Cost Analysis Comparison of Bloom Energy Fuel Cells

Cost Analysis Comparison of Bloom Energy Fuel Cells with Solar Energy Technology and Traditional Electric Companies
A Project Report Presented to The Faculty of the Department of General Engineering San Jose State University
In Partial Fulfillment of the Requirements for the Degree Master of Science in Engineering
by
Alina Adams Amrita Chowdhary Vasudha Subbaiah Amrita Chowdhary
April 2011
2011 Alina Adams Vasudha Subbaiah Amrita Chowdhary
ALL RIGHTS RESERVED
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SAN JOSE STATE UNIVERSITY
The Undersigned Master's Project Committee Approves the Master's Project Titled COST ANALYSIS COMPARISON OF BLOOM ENERGY FUEL CELLS WITH SOLAR ENERGY TECHNOLOGY AND TRADITIONAL ELECTRIC COMPANIES
by Alina Adams Vasudha Subbaiah Amrita Chowdhary
APPROVED FOR THE DEPARTMENT OF GENERAL ENGINEERING
________________________________________________________________________
Mr. Karl Stahl Technical Advisor, Tesla Motors Date
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Prof. Mithal Albassam Academic Advisor, Department of Industrial and Systems Engineering San Jose State University Date
________________________________________________________________________
Dr. Leonard Wesley Associate Professor, Department of Computer Engineering San Jose State University Date
APPROVED FOR THE UNIVERSITY
________________________________________________________________________
Associate Dean Office of Graduate Studies and Research Date
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Abstract
Cost Analysis Comparison of Bloom Energy Fuel Cells with Solar Energy Technology and Traditional Electric Companies
by Alina Adams Vasudha Subbaiah Amrita Chowdhary
Whether it is due to climate concerns or the inevitable depletion of fossil fuels, the future of electricity generation is headed toward cleaner alternatives. In order to bring new technologies to the market, funding must be secured for research and development. Investors and government agencies rely on forecasts for the future to decide what direction to pursue. Our project investigates the Bloom Box, a new fuel cell technology being developed by the Bloom Energy companyCompany. The Bloom Box represents a potential breakthrough in fuel cell technology, offering a cheaper and more efficient option for the future. Our analysis compares the Bloom Box with the traditional method of purchasing energy from a utility company and the clean energy alternative of solar panels. We include all costs associated with these three electricity sources and account for the time value of money to forecast which will offer the cheapest option for providing electricity to a residential consumer over a 10-year period. In addition to the baseline cost estimation, we also explore different cost forecast scenarios to identify the most important cost components for Bloom Energy in developing a competitive and successful product for the future.
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Acknowledgements
We would like to express our gratitude to Mr. Karl Stahl for his help and support during the project. His technical expertise in the field of mechanical engineering was truly a great help in our research efforts.
We would like to thank and show our appreciation to Dr. Mithal Albassam. Her advice was very valuable and helped guide us throughout the project. Her experience in financial analysis was critical to our project, and her experience in academia helped steer us in the right direction.
We would like to thank Dr. Leonard Wesley for his instruction in class, as well as his individualized advice outside the classroom. He truly helped us pull the whole project together, and we greatly appreciate his efforts.
Table of Contents 1.0 Introduction .... 2.0 Project Scope ... 2.1 Objective ..... 2.2 Hypothesis ... 2.3 Method of Investigation ...... 2.3.1 Experimental Procedures ..... 2.3.2 Resources Utilized ... 3.0 Literature Review ....... 3.1 Forecasting the Cost of Electricity Purchased from Electric Companies ... 3.1.1 Electricity Usage ... 3.1.2 Electricity Prices ... 3.1.3 Factors Affecting Electricity Cost 3.1.4 Cost Prediction .. 3.1.5 Cost of Natural Gas ... 3.2 Fuel Cells ..... 3.2.1 Fuel Cell Introduction ... 3.2.2 Fuel Cell Technology 3.2.3 Usage of Fuel Cells ... 3.2.4 Types of Fuel Cells: Pros and Cons ... 3.2.5 Fuel Cell Cost Components .. 3.3 Solar Energy ... 3.3.1 Solar Energy Introduction 3.3.2 Types of Solar Energy .. 3.3.3 Solar Energy Pros and Cons . 3.3.4 Classification of Solar Panels ... 3.3.5 Photovoltaic Solar Cells 3.3.6 Market End-use Sectors 3.3.7 Solar Energy Costs 3.3.8 Solar Energy Maintenance Costs .. 3.4 Total Current Cost Summary ...... 4.0 Cost Analysis Formulation ......... 4.1 Return On Investment Selection ..... 4.2 Analysis Cases .... 4.3 Bloom Box Cost Analysis ... 4.3.1 Bloom Box Purchase Price 4.3.2 Bloom Box Installation Cost . 4.3.3 Natural Gas Fuel Cost 4.3.4 Price Trend of Natural Gas 4.3.5 Cost of Bloom Box Maintenance .. 4.3.6 Bloom Box Salvage Value 4.3.7 Bloom Box Cost Estimation Equations 1 2 2 3 3 45 65 76 67 67 68 68 811 911 129 129 1511 184 195 2419 282 282 293 3024 3225 2347 3428 3528 370 381 391 4032 4033 4234 4234 4234 4334 4435 4435 4435 4367
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4.4 Solar Panel Cost Analysis ... 4.4.1 Solar Panel Purchase Price 4.4.2 Solar Panel Installation Cost . 4.4.3 Cost of Solar Panel Maintenance .. 4.4.4 Solar Panel Salvage Value 4.4.5 Solar Panel Cost Estimation Equations . 4.5 Electric Company Cost Analysis ..... 4.5.1 Electric Company Cost Estimation Equations .. 5.0 Results and Discussion ....... 5.1 Baseline Cost Estimate .... 5.2 Minimum and Maximum Cost Estimates .... 5.3 Individual Input Parameter Dependence ..... 5.4 Varying ROI .... 5.5 Bloom Box Cost Strategy .... 5.5.1 Bloom Box Purchase Price Importance 5.5.2 Bloom Box Maintenance Cost Importance . 5.5.3 Government Subsidies . 6.0 Economic Justification ....... 6.1 Executive Summary .... 6.2 Problem Statement .. 6.3 Solution and Value Proposition ... 6.4 Market Size ..... 6.5 Competitors ..... 6.6 Customers ... 6.7 Cost . 6.7.1 Fixed One-time Cost 6.7.2 Fixed Recurring Cost 6.8 Price Point .... 6.9 SWOT Assessment ..... 6.10 Investment Capital Requirements ..... 6.11 Personnel ... 6.12 Business & Revenue Model ..... 6.13 Strategic Alliances/Partners ..... 6.14 Profit and Loss Statement ..... 6.15 Exit Strategy ..... 7.0 Project Schedule ........ 7.1 Gantt Chart ..... 8.0 Team and Committee Structure ........ 9.0 Future Work ...... 10.0 Conclusion ...... 11.0 References .......
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1. Introduction In a recent talk given at NASA Ames Research Center, KR Sridhar, Bloom Energy cofounder and CEO, summed up his perspective on sustainability with the following quote, "the Earth was not given to us by our parents, but rather it was lent to us by our children." Energy concerns for the future include electricity shortages, pollution, climate change, and eventually depleted fossil fuel supplies. Whether looking far into the future or even just at the next few years, determining the correct path for the future of energy production is an important and relevant topic. Many new clean energy technologies are currently being developed, and one of the newest alternatives is a fuel cell being developed by Bloom Energy. The main focus of our project is investigating the role that the Bloom Energy fuel cell will have in the future of the power industry. If it can be shown that this fuel cell has strong competitive possibility, it is worth investing more time and money now to realize its full potential as soon as possible.
