Bloom Energy has announced a partnership with SK Engineering & Construction to distribute their Bloom Boxes manufactured in Delaware in South Korea.  The distributor is part of the third largest conglomerate in South Korea.  South Korea has made one of the largest commitments in the world to installing fuel cell systems powered by natural gas in its electric grid to replace coal to lower air pollution.  The significant premium cost of the fuel cell systems is offset with national tariff subsidies equal to 80 percent of the cost of power with some local governments offsetting another 10 percent.  The tariff costs are passed on to electric customers.

 

South Korean shipments accounted for 58 percent of Bloom’s fourth quarter, 2018 sales, and for 29 percent of total 2018 sales.  Bloom has stated they cannot sell product without government subsidies and South Korea is offering the largest fuel cell subsidies in the world.  In the US Bloom collected 27 percent of its revenue from installation, and service, but SK E&C will handle this in South Korea.  This may be a good thing. Bloom went from earning $16 million on installation and service in the fourth quarter, 2017 to losing $11 million in the fourth quarter, 2018.  Service cost have risen dramatically, and will continue to do so as Bloom replaces all of its servers in use by Delmarva Power which total more than Bloom’s most recent quarterly sales volume.

 

In releasing its most recent financial results in its Consolidated Statement of Operations comparing the 4^th quarter, 2017 to the 4^th quarter, 2018, Bloom demonstrates some disturbing trends:

Relying on sales in South Korea could be problematic.  South Korea has clearly stated they want fuel cells manufactured in country.  Other fuel cell products have been imported so far, and many of the competing systems are lower cost than Bloom Boxes.  South Korea is also pursuing wind and solar installations that now compete with existing coal-fired power plants while fuel cells require massive subsidies to compete.  How much longer will those subsidies be available?  My best guess is the South Korean business will, at best, replace falling US sales and Bloom’s Delaware operation will not go on a hiring spree.

 

Meanwhile the comment period on Bloom’s request for construction permits to replace the Delmarva servers has passed, and we await DNREC’s decision on the permit.  Public comments focused on incorrect and missing emission, and hazardous waste information in the permit requests, along with concerns about how construction waste will be handled that should require re-submittal of the permit requests.