In Bloom Energy’s latest fundraising round of $130 million, it was revealed that one company alone – E.ON – invested €91.5 million ($120 million at the going exchange rate).  Setting aside the fact that this takes Bloom Energy’s private investment levels to an eye-watering $1.2 billion for a company that has yet to make a profit, the signal that E.ON is sending is staggering.

The skeptics continue to sharpen their knives on the future of the fuel cell industry, pointing out that no U.S. fuel cell company to date has made a profit, but serious players like E.ON clearly see a strategic play in the sector.  Here, the Navigant Research fuel cell analyst team of Lisa Jerram and I hypothesize what this could be.

In our white paper, “Smart Energy: Five Metatrends to Watch in 2013 and Beyond,” we pointed out that the role of the traditional utility was changing and that the energy sector had the potential to be democratized through distributed generation.  The traditional role of utilities centered on the control of two types of assets: power generation and grid control. With the development of small-scale generation, microgrids, and virtual power plants (VPPs), the control of power generation was starting to shift away from the utility to the hands of, well, anyone. Traditionally, solar and small-scale wind systems were not powerful enough to fundamentally disrupt this model – then fuel cells came along. From ClearEdge’s 5 kW residential / light commercial systems to Bloom Energy’s 100 kW system, right up to FuelCell Energy’s 400 kW system, these are all available to plug into your home/building /school/campus/swimming pool to generate power – and feed excess into the grid when you are not using it. And “you” refers to anyone with enough money or determination to control their own power generation, from homeowners to hospitals to office managers. In theory, as long as you were in the right geography, you could buy a system. That essentially had the effect of throwing the utilities into a head spin and raised the all-important question: What is the future role of the utilities in this emerging energy economy?

E.ON, which will at least have bought one seat on the board with this investment and some direct control into the direction of the company, seems to be taking a punt of carrying on along the traditional role – ownership and critical control of generation assets.  Control, or partial control, of the company is a step in the direction of controlling generation assets. Is it an out-and-out technology land grab? Not yet.  Could it be? Yes. Whoever controls the flow of technology into the marketplace will control the use of the technology. But E.ON’s war chest is actually not bottomless. A growing number of stationary fuel cell companies have low enough costs to potentially ship a serious number of systems over the next 5 years. This market will not be controlled by any one company. The game is still afoot!

Currently, two markets have subsidies for distributed solar photovoltaic (PV) systems plus energy storage.  Germany and Japan are both trying to encourage distributed PV users to consume the electricity generated onsite, using energy storage systems (ESS).  Announced in early May, the German government program offers both a subsidy and a low-interest loan to encourage ESS.

In addition, the feed-in tariff for distributed solar has dropped below the retail price of electricity, in order to encourage self-consumption of PV energy.  Germany will spend up to $32.17 million (€25 million) in 2013 to support distributed PV+ESS, in an effort to defer upgrades to the distribution grid, which is overtaxed thanks to the successful campaign to encourage distributed PV adoption.  The subsidy increases the existing subsidy for systems that are only solar PV from €600 ($785) per kilowatt (kW) to €660 ($863) per kW if a battery system is also installed.  The maximum payment for the entire system is €3,000 ($3,926) total.

Financing Storage

Representatives from KfW – the German development bank – have stated that a similar amount of funds (€25 million, or $32.17) will be available for 2014.  All battery systems are eligible, but must have a 7-year warranty.  KfW is administering both the subsidy and low-interest loans.

Specifically, KfW, is offering low-interest loans to finance the capital expenditures associated with adding battery energy storage systems to PV systems in Germany.  KfW will finance up to 100% of the upfront cost for battery ESS and PV systems (not including VAT).  In addition, the battery portion of the system can qualify for a repayment bonus.

These loans are being offered to a cross-section of the market similar to the one served by the subsidy for residential storage plus PV.  The loans are available to ESS retrofits for PV installations that went into operation after December 31, 2012 and are targeted at solar PV systems as large as 30 kW.

If the German program succeeds, it will mean increased flexibility and resilience for the German distribution system with less investment on the part of DSOs. Germany is also a model for the rest of Europe; other markets with high PV penetration such as Italy, Spain, and France may adopt a similar scheme once the benefits to the grid and customers is better understood.

Five years ago, most people thought the only way solar power would be affordable in the United States was if it was installed in massive solar farms out in the desert.  A gold rush of plans for concentrated solar power (CSP) and solar photovoltaic (PV) plants ensued, amounting to, at one point, applications for 24 GW of proposed utility-scale projects in California alone.  Several of those projects have been completed, but the majority will never be, as the market has changed dramatically since then.  The rapid decline in solar PV module prices, the emergence of residential financing models, and the prospect of eliminating new construction of costly transmission lines mean that, in a growing number of cases, distributed solar offers the most economical path for scaling cost-effective solar PV worldwide.