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We are performing a cost analysis comparing the Bloom Energy fuel cell, solar panels, and purchasing electricity from a utility company. Each energy source has advantages and disadvantages that are described in more detail later in this project report. There are many other sources of electricity such as nuclear electricity generation, wind power, and hydroelectricity, but these are all typically delivered through electric companies, rather than being installed at residential locations. The main reason is that most are generated with very expensive equipment at a large, remote facility. We included solar panels as a
competitor to electric companies, because they can be purchased and installed directly at the source of electricity usage. Furthermore, solar panels are a relatively mature technology. Fuel cells are another example of an electricity generation technology that can be installed directly at residential locations.
Fuel cells are not a novel technology, but the Bloom Energy Bloom Box represents a revolution in fuel cell development. They aim to offer residential customers, for the first time, a fuel cell that is cheap and efficient enough to be less costly than purchasing electricity from electric companies. The technology is not yet ready for market, but Bloom Energy has set a goal of developing a residential Bloom Box available for $3000. This purchase price, however, is not the only cost that consumers need to consider when switching from the power grid to a Bloom Box. The equipment will be used over a long period of time, so the purchase price can be divided over many years, but the user is also responsible for purchasing fuel and maintaining the fuel cell. In the end, the Bloom Box will be competitive only if users are confident that it represents a money saving investment. Furthermore, in order to bring the technology to market, investors must also fund the research and development phase. Finally, governments interested in promoting green energy also need guidance in deciding which future technologies have the potential for success. This project will help illustrate whether or not the Bloom Energy Bloom Box will become a significant competitor in the future of clean energy.
2. Project Scope 2.1. Objective The primary objective of this project is to determine how competitive the Bloom Energy fuel cell technology will be when competing with other electricity generation sources. This will be largely determined by the bottom line cost in purchasing electricity. The most common source of electricity is purchasing, based on kilowatt hours (kWh) used, from a utility company, and this has been due mostly to the fact that it is the most cost effective source. While there are other factors to consider, consumers are undeniably interested in saving money. Therefore, we aim to estimate which, among three competitors, will offer the cheapest source of electricity over a ten year period.
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2.2. Hypothesis If Bloom Energy meets their goal of reducing the price of a residential use fuel cell to $3000, investing in one will save money over 10 years, compared to using traditional energy or solar power.
2.3. Method of Investigation The general approach to testing our hypothesis will involve a detailed estimate of the total cost of the three different sources of energy over a 10-year period. The primary energy source of interest is the Bloom Energy residential fuel cell. It will be compared to the most traditional and widely used energy source of purchasing energy
from a major electric company. Finally, the fuel cell is compared to solar power, a competitive alternative clean energy source that is in a more mature stage of development.
The 10-year cost of energy is estimated differently for the three different energy sources, because the user receives them differently. When purchasing energy from an energy company, consumers just pay per amount of energy used. There is no installation cost or equipment to maintain over time. Thus, only the price of energy is needed over the 10-year period. For consumers using either the Bloom Energy fuel cell or their own solar power generation, there are other costs that must be estimated such as equipment purchase and maintenance.
Once the setup and recurring costs are estimated, the entire cost is converted to an equivalent annual energy cost, taking into account the time value of money. Of course, there will be some level of uncertainty in the estimates, so a range of inputs is used to evaluate different cases. An attempt is made to identify important cost areas for Bloom Energy. These include costs with either a high variability or a potential for improvement.
2.3.1. Experimental Procedures 2.3.1.1. Traditional Energy Company The main cost associated with buying electricity from a utility company is simply the price of power at the time. Therefore, estimating the cost of 10 years worth of purchasing energy requires a forecast of the price of electricity into the future. Studies have been done to predict how the price of energy will change, so the main task is evaluating the analyses and identifying which are the most accurate and reliable.
2.3.1.2. Solar Energy Solar energy is used as an example of a cleaner energy source that can produce energy at the site, rather than purchasing energy from a remote location. With solar energy, there is an initial cost of purchasing solar panels and installing them at the location. In addition, there are maintenance costs over time, because the solar panels lose efficiency, wear our, get dirty, and possibly need replacement. In order to estimate the 10-year cost of solar energy, we first need to determine the purchase and installation cost for enough solar panels to power an average residential house. This is a one-time cost, because the panels are expected to last for more than 10 years. In addition to these large equipment investments, there are maintenance costs, so we estimate the frequency and cost of repairing and maintaining solar panels as well.
2.3.1.3. Bloom Energy The cost of the Bloom Energy source has similar considerations to solar power, because there is an initial purchase cost, along with maintenance and possible replacement costs over time. However, the Bloom Energy fuel cell is earlier in the development process than solar energy, so the cost estimates are not as certain. However, historical data is available on other fuel cells, so the process involves identifying the similarities and differences among different kinds of fuel cells.
As with solar power, there are purchase and installation costs upfront. Unlike solar energy, the fuel cell needs a source of fuel to run, so some type of fuel, in this case natural gas, needs to be purchased regularly over time. We perform the same price projection for this fuel source as with the energy price from the power company. Finally, we look at what maintenance costs will be involved, and their expected price and frequency. The present and future costs are brought to a common annual cost, and a three-way comparison is made between traditional energy, solar power, and the Bloom Energy Bloom Box.
2.3.2. Resources Utilized In order to project the cost of energy into the future, we evaluate energy studies that have already been done. The most informative source that we have identified
comes from the United States Energy Information Administration, and this is described in more detail in the literature review.
In order to estimate the cost of solar energy, we look at current purchase and installation prices, and research the current maintenance costs. We also look at what is currently being developed in solar energy research to find if we expect any significant changes to the cost of maintenance in the future, such as more reliable solar cells, or solar panels with a longer life expectancy.
The primary resource used for the Bloom Energy fuel cell is the data that has been made public by Bloom Energy. However, we do not have access to all of the data that we need, because Bloom Energy is a private company. Additionally, there are cost factors that even Bloom Energy does not know for sure. However, for additional information, we have researched what has previously been accomplished with fuel cell technology. This involves both a literature review and speaking to engineers currently involved in fuel cell technology research.
3. Literature Review 3.1. Forecasting the Cost of Electricity Purchased from Electric Companies 3.1.1. Electricity Usage It has been reported that the demand for electricity in the period from 1970 to 2000 has increased by 50%. If the available energy does not follow a similar
progression, the price of electricity will inevitably increase with simple supply and demand. This will lead either to an increase in the cost of building new energy sources, or an increase in the cost of electricity due to increased demand. Thus, these costs must be taken into account when forecasting the future price of electricity.
3.1.2. Electricity Prices When looking at previous pricing trends, there is reason to believe that the cost of electricity from a traditional power company will rise significantly over the next 20 years. Nationally, the cost of electricity has outpaced inflation since the 1970's. In fact, the U.S. Energy Information Administration reports an 85% increase in the average national cost of power over the last 25 years [33]. An analysis, in California, of the past ten years shows an energy price increase of 44 to 65%, which is an annual increase of about 4 to 5%, without giving reason to believe that the rate of increase will slow down [33].
