends on the cost of the electricity input to produce it; so with the levels of energy efficiency Bloom is achieving in its production demonstrations, I am very confident that clean hydrogen is on a path to becoming more affordable and accessible. For example, the lower heating value (LHV) of hydrogen by burning hydrogen is ~ 33.3 kWh/Kg. The 4MW Bloom eletrolyzer that was demonstrated earlier this year had an energy efficiency of 37.5 kWh/kg, which means that we are only 12% higher than the theoretical value.
Absent the ability to store and/or transport large volumes of such hydrogen for low cost, however, we see that there will still be economic challenges of generating green hydrogen from electricity, and then re-converting back into electricity due to the round-trip efficiency as well as the capex required for storage, transportation, as well as the electrolyzer and the fuel cell. We are optimistic for the future, and the cost of each of these processes does continue to decline; but today, generally, we see that this is a challenging economic proposition.
Is Bloom Energy working on increasing the cycle efficiency of green hydrogen when used for electricity?
Our fuel cell can already produce electricity using hydrogen with very high efficiency. In fact, even while using natural gas, our fuel cells are essentially running as hydrogen fuel cells as they can do steam methane reformation on the cell to locally produce hydrogen. This hydrogen reacts with the oxygen ions to make electricity.
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The only reason we are not directly using hydrogen today is that the cost of hydrogen is prohibitive for customers and further, clean hydrogen is not yet widely available. With the hydrogen Production Tax Credits provided by the Inflation Reduction Act (IRA) and continued technological innovation, the cost of zero-carbon hydrogen will only continue to decrease in the U.S., and we can easily switch our fuel cell from natural gas to pure hydrogen or to a blend of hydrogen and natural gas.
Back in 2021, Bloom Energy made a historic deal with SK Ecoplant for the purchase of at least 500MW of power from Bloom through 2024. What is the current progress of the deal?
Bloom Energy is the preeminent fuel cell leader for utility-scale power in South Korea, thanks largely to our ongoing strategic partnership with SK Ecoplant. As you noted, our partnership includes deploying a minimum of 500 megawatts (MW) of power from Bloom through 2024, which represents a $4.5 billion revenue commitment.
Since the beginning of our collective work four years ago, we have transacted nearly 200MW of projects together, totaling more than $1.8 billion of equipment and expected service revenue. These projects have eliminated 300,000 tons of carbon emissions – equivalent to the emissions from 63,000 passenger vehicles.
We are continuing to expand this existing business with contracts for at least an additional 500MW of power between 2022 and 2025. The hydrogen innovation centers we co-create will significantly accelerate the market expansion for our hydrogen fuel cell and electrolyzer products, and the approximately $500 million SK Ecoplant invests in Bloom will advance the market growth and commercialization of hydrogen solutions.
What are Bloom Energy’s expansion plans globally?
Expanding our international footprint has been a large focus for Bloom over the last year. We made our entry into Europe in 2022 through contracts with Ferrari and CEFLA, and, in partnership with a local renewable energy marketing enterprise to deepen our EU presence, we announced plans to market and deploy our electrolyzer and energy servers in Spain and Portugal.
We’ve also recently announced our entry into Taiwan and into Canada. These advancements, along with our continued partnership with SK Ecoplant in South Korea, represent Bloom’s keen interest in growing the global hydrogen economy.
As most hydrogen companies, Bloom Energy is generating a quarterly net loss. When is management forecasting the company to turn profitability?
We are taking actions now to position Bloom Energy for long-term profitability. Bloom saw record revenue in the first quarter of 2023, and we are continuing to invest in our cost-down program, an enabler for growth and profitability.
We are on track to meet our 12% cost-down targets this year and well-positioned to deliver at least $1.4 billion of annual revenue at our target of 25% non-GAAP gross margins. At this annual revenue and gross margin profile for the year, we should achieve positive non-GAAP operating margins and cash flow from operations.
How is the IRA affecting Bloom Energy? Is the company a beneficiary of tax credits?
The IRA marked a major milestone in increasing clean energy production in the U.S., which grows even more critical to our national energy security amid natural disasters and geopolitical conflicts. As an industry leader, the company is looking forward to the ways new hydrogen production subsidies provided by the IRA will help to jump-start the hydrogen economy around the country; notably, the act is critical for decarbonizing hard-to-abate sectors such as steel, cement, and aviation.
With respect to the Production Tax Credits (PTC) noted above, which are up to $3/kg, Bloom believes that this will spur significant growth in clean hydrogen investment. Bloom’s position in the hydrogen value chain is as a technology provider, not as an investor directly in projects, so we are delighted to see the potential for more projects.
We believe, and independent testing has shown, that we have the most efficient electrolysis technology, so we are going to work hard to sell that technology to project developers of many types and, through building and learning, continue to hone our efficiency and further reduce cost as we have done for 15+ years building the Bloom fuel cell. This is the beauty of a single platform with already over 1 GW deployed – we can continue to learn and scale and drive value across the entire platform.
As of today, Bloom’s projects don’t currently rely on tax credits from the IRA, but we see opportunities to capitalize on nine key provisions of the act, ranging from the hydrogen production tax credit (PTC) to tax credits for microgrid and biogas equipment, and support for American factories like Bloom’s.
What are the current company targets in terms of profitability and market share, both for hydrogen and carbon capture?
Based on our historical growth rates as we continue to grow in our current markets and new geographies, Bloom has set the target of achieving annual revenue of $15 billion to $20 billion per year by 2031. We are on track to meet that target and our targets of 30% non-GAAP gross margin and 15% non-GAAP operating margin by 2025, with our product and service revenue continuing to increase.
The need for our product is rapidly growing, and we are poised to meet that demand and build our commercial position while reducing the cost of our products.