According to the Institute for Local Self-Reliance, solar PV systems installed at $5 per watt can only compete with grid electricity prices in the 16 largest U.S. metropolitan areas, including subsidies and assuming the availability of time-of-use pricing.  The majority of U.S. residential systems are leased, meaning that buyers pay a fixed rate for electricity to companies such as SolarCity, which own the system and essentially become the customer’s “solar utility.”  In most cases, the rate solar leasing customers pay is equal to or less than retail electricity prices they currently pay.  Over the 20-year lease period, solar customers will pay significantly less for solar power than they would pay for grid-electricity dominated by fossil fuels.

In Germany, residential solar PV systems are being installed for less than $3 per watt, and in some cases closer to $2 per watt.  The financial services firm UBS has forecast that 43 GW of unsubsidized solar PV systems by 2020 could be installed in Germany, Spain, and Italy due to high cost of electricity and advances in battery storage technology.  If the United States can get installation costs down to near the German rate, solar PV systems in the residential and commercial segments in high-cost retail electricity markets such as parts of Southern California and New England, could reach grid parity in that timeframe as well.

Half a Trillion Dollars

This is a possible future we forecast in the recent Navigant Research report, Distributed Solar Energy Generation.  “Distributed solar” is defined in that report as systems typically less than 1 MW in capacity, although there is no official definition.

Our research shows that in 2012, annual distributed solar PV systems accounted for an estimated 69% of all solar PV installations, representing an estimated 19.2 GW and $65.7 billion in revenue.  Europe has long been the leader in distributed solar, but feed-in tariff (FIT) reductions and rule changes to key incentive programs in Germany and Italy resulted in a reduction in distributed solar installations compared to 2011.  On the other hand, annual distributed solar PV installations in Asia Pacific (led by China) and North America (led by the United States) grew 53% and 42%, respectively.  During the forecast period of the report (2013-2018), 220 GW of distributed solar PV will be installed worldwide, representing $540.3 billion in revenue.

The long-term impact of natural gas on U.S. retail electricity rates, however, has yet to be seen.  But if prices remain low, cheap gas could slow the growth of solar PV.  Fixed utility fees such as system demand charges and transmission fees dilute the impact of the actual generation cost as a portion of the utility customer’s total bill, making the choice to go solar less clear-cut.  In some cases, utilities are even considering adding fees for customers that go solar, claiming that solar users are avoiding “network fees” that are then borne by other ratepayers.

The real issue is that the utility business model is under threat, as each new distributed solar system results in lost revenue to the incumbent utility.  Utilities will continue to resist distributed solar, but we have passed a tipping point, and it will be up to utilities to adapt in order to survive.

Bill Gates, who is working to promote a carbon-free energy future, also wants to spend the next 20 years of his life eradicating disease in the developing world.  And he wants to do it, in part, by turning poop into profit.  In May, he appeared on 60 Minutes to discuss a variety of initiatives deployed by the Bill and Melinda Gates Foundation that promote forward-thinking technologies as logistical solutions for sanitation problems.  One of these, the Reinvent the Toilet initiative, provides funding for engineer teams to develop a solar-powered toilet that can provide a sanitary way to dispose of waste and generate a useful, salable byproduct.

An estimated 2.5 billion people across the globe lack improved sanitation facilities.  Along with increasing disease levels, these unhygienic facilities generate a range of direct and indirect costs, including hospitalization and healthcare costs, loss of productivity, and lack of access to education.  In Nigeria, these costs amount to more than 1% of total GDP.

Despite this hefty price tag, persistent barriers to the development of utilities infrastructure prohibit the types of solutions that the developed world takes for granted.  That brings me back to the toilet – and to Bill Gates.  Reinvent the Toilet (RITT) has committed to provide nearly $40 million dollars for a competition to develop a toilet that meets the requirements to process waste remotely (i.e., without water or outside electricity), produce a profitable byproduct, and cost no more than 5 cents per visitor per day to operate (which includes the upfront cost and any ongoing maintenance).

Possible Privies

That basically sounds impossible.  With teams developing models based upon technologies such as membrane filtration (not cheap), fiber optics (less cheap), and hydrogen-storing fuel cells (WAY less cheap), it remains unclear how the 5-cents-a-day requirement can be achieved without a massive user base … which would then probably raise issues of capacity and maintenance.

I spent part of last year working with the University of Colorado-based team competing in the RITT competition.  With a third round of funding/weeding out of proposals approaching this August, we were pressed to address issues surrounding the cost and feasibility for our model, which utilized fiber optic cables to concentrate solar power.  There are a number of organizations that operate profitable human waste disposal programs, and there’s potential for a sizeable international biochar market.  But these programs face various barriers that range from cultural acceptance to biochar health/safety regulations.

The toilet is a funny thing.  The other technologies Gates supports, such as the portable vaccine refrigerator, don’t seem to trigger as many logistical or cultural issues.  It remains to be seen if RITT teams will be able to successfully devise a business plan that addresses these while leveraging business opportunities that make it affordable.  It’s already very clear that they can make a sexy toilet.