TURN and California Senator Christine Kehoe question how and why the CPUC runs the Self-Generation Incentive Program (SGIP) to benefit one company—Bloom Energy. California consumers have contributed $210 million dollars to subsidize the company’s fuel cell technology. The CPUC suspended the SGIP incentive program earlier this month.
In the world of alternative power generation, Bloom Energy is golden. It certainly has figured out how to get some the public’s green.
Time magazine declared the Silicon Valley company’s fuel cell technology, called Bloom Boxes, to be one of the top inventions of 2010.
"Their invention? A little power plant-in-a-box they want to put literally in your backyard," CBS correspondent Lesley Stahl said in a glowing "60 Minutes" segment last February.
"The idea is to one day replace the big power plants and transmission line grid, the way the laptop moved in on the desktop, and cell phones supplanted land lines," Stahl said. "It has a lot of smart people believing and buzzing."
Perhaps Bloom Boxes will provide clean, reliable power while reducing our carbon footprint. That’d be marvelous. If it comes to pass, Bloom Energy might want to thank Californians for their generosity.
In 2009, as Bloom’s scientists honed the technology, Bloom’s lobbyists shaped legislation at the Capitol and a key decision at the California Public Utilities Commission.
By the end of 2010, the commission had granted Bloom payments and commitments totaling $210 million to subsidize its fuel cell technology, PUC officials said.
Bloom was so effective that some legislators worried there would be no money left for other companies that might have innovative technology. Earlier this month, Public Utilities Commission President Michael Peevey issued an order suspending the program.
In many ways, Bloom is a feel-good and hopeful story. It’s also a story about how Bloom has navigated the system and tapped into other people’s money.
Bloom Energy had a minor presence in Sacramento until 2008, when it sponsored rather audacious legislation that sought to place a $2 billion bond on the ballot to fund energy research.
Although that measure failed, the company came back in 2009, setting its sights on a share of money paid by customers of PG&E and other private utilities in a program intended to foster alternative energy.
The Self-Generation Incentive Program has its roots in the energy crisis of 2000, when Enron was manipulating the grid, PG&E was mired in bankruptcy court, and legislators scrambled to replace traditional sources of electricity with alternative energy.
Legislators funded the program by allowing the PUC to collect $125 million a year paid by ratepayers. The program was supposed to disappear in 2004. It didn’t.
Legislators carried bills to extend the program several times, culminating in 2009 when Sen. Christine Kehoe, a San Diego Democrat, carried Senate Bill 412.
The fund had been moribund. More than $100 million was unused. Kehoe’s bill sought to expand the types of alternative energy producers who could apply for the money. She also sought to lower the annual amount to be collected to $83 million.
Several energy companies wrote letters supporting the bill. Bloom, which has retained some of Sacramento’s most savvy operators, was not among the bill’s vocal backers, though Bloom’s Josh Richman, vice president of business development, said the firm did advocate for it.
The Legislature gave final approval to Kehoe’s bill in September 2009. Two weeks later, the Public Utilities Commission approved a proposal by Bloom that shaped how money in the fund would be allocated. The ruling positioned Bloom to receive a greater share of allocations.
With Kehoe’s legislation and the new regulation in place, Bloom launched a public campaign touting its Bloom Boxes. Bloom founder K.R. Sridhar was featured on the "60 Minutes" segment, showing off Bloom Boxes in use at iconic companies such as Google.
Next, Gov. Arnold Schwarzenegger, burnishing his environmental credentials, attended a press conference at eBay headquarters, where he heaped praise on Sridhar as someone who was "shaping the future of energy not just for California but for the world."
In Peevey’s view, California should help fund ventures such as Bloom’s if the state is to cut greenhouse gases.
With the infusion of ratepayers’ money, Bloom is able to lower the $800,000 cost of the refrigerator-sized units and make them economical for its customers.
"They have a great product," Peevey told me. "My hat goes off to them. They played by the rules."
Richman said he hopes the PUC suspension of the incentive program is short-lived. In his view, the program is working, as evidenced by Bloom’s 70 percent growth last year.
"California is leading the way, and it is being successful. It has been a visionary program," Richman said.
Others are not so sure. Kehoe said Bloom no doubt has a promising product, but "there’s a lot of good technology in California." Other companies should be receiving some of the money.
"What is the purpose of the program, to benefit one company?" asked Lenny Goldberg, lobbyist for The Utility Reform Network, a consumer-oriented organization that opposes requiring ratepayers to subsidize companies.
California supposedly is an unfriendly place to do business. In reality, the state finds many ways to help favored businesses. It uses tax breaks to encourage companies to hire and expand. It invokes its authority to funnel utility customers’ money into subsidies for Bloom Energy fuel cells installed at Google, Wal-Mart and eBay.
Maybe Bloom’s technology will transform electricity generation. Time will tell. But this is clear: This Silicon Valley startup has gotten golden, thanks in no small part to a lobby effort that helped win favorable legislation and regulations that helped it raise $210 million from you.