3.1.3. Factors Affecting Electricity Cost 3.1.3.1. Infrastructure One factor that must be included in an electricity price forecast is infrastructure. From 1970 to 2000, the national investment in electricity infrastructure has declined, in spite of the fact that demand has increased. Due to this decrease in investment, some estimates predict that demand will exceed
supply as soon as 2013. As a result, power companies will find the need to increase investment in the years to come. Some have projected this to cause an increase in the cost of electricity of around 2 to 2.5% per year for the next 10 years [33].
3.1.3.2. Fuel Costs Another factor that must be included in an estimate of the cost of electricity is the cost of fuel used in electricity production. As the electricity industry uses the largest amount of coal and natural gas, the cost of electricity will certainly increase with a price increase of either resource. It is estimated that the price of natural gas will double in the next 10 years due to higher demand [4]. Part of the additional demand is expected to come from climate change regulation forcing companies away from coal-powered electricity. This increase in gas prices is forecasted to raise the price of electricity by an annual rate of 1.5 to 2% [33].
3.1.3.3. Climate Change There is a national push to move toward cleaner energy to reduce greenhouse gases. Experts are predicting, even with a weak set of clean energy legislation, the effect on the cost of electricity will be anywhere from 1 to 3% annually. As an example in California, the AB 32 climate emissions bill is projected to
have an inflation-adjusted increase on electricity costs of 5 to 6.5% of current baseline projections [33].
3.1.3.4. Technology One factor that could potentially decrease demand for electricity is improved efficiency through technological development. Some estimates of best-case scenarios show a per capita residential demand for electricity dropping by about 40% by 2035. This, however, is an aggressive estimate, and more conservative estimates for efficiency-related decrease in demand are about 15% [33].
3.1.3.5. Economic Growth The growth of the economy is another important factor in projecting increased electricity prices in the future. The overall cost of electricity based on the economy is estimated for low, medium, and high economic growth cases. Including all of these effects over the next 20 years, the cost of electricity is projected to rise from around 8.5 cents per kilowatthour to about 9 cents per kilowatthour for low economic growth and as much as 11 cents per kilowatthour for high economic growth [33]. The figure below shows the conservative and liberal cost estimates based on economic growth.
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Figure 1. Average annual US retail electricity prices in three cases [33]
3.1.4. Cost Prediction Because there have been more than one study attempting to forecast the future of electricity prices from electric companies, a method must be chosen to either choose the most credible source, or combine information from multiple sources. While choosing just one approach may not be simple, there is also an option to look at a range of prices over the 10-year period. For example, it makes sense to do the cost analysis in multiple parts. There are criteria that can be used to generate conservative and liberal cost estimates, and it is beneficial to examine and be prepared for both cases.
3.1.5. Cost of Natural Gas Since the Bloom Energy generator itself runs on natural gas, it is important to project the cost of natural gas over the 10-year period as well. As mentioned
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above, some estimates predict a large increase in the cost of natural gas, as much as 100% in 10 years [4]. However, another study expects an increase more on the level of 50% [33]. In either case, this cost is a big driver in the cost per unit energy output from the Bloom Box fuel cell.
3.2. Fuel Cells 3.2.1. Fuel Cell Introduction Scientists have known fuel cells for more than 150 years. They were widely considered to be a curiosity in the late 19th century. It is now that they have gained prominence and has been the focus of intense research and development for the last couple of decades.
One of the first fuel cells developed was in 1838, when the renowned Welsh lawyer turned scientist William Robert Grove developed the advanced version of the wet-cell battery. This cell came to known as the "Grove Cell" and consisted of a platinum electrode immersed in nitric acid along with a zinc electrode in zinc sulfate. This cell was able to produce approximately 12 Amps of electrical current at about 1.8 V [28].
It was Grove who discovered that by placing a couple of platinum electrodes with one end immersed in sulfuric acid and the other end dipped in a sealed mixture of oxygen and hydrogen, electrical current would start flowing constantly between
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the electrodes. The sealed vessel containing the mixture would hold the water as well as the other gases, and it was observed that the level of the water would rise when the current started flowing [28].
Earlier in the 19th century, the process of decamping water into oxygen and hydrogen using electrical current was described by two British scientists Anthony Carlisle and William Nicholson. But then Grove took this a step further and produced electrical current by combining oxygen and hydrogen. He understood that by inserting several sets of electrodes in a serial circuit, he might "effect the decomposition of water by means of its composition". Grove eventually able to achieve this goal with a device he called a "gas battery". This is the first known fuel cell [28].
A device that can generate electrical current by a controlled chemical reaction is by definition called a fuel cell. Each such fuel cell consists of one positive and another negative electrode. These are called as the anode and the cathode respectively. The chemical reaction which generates electricity will occur at the electrodes.
Each such fuel cell will also contain an electrolyte, the purpose of which is to transport electrically charged particles from one electrode to another. Also, this contains a catalyst, which is used to hasten the chemical reactions at these
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electrodes. The basic fuel for these fuel cells consists of mixture of oxygen and hydrogen.
The most attractive aspect of fuel cells is its ability to produce electricity with almost negligible pollution. Most of the hydrogen and oxygen used by the fuel cell will eventually combine to form water, which a very harmless byproduct by any means.
A single unit of a fuel cell will produce a very small amount of DC (direct current) electricity. To generate any meaningful amount of electricity, we will need to assemble them into a stack. Whether we use it as a single fuel cell or stack them up, the fundamental concepts of the fuel cell remain the same.
In general, fuel cells are devices that convert chemical energy directly into electrical current and heat. They can be thought of as commercially available batteries, which will not die down if provided with a constant supply of fuel. They are electrochemical devices that efficiently process the chemical energy of the fuel mixture directly into electrical current, and at the same time are much more environment friendly than the conventional combustion-based technologies.
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3.2.2. Fuel Cell Technology The goal of the fuel cell is to generate electricity which can be transferred outside the cell to power a wide array of appliances, such as powering an electric motor or providing power to a residential neighborhood etc. Due to the behavior of electrical current, the current generated by the fuel cell will eventually return back to the fuel cell to complete the electrical circuit. The most important aspect of these fuel cells is the chemical reactions that produce electricity and is the key reason why the fuel cells work. A number of different types of materials are used as the electrolytes and along with the working temperature differentiate the different types of fuel cells. In general, here is how the fuel cell works hydrogen gas enters the cell at the anode end, at this time a chemical reaction takes place to remove the electrons from the hydrogen atoms. This results in the hydrogen atoms to be ionized, which is turn will transport positive electrical current. The stripped electrons are negatively charged and generate the electrical current to be used for actual work.
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Figure 2. Fuel Cell Concept Diagram. [5]
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Figure 3. Bloom Energy Fuel Cell Design. [5]
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Fuel cells can work in the open atmosphere, or an unassisted environment, but this leaves room for improvement. By operating in a pressurized environment, called a pressurized hybrid system, efficiency can be improved.
Various types of fuel cells exists today - the most common types of fuel cells are PEMFC (Proton Exchange Membrane fuel cell) (PEMFC); DMFC (Direct Methanol Fuel Cell (DMFC); SOFC (Solid Oxide Fuel Cell (SOFC); MCFC (Molten Carbonate Fuel Cell (MCFC); PAFC (Phosphoric Acid Fuel Cell (PAFC) and AFC (Alkaline Fuel Cell (AFC).
Modern fuel cells are similar to commercially available batteries, except that they are always running. The fuel cell technology which is the focus of our project is different than legacy hydrogen fuel cells as follows: Cheaper manufacturing materials more common powder resembling sand, rather than precious metals Higher efficiency nearly double some baseline models More flexible fuel may be renewable or fossil fuel Reversible energy can be generated or stored
To make these fuel cells commercially viable, multiple such fuel cell systems are deployed in a stack or side-by-side.
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Apart from the above mentioned advantages of our fuel cell, its modular design also provides the following additional features:
Simple installation Designed for fault tolerance Power components modular ability to replace one, while other run nominally
Mobile unit can be moved easily

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3.2.3. Usage of Fuel Cells Solid Oxide fuel cells have been the focus of most of the research and development activities mainly because they use a wide array of fuels and at the same time are very highly efficient as compared to commercial generators and power plants. The efficiency of SOFCs is 40-60% in an unassisted environment and can be as high as 70% in a pressurized hybrid system. The efficiency of the power plants is in the 30-40% range. The most important aspect of the Solid Oxide fuel cells is it adaptability to currently available fossil fuels, which in turn drastically reduces the cost of the whole operation. Apart from SOFCs, the various other fuel cell methodologies (MCFC, PEMFC, PAFC, AFC etc) use hydrogen as its main fuel. This would need commercially available hydrogen gas stations for them to have widespread usage. This is off course a very costly
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proposition and that's why they are not very attractive at this time as compared to the SOFCs.
Apart from its obvious advantages of using currently available fossil fuels and being highly efficient, SOFCs are also very much in demand because they are very clean, robust and pollution free at the same time. Since they do not have any mobile parts, these cells are almost entirely vibration free and therefore eliminating the noise pollution aspect associated with most commercial power generation units. These fuel cells can be used for residential appliances, industrial machines, hospital equipments, and at schools etc.
3.2.4. Types of Fuel Cell: Pros and Cons
The different types of fuels cells are categorized based on the type of the electrolyte or the type of fuel used in a particular fuel cell. The following section discusses the characteristics of the most commonly used types of fuel cells, as well as its pros and cons.
3.2.4.1. PEMFC (Proton Exchange Membrane Fuel Cell)
Proton exchange membrane fuel cells use a solid polymer membrane as its electrolyte at 50-120C as its working temperature. The working temperature for Proton Exchange Membrane Fuel Cell (PEMFC)PEMFC is relatively very
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low as compared to the other fuel cells. It can also vary its power output rapidly in order to meet varying power needs, thus having high power density. Its low weight and volume contribute to PEMFC having a good power to weight ratio. Additionally it has an efficiency of 40-60%. All these features make PEMFC very attractive for automobile and mobility applications. Among its drawbacks, it is very sensitive to impurities such as CO in its fuel (CO poisoning). Also, it uses the expensive platinum catalyst (which in turns increases the cost of the power generated) and hence we would need to lower the catalyst for this catalyst.
3.2.4.2. DMFC (Direct Methanol Fuel Cell)
The Direct methanol fuel cell is similar to the PEMFC except that it uses methanol as its fuel input. Its working temperature is also higher and in the range of 90-120C. Another interesting aspect of the DDirect Methanol Fuel Cell (DMFC)MFC is that can store a lot of electrical power in a small confined place, even though its power capacity is very small. These features make DMFC very attractive for mid-sized applications or to power up the mobile and personal gadgets.
3.2.4.3. SOFC (Solid Oxide Fuel Cell)
Hard non-porous ceramic compounds are used in the Solid Oxide Fuel Ccell (SOFC) as electrolytes. Its high working temperature of 800-1000C reduces
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the requirement of needing high cost precious metal catalysts. This also makes the SOFCs very tolerant to carbon monoxide impurities. Its efficiency is of the order of 60 to 65%. Along with its high efficiency, it also has low cost, wide range of fuel usage capability, no durability issues and very low emissions. These fuel cells are widely used for small to medium scale power generation and for stationary appliances/equipments. The high working temperatures for the SOFCs results in it having some chemical and mechanical stability issues along with long start up times.
3.2.4.4. MCFC (Molten Carbonate Fuel Cell)
The electrolyte used for the Molten Carbonate Fuel Cell is molten NaHCO3 (alkali carbonate mixture). It Molten Carbonate Fuel Cell (MCFC) has a very high working temperature of 600-750C. Its overall cost of operation is very low since it uses low cost materials as its catalyst and it very tolerant to impurities (carbon monoxide). It is also very efficient with an 50-60% efficiency. Due to its very high operating temperature and its electrolyte being very corrosive, it has a lots of problems with regards to its stability and durability.
3.2.4.5. PAFC (Phosphoric Acid Fuel Cell)
Molten H3PO4 (phosphoric acid) is used as an electrolyte for the Phosphoric Acid Fuel Cell. It typically operates at a working temperature of 150-200C.
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Due to this temperature range, the Phosphoric Acid Fuel Cell (PAFC )PAFC is relatively more tolerant to impurities such as carbon monoxide. It can sustain a carbon monoxide concentration of approximately 1-2%. The fuel cells are commercially available and have 40% efficiency. PAFCs will solidify at low temperatures (40C) and thus require it to be operating continuously. This makes its startup a bit difficult, thereby restricting its usage to stationary appliances/equipments.
3.2.4.6. AFC (Alkaline Fuel Cell)
The Alkaline Fuel Cell (AFC) uses a solution of potassium hydroxide as it electrolyte. It operating temperature is approximately 70C. These fuel cells can have an efficiency of high as 60-70%. Since these fuel cells can be very easily poisoned by small traces of CO2, they operate in an environment of pure oxygen. This results in very high cost and also restricts its usage in a very controlled environment (underwater or aerospace equipments). AFCs have been used to generate power and water for astronauts by NASA since the late sixties.
The pros and cons of each type of fuel cell are summarized below.:
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Table 1. Pros and Cons of Different Fuel Cell Technologies. No. 1 Fuel Cell PEMFC (Proton Exchange Membra ne Fuel Cell (PEMFC)) Pros High power density It can vary its output quickly to meet shift in power demand. Has low weight and volume with good power-to-weight ratio. These characteristics make PEMFC suitable for mobile and automotive applications. The efficiency of PEMFC ranges between 40-60%. Low working temperature range (50-120C) Quick start up Solid electrolyte reduces corrosion & electrolyte It can still store a high energy content in a small space It is suitable for tiny to midsized applications, to power cellular phones and laptops. Cons PEMFC is sensitive to fuel impurities, such as CO poisoning Expensive platinum catalyst Expensive cost of its output electricity
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2 DMFC (Direct Methanol Fuel Cell (DMFC))
3 SOFC (Solid Oxide Fuel Cell) (SOFC) SOFC uses a hard, nonporous ceramic inexpensive compound as the electrolyte Operate at high temperature (800-1000C) High temperature operation eliminates the need for precious metal catalyst SOFC is tolerant to CO
Limited in the power DMFC can produce a small amount of power over a long period of time. Expensive platinum catalyst It requires longer start-up time as well as some mechanical/ chemical compatibility issues
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MCFC (Molten Carbonat e Fuel Cell (MCFC))
PAFC (Phospho ric Acid Fuel Cell (PAFC)
AFC (Alkaline Fuel Cell (AFC)
poisoning It has high efficiencies (6065%) Long term stability, fuel flexibility Low emissions and low cost SOFC is well-suited for stationary applications; medium-to-large scale, onsite power generation It has high efficiency (5060%) Tolerant to carbon poisoning Able to use non-precious metals as catalyst Inexpensive or Cheap Fuel flexibility Can use variety of catalysts It is tolerant to impurities PAFC can tolerate a CO concentration of about 1.5% It has efficiency of 40% and commercially available widely installed in many facilities, suited for stationary applications It has been used by NASA to produce power and drinking water for astronauts since 1960 AFC can reach high efficiency up to 60-70% Cathode reaction faster in alkaline electrolyte and leads to higher performance
It has problems related to durability due to its high operating temperature Corrosive nature of its electrolyte
It solidifies at a temperature of 40C Making startup difficult and restraining PAFC to continuous operation It can be poisoned easily by small quantities of carbon dioxide, that's why AFC typically operate on pure oxygen (causing cost increase) It is very expensive
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Can use a variety of catalysts
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3.2.5. Fuel Cell Cost Components 3.2.5.1. Initial Cost
With all the obvious advantages of the various types of fuel cells, they are still not very popular with a very small installation base. One of the main reasons for this is the cost of the overall fuel cell system and the cost of premium fuels used to power these cells. Originally, fuels cells were developed almost 40 years back for use in space missions. These systems were very expensive would cost around $600K/kW and thus making it impractical for residential or industrial usage. A lot of research and development activity has been done on fuel cells in the last thirty years to make it more efficient and affordable for commercial usage. Even with all this focus on fuel cells for all these years, it is still not commercially viable as compared to other power production systems. The most commonly used fuel cell, the newer technology, will cost approximately $4500 per kW currently, whereas a fossil fuel generator, more mature technology, would cost somewhere between $800 - $1500 per kW.
As is the case with most technologies, the initial cost is very high (almost unaffordable for commercial use) but as more units are deployed along with multiple manufacturers, the cost will most likely come down drastically. The
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price per kW for fuel cells varies with different types of fuel cell and fuel cell developers,developers; however most of them are expected to be about $1500/kW eventually. The current price for these fuel cells areprice for these fuel cells is extremely high and can only be used for specific applications which require high reliability or where the price of conventional electricity is very high.
3.2.5.2. Maintenance Cost
The maintenance cost of these fuel cells is expected to be very low. Periodic once a year inspection and servicing would be required by the fuel supply systems. The fuel cell assembly will probably not need any maintenance activity for its total life cycle. Having said all this, we still need to determine the overall reliability and serviceability of these systems in a large and long duration deployment scenario. The day-to-day cost of maintaining these fuel cells are expected to be somewhere in the range of $0.005 - $0.01 / kWh.
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3.2.5.3. Incentives
Apart from all the ongoing rR&Desearch and development activities to make fuel cells more affordable, the federal government is also provide tax incentives for fuel cell power plants and to users of these fuel cell systems. The Energy Policy Act of 2005 allows the fuel cell power plants to claim tax benefits from the Federal government. In order to qualify for these tax breaks, the power plants should have a fuel cell stack assembly to generate electricity using electro-chemical reactions. Additionally they should have an efficiency of 30% or greater. A number of states are also providing financial incentives to support fuel cell installation facilities. Fuel cell power consumers are also able avail 1.5 cents per kWh credit for the first 5 years since they started using this service. Although the above tax and financial incentives do not reduce the cost of the manufacturing and generating power using fuel cells, they do lower the operating costs for both the supplier and the electricity users.
The following table gives us a quick snapshot of how the some of the most commonly used fuel cells compare with each other from a cost per kW perspective.
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Table 2. Fuel Cell Costs: Price per kW [32] Operating and Maintenance cost ($/kW) 0.023
Formatted: Keep with next, Keep lines together
Fuel Cell Type PEFC (200kW System) SOFC (100kW System) PAFC (200kW System)
Package Cost ($/kW) 3120
Total Installation Cost($/kW) 3800
Formatted Table
Formatted: Keep with next, Keep lines together
2850
3620
0.024
4500
5200
0.029
The following table shows the most recent cost estimates of fuel cells in terms of $/kWh.
Formatted: Indent: Before: 0.5", Line spacing: Double
Formatted: Font: Not Italic
Table 3. Fuel Cell Costs: Price per kWh [32]

Formatted: Font: (Default) Calibri, Bold Formatted: Font: (Default) Calibri, Bold Formatted Table
Fuel Cell Phosphoric Acid Fuel Cell (PAFC) Proton Exchange Member Fuel Cell (PEMFC) Molten Carbonate Fuel Cell (MCFC) Solid Oxide Fuel Cell (SOFC)
Price ($/kWh) 1 MW:, 0.1245 $/kWh 0.25 MW:, 0.1048 $/kWh 20 MW: , 0.1084 $/kWh 3 MW:, 0.0895 $/kWh
Formatted: Font: Bold Formatted: Font: (Default) Calibri, Bold Formatted: Font: Bold Formatted: Font: (Default) Calibri, Bold Formatted: Font: Bold Formatted: Font: (Default) Calibri, Bold Formatted: Font: Bold Formatted: Font: (Default) Calibri, Bold
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Solid Oxide Fuel Cell + GT Hybrid (SOFC-GT)
5 MW:, 0.0954 $/kWh
Formatted: Font: Bold Formatted: Font: (Default) Calibri, Bold
In summary, fuel cells have the potential to revolutionize our lives in a similar fashion as the microprocessor has been. Once we have figured out a way to make these fuel cells commercially affordable, this power source will change our world and improve the quality of our lives by reducing the environmental degradation caused by combustion engines.
3.3. Solar Energy 3.3.1. Solar Energy Introduction
"Solar energy is considered as the most abundant energy resource on earth. The solar energy that hits the earth's surface in one hour is about the same as the amount consumed by all human activities in a year. As global warming continues to threaten our environment, there seems little doubt that solar power will become an even more important form of renewable energy in future." [29]
Solar power is produced by collecting sunlight and converting it into electricity. This is done by using solar panels, which are large flat panels made up of many individual solar cells. It is most often used in remote locations, although it is becoming more popular in urban areas as well.
Solar radiation is an integral part of different renewable energy resources. It is the main and continuous input variable from practically inexhaustible sun. Solar energy is expected to play a very significant role in the future especially in
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developing countries, but it has also potential prospects for developed. Another future perspective use of solar energy is its combination with water and as a consequent electrolysis analysis generation of hydrogen gas, which is expected to be another form of clean energy sources. Combination of solar energy and water for hydrogen gas production is called solar-hydrogen energy. [25]
3.3.2. Types of Solar Energy
There are many types of solar energy. The two most common ways to categorize solar energy are: depending on how it is converted into useful energy and type of energy it is converted into the solar energy.
In the first way, solar energy can be converted into two types: passive and active solar energy.
3.3.2.1. Passive Solar Energy
Passive solar energy refers to the harnessing of the sun's energy without the use of mechanical devices. Using south-facing windows to provide natural lighting and heat for your home are examples of passive solar energy.
3.3.2.2. Active Solar Energy
Active solar energy uses mechanical devices in the collection, storage, and distribution of solar energy for your home. For example, in active solar energy water heating systems, pumps are used to circulate water through the system.
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Additionally, there are three types of active solar energy.
Solar Thermal Energy -: is the energy created by converting solar energy into heat. Several applications that take advantage of this type includes solar space heating, solar water heating, solar pool heating, and solar thermal heating.
Photovoltaic Solar Power -: is the energy created by converting solar energy into electricity using photovoltaic solar cells.
Concentrating Solar Power - : is a type of solar thermal energy that is used to generate solar. This technology is aimed at large-scale energy production. Because of this, as a homeowner, you won't use concentrated solar power directly, but could take advantage of it through a green-pricing service offered by your regulated utility or an alternative energy supplier.
3.3.3. Solar Energy Pros and Cons:
There are many advantages and disadvantages using the solar energy. When evaluating the pros and cons, one should look into the usability factor, environmental factor and the requirement factors of the solar energy systems. The pros and cons of solar energy in general are shown in Table 4.:
Table 4. Pros and Cons of Solar Energy. Solar Energy Pros Solar Energy Cons
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Solar panels give off no pollution excluding the pollution produced during manufacturing the solar panels. The production of power from solar energy is quiet compared to other renewable energy like fossil fuels. One of the great pros of solar energy is the ability to harness electricity in remote locations that are not linked to a national grid. A prime example of this is in space, where satellites are powered by high efficiency solar cells. Solar energy providers give costeffective installation in remote areas Solar energy can be very efficient in a large area of the globe, and new technologies allow for a more efficient energy production on overcast/dull days. Solar panels can be installed on top of many rooftops, which eliminate the problem of finding the required space for solar panel placement. Although the initial investment of solar cells may be high, once installed, they provide a free source of electricity, which will pay off over the coming years. The use of solar energy to produce electricity allows the user to become less dependent on the worlds fossil fuel supplies.
The major con of solar energy is the initial cost of solar cells. Currently, prices of highly efficient solar cells can be above $1000, and some households may need more than one. This makes the initial installation of solar panels very costly. Solar energy is only able to generate electricity during daylight hours. This means for around half of each day, solar panels are not producing energy for your home. The weather can affect the efficiency of solar cells. Pollution can be a con of solar energy, as pollution levels can affect a solar cells efficiency, this would be a major con for businesses or industry wishing to install solar panels in heavily polluted areas, such as cities
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3.3.4. Classification of Ssolar Ppanels Solar panels are used widely and are the most important component in the solar energy systems. It converts sunlight into electric energy and outputs the direct current into batteries.
Solar components mainly constitutes of different sized solar cells also known as solar array. The solar cells are also called as PV cells. The solar power is related to the solar cells. If the area is large then the capacity of producing power is more. The solar cells are generally made either from crystalline silicon, sliced from ingots or castings, from grown ribbons or thin film, deposited in thin layers on a low-cost backing.
There are many types of solar panel technologies available in the market. The main types are:
Crystalline silicon technology.: Crystal cells are made up from thin single crystal of silicon (monocrystalline) or from a block of silicon crystals (polycrystalline), their efficiency ranges between 12% and 17%. This is the most common technology representing about 90% of the market today [9].
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Thin Film technology.: Thin film modules are constructed by depositing extremely thin layers of photosensitive materials onto a low-cost backing such as glass, stainless steel or plastic.
There are for types of thin modules which are commercially available in the market: Amorphous silicon (a-Si), Cadmium telluride (CdTe), Copper Indium/gallium Diselenide/disulphide (CIS, CIGS), Multi junction cells (a-Si/mSi).
Table 5 shows sSome of the important and most widely used solar cell technologies and their efficiency are.: Table 5. Summary of Solar Cell Technologies [9]
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3.3.5. Photovoltaic Solar Cells Direct conversion of sunlight into electricity in Photovoltaic (PV) cells or solar cells is one of the three main solar active technologies, the two others being concentrating solar power (CSP) and solar thermal collectors for heating and cooling (SHC) [29]. Photovoltaic (PV) is a method which converts direct sunlight into electricity using variety of different sized solar cells, also known as PV cells. Today, PV provides 0.1% of total global electricity generation. However, PV is expanding very rapidly due to dramatic cost reductions. PV is a commercially available and reliable technology with a significant potential for long-term growth in nearly all world regions [29].
It is been predicted that PV will provide 5% of global electricity consumption in 2030, rising to 11% in 2050 [29]. If the PV industry gets more concerted policy support from the government. Sustained, effective and adaptive incentive schemes are needed to help bridge the gap to PV competitiveness, along with a long-term focus on technology development that advances all types of PV technologies, including commercially available systems and emerging and novel technologies [29].
3.3.6. Market Eend-uuse Ssectors According to Technology Roadmap, there are four end-use sectors with distinct markets for PV:
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Residential systems are (typically up to 20 kW systems foron individual homes.)
Commercial systems are (typically up to 1 MW systems for commercial office buildings, schools,
hospitals, and retail.) Utility scale systems are (starting at 1 MW, mounted on buildings or directly on the
Ground.) Off-grid applications are (varying in sizes.)
3.3.7. Solar Energy Costs The solar energy industry typically uses price per Watt Peak (Wp) as its primary unit of measurement. The prices for high power band (>125 watts) solar modules has dropped from around $27/Wp in 1982 to around $4/Wp today. Prices higher and lower than this are usually dependent upon the size of the order. [25]
The solar module represents 40%-50% of the total installation cost of the Solar Electric Systems. The total installation costs is calculated depending upon the type of solar systems, where the energy feed is going in to the grid or off the grid.
The average price of the solar electricity is around 30 cents/kwh (kwh, a measure which takes account of solar conditions).
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The calculation of kWh is done depending on the location of the solar installation and the local electricity tariff rates. Then in order to determine what proportion of total energy solar will provide, one has to take in to account the size of the solar energy system and the energy demand of the customer. [25]
Typical kWh usage by homes in three selected US average homes is shown below. For example, in a Sacramento, California home, it would cost around $16$20,000 (depending on 8,000 -10,000 above that you may change) to satisfy around 25% of that homes energy needs.
Grid-connected PV is the fastest growing segment in the solar industry market in the Unites States because of its cost-effective parameter.
The cost of Solar Power from Photovoltaic Cells, according to the U.S department of energy, arecost of Solar Power from Photovoltaic Cells, according to the U.S
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department of energy, is illustrated in Figure 4, Figure 5, and Figure 6.
Figure 4. PV System Efficiency. [5]
Figure 5. PV System Capital Cost [5]
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Figure 6. PV Cost of Energy [5]
3.3.8. Solar Energy Maintenance Costs Maintenance will need to be estimated separately, and the lifetime of the systems is not addressed in this data. Most resources report that maintenance costs are low, about 0.1 cents/kWh [25]. Studies show a maintenance cost proportional to equipment size and predict operating and maintenance costs of about 1% of the installation price [25]. The following charts show the recent decrease and leveling off of the price to purchase and install solar power equipment. Many systems are rated for use for 20 years or more, so replacement costs are not included.
3.4. Total Current Cost Summary The following is a summary of the current average cost of the three types of electricity.
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Table 6. Current Energy Cost Summary. Typical Installation Size Cost per kilowatt peak ($/kWp) Cost per kilowatt hour (/kWh)
Energy Source
Typical Use Baseload power source. Off grid residential, remote industrial applications Baseload power source. Off grid residential. Transportation Baseload power source. Primary residential and commercial
Solar Power
1-100 kW
6,000-10,000
20-40
Fuel Cells
1-200 kW
3,000-4,000
10-15
Electric Company
N/A
N/A
8-9
Energy Source
Typical Installation Size
Cost per kilowatt peak and per kilowatt hour $6K - 10K per kWp or 20-40 cents per kWh
Dispatchable?
Typical Uses
Solar Power
1-100 kilowatts
No
Baseload power source. Off grid residential, remote industrial applications.
Fuel Cells
1-200 kilowatts
$3K - 4K per kWp or 10 - 15 cents per kWh
Yes
Baseload power source. Off grid residential. Transportation.
Electric Company
N/A
8-9 cents per kWh
No
Baseload power source. Primary residential and commercial.
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4. Cost Analysis Formulation In this study, cost analysis is based on current market values for the price of electricity, solar panels, and natural gas. The Bloom Energy fuel cell is not yet ready for market on the residential level, never the less cost analysis is formulated including the Bloom Box to show what the cost comparison would be if it hit the market now on that level. For future release dates, the analysis can be rerun using future values, simply by updating the inputs.
Reports showed that an average monthly use of electricity for a typical US residential user is approximately 920 kWh [26]. Estimates for the size of solar panel(s) and fuel cell are based on this average value. Furthermore, in purchasing electricity from the electric company, we have based the average monthly cost on this amount as well. We found that most costs are estimated based on the size of the equipment, so the total cost would scale linearly with an increase or decrease of total energy requirements. Therefore, we would not expect a very large dependence of the results on the selection of this value.
A period of 10 years is being selected to do our cost analysis. Both solar panels and fuel cells have the potential to be in service for a period longer than 10 years, so a replacement cost will not be included. However, an annual maintenance cost is estimated for both the Bloom Box and the solar equipment. Furthermore, since the lifetime for the equipment is longer than the 10 year analysis period, a salvage value based on depreciation will be considered in the formulation.
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4.1. Return On Investment Selection In reviewing various equipment replacement Return on Investment (ROI) descriptions, we identified a range of typical values. More specifically, Black [3] claimed that solar electricity can generate rates of return of 11-20%. Furthermore, the American Machinist [15] showed the following quote, "When the financial department looks at the cost justification for a new piece of equipment it usually wants to see a return of at least 15 percent." We are interested in the range of 10-20% ROI in reference to the latter ROIs.
In the final results, we are planning to list the 15% interest rate calculation as our main result, but also vary the interest rate (using 10% and 20%) as a measure of how sensitive the results are to a different choice of interest rate.
4.2. Analysis Cases For each cost analysis, we have a baseline case that represents our best estimate of the annual cost of electricity generation for each of the three methods under consideration. However, since many of the input parameters involve estimating costs or forecasting prices in the future, there is some uncertainty associated with the analysis. Therefore, it is important to look at different "what-if" cases to determine the dependence of the results on each individual input parameter.
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We use an upper and lower estimate for each input parameter as well. These represent the range of values for a given input. We do the annual cost estimate varying each input individually, as well as estimating best-case and worst-case scenarios. The bestcase scenario for the Bloom Box, for example, uses all of the input variations that would provide the lowest possible annual cost for Bloom Box electricity.
These what-if cases show how much the annual cost varies with each input parameter. This information is valuable to Bloom Energy in indicating what areas pose the most risk for being competitive with the price of electricity. For example, if the maintenance cost has a larger total effect on the cost of electricity generation than the purchase price, then Bloom Energy might want to focus on reliability rather than putting effort into making small decreases in purchase price. There are inevitably tradeoffs during the design and development phases of new technology, and this cost analysis helps pin point the most important design areas.
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4.3. Bloom Box Cost Analysis 4.3.1. Bloom Box Purchase Price The purchase price for the Bloom Box fuel cell comes from the design goal that Bloom Energy has specified for its residential unit. They have set the goal to sell an average residential fuel cell for $3,000. This is the baseline value for our cost comparison equations. We are including the federal tax credit of 30%, which reduces this input to $2,100. This credit would be available for purchasing a Bloom Box, and it is a direct saving for customers. It is possible that Bloom Energy could either do better or worse than their goal, so it is important to test at higher and lower values as well. We are testing the range of 10% below and above the target price as well.
4.3.2. Bloom Box Installation Cost Although Bloom Energy claims that the Bloom Box is different from other fuel cells in that it has higher efficiency and a lower purchase price, the technology used to transmit electricity from the Bloom fuel cell to the building is essentially the same. Therefore, the work required to install a Bloom Box is expected to be comparable to the installation for other fuel cells, especially solid oxide fuel cells. We estimate the baseline installation cost using a comparable fuel cell.
From literature review, a comparable fuel cell with a purchase price of $2,850 cost $770 to install. As a fraction of purchase price, the installation is 27% of the
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purchase price. We use that fraction to estimate our installation cost of $810, or 27% of our $3,000 purchase price. We also reduce the installation price by 30%, because the federal tax credit for fuel cells includes the installation price.
4.3.3. Natural Gas Fuel Cost The current commercial Bloom Box uses 0.661 MMBtu/hr of natural gas to generate 100 kW of electricity. The amount of natural gas used by a residential unit will scale linearly with the size of the unit and amount of electricity generated, so we estimate the amount of natural gas required by scaling linearly from the 100 kW usage.
Our monthly electricity use estimate is 920 kWh, based on average household electricity use. Since fuel cells can generate electricity continuously and store electricity, we assume that the fuel cell will run for 24 hours a day. Based on the average monthly electricity demand and a full-time generation schedule, 1.26 kW are needed for an average residential Bloom Box.
For a residential Bloom Box, 6.08 MMBtu of natural gas are required monthly. The current price of natural gas is $10.63 per MMBtu, so the estimated annual cost of natural gas to run the Bloom Box is $775.
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4.3.4. Price Trend of Natural Gas The price increase for natural gas fits well to a linear trend. Therefore, we are using a linear gradient increase of 3%. The forecast for natural gas prices is provided by the U.S. Energy Information Administration's annual report for 2011. The full report has not yet been released at the time of this analysis, but an executive summary along with electricity and other energy source price forecasts has already been published [34].
4.3.5. Cost of Bloom Box Maintenance In our literature review, we found that the expected maintenance costs for fuel cell can be estimated based on amount of electricity generated. The value quoted is approximately 2.4 cents per kWh, so the monthly maintenance cost in our analysis is expected to be around $22. This gives an annual maintenance cost of $264.
4.3.6. Bloom Box Salvage Value Well maintained fuel cells can last for more than ten years, so there is a salvage value for the Bloom Box calculation. We are assuming, in our maintenance calculations, that preventative maintenance is used to keep the fuel cell running optimally and that the Bloom Box is designed to last for 20 years. Since we are assuming the fuel cell will provide a constant amount of electricity throughout its lifetime and it will not actually be sold at the end of 10 years, it is most representative to spread its value out evenly over the 20 year lifetime. This is best
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described using Straight-line depreciation. Using this depreciation method and the initial purchase price of $3,000, the salvage value at the end of our 10 year analysis period is $1,500.
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4.3.7. Bloom Box Cost Estimation Equations 4.3.8.4.3.7.
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4.4. Solar Panel Cost Analysis 4.4.1. Solar Panel Purchase Price In our literature review, we found that the current estimate for the purchase price of solar panels is estimated at $2,000 per kW of electricity generation. We estimated that a typical household would need 6.05 kW of electricity generation potential with an average period of peak sunlight of 5 hours per day to produce the 920 kWh of electricity per month. This gives an estimated purchase price for solar panels of $12,000. There is also a federal tax credit on solar panels of 30%, so that reduces the value to $8,400 in our cost analysis.
4.4.2. Solar Panel Installation Cost The solar panel installation estimate is based on the size of the solar equipment. It is estimated that the installation costs for solar panels is approximately the same as the purchase price of the panels. Therefore, our estimate is $12,000, however, the federal tax credit applies to installation costs as well, so the baseline value is also reduced to $8,400.
4.4.3. Cost of Solar Panel Maintenance The maintenance cost for solar panels is relatively low, estimated at 0.1 cents per kWh. Using our baseline value of 920 kWh per month, the estimated solar panel monthly maintenance cost is about $1 per month, or $12 annually.
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4.4.4. Solar Panel Salvage Value Solar panels have an average lifetime of 20 years, so we use a salvage value for the end of our 10 year analysis period. We use a Straight-line depreciation to estimate the salvage value, so our baseline estimate is 50% of the purchase price, or $6,000.
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4.4.5. Solar Panel Cost Estimation Equations
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4.5. Electric Company Cost Analysis The only cost input that is required for the cost of electricity calculation is the price of purchasing electricity, per kWh, from the utility company. The U.S. Energy Information Administration provides a forecast for the price of electricity for each year, for more than the 10-year period that we are studying [34]. Much effort has already gone into incorporating the most significant factors in electricity cost prediction by this agency, so this is used as our estimate for electricity cost. We found that a linear increase approximation to the next ten years of forecasted electricity costs describes the data well, so we are using the current cost of electricity as an initial price and a linear increase rate of 2% per year. This is used in the gradient formula during the cost estimate analysis.
In addition to this best estimate for electricity price, the agency has also estimated the dependence of the cost of electricity based on economic growth. They have predict that if the economy slows down, the rate of increase will be reduced to a level of about 1%, instead of 2%. Furthermore, a higher rate of economic growth is expected to produce a higher increase rate of about 3%. So, these values are used in the what-if analysis as well.
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4.5.1. Electric Company Cost Estimation Equations
5. Results and Discussion 5.1. Baseline Cost Estimate The baseline case represents the best estimate for the annual cost of electricity for each source. The results for this case are shown in Table 7 below. Table 7: Baseline Annual Electricity Cost Results Baseline Annual Cost (ii = 0.15, n = 10) Bloom Box $1,575
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Electric Company Solar Panels
$1,297 $3,064
Our baseline results show that the cost of electricity from the electric company is still cheaper than the Bloom Box given our assumptions. The annual cost of electricity for the Bloom Box is estimated at $1,575, and the cost of solar and electric company are $3,064 and $1,297 respectively. The results are also shown in Figure 7.
Baseline Annual Electricity Cost (i = 0.15, n = 10)
$3,500 $3,000
$3,064
Annual Cost ($)
$2,500 $2,000 $1,500 $1,000 $500 $0 Bloom Box Electric Company Electricity Source Solar Panels $1,575 $1,297
Figure 7: Baseline Annual Electricity Cost Results 5.2. Minimum and Maximum Cost Estimates Due to uncertainty in the input parameters, we have also varied the inputs by a fixed amount of 10%. The results shown in Table 8 show the minimum and maximum costs
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with all input parameters either increased or decreased by 10% to yield a minimum or maximum cost. Table 8: Minimum and Maximum Annual Cost Results Annual Cost - Min/Max (i = 0.15, n = 10) Minimum Bloom Box $1,403 Electric Company $1,167 Solar Panels $2,698
Maximum $1,748 $1,426 $3,429
In this analysis, even the best-cast scenario for solar yields a $2,698 annual cost where the worst cases for the Bloom Box and electric company are $1,748 and $1,426 respectively. Therefore, the discussion of results focuses less on a comparison with solar panels than with the more competitive comparison between the Bloom Box and the electric company. There are parts of the country where solar energy is cheaper and a more competitive option, for example, California has additional state subsidies that help lower the cost of solar energy. Furthermore, there are climate factors, such as amount of available sunlight that also reduce the cost of solar in some parts of the country. However, this analysis focuses on the average case over the whole United States, so we focus less on the specifics of local regions.
The comparison of the Bloom Box with purchasing electricity from the electric company is more competitive and will likely present the largest challenge to Bloom Energy. The $1,403 best-case scenario for the Bloom Box does represent a cost savings over the worst-case scenario for the electric company of $1,426. Furthermore,
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using the 3% increase rate for the price of electricity from the high economic growth case brings the worst-case price of electricity to $1,471, which is even closer to the baseline Bloom Energy cost. These results indicate that Bloom Energy does have a chance to compete with electricity companies, but also that it is important to focus on areas for improvement to increase the chances of success. Some options for reducing the cost of electricity generated by a Bloom Box are reducing the purchase price or maintenance costs. If the cost of natural gas goes down in the future, this will also introduce a greater chance that Bloom will be able to succeed as well, but this is not necessarily something that Bloom has any control over.
5.3. Individual Input Parameter Dependence In an effort to identify the most critical cost components for each source of electricity, we vary each input parameter, one at a time, by a fixed amount of 10%. The results of this analysis for the Bloom Box case are shown in Table 9 below. The decrease and increase columns show the annual cost if the input parameter is decreased by 10% or increased by 10%. The columns labeled "Percent DifferencePct Diff" show the increase or decrease as a percentage of the baseline annual cost. Table 9: Bloom Box Single Input Variation Cost Analysis Results Bloom Box Cost - Varying Individual Parameters Baseline Annual Cost = $1,575 Percent DifferencePct Input Parameter Decrease Diff Increase P_b_pur $1,533 -2.66% $1,617
Percent DifferencePct Diff 2.66%
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P_b_inst A_b_fuel_init G_b_fuel A_b_rpr S_b
$1,564 $1,498 $1,567 $1,549 $1,568
-0.72% -4.92% -0.50% -1.68% -0.47%
$1,587 $1,653 $1,583 $1,602 $1,583
0.72% 4.92% 0.50% 1.68% 0.47%
Since it is the change in cost of electricity that we are interested in, the salvage value is varied so that the cost of electricity will increase or decrease. For example, in the decrease column in Table 9, the salvage value is actually increased, resulting in an electricity price decrease.
By varying the inputs in the what-if analysis, each by 10%, the largest annual Bloom Box cost difference in both the minimum and maximum cases results from varying the cost of natural gas. This indicates that the price of natural gas has the largest effect on the cost of using a Bloom Box for electricity generation. While it is the current price of natural gas that is used as an input, varying its value has significance for two reasons. One, this analysis focuses on the case where the Bloom Box is released today. However, it will actually be released in the future, and it will be the current price of natural gas when the Bloom Box is released that will help determine its success. Two, the gradient line that is used in the TVM equations is represented by an initial cost and a linear trend. That line is an approximation of ten data points, and if the cost changes in the future, the average value of the line can increase or decrease in addition to the slope changing.
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The percentage of each component of the total cost is shown in Figure 8, excluding the salvage value, since it is a negative value.
Bloom Box Cost Components
Maintenance 16%
Purchase 25% Purchase Installation Fuel Maintenance
Installation 7% Fuel 52%
Figure 8: Bloom Box Cost Components as a Percentage of Total Cost
Both of these analyses show that the cost of electricity from a Bloom Box relies most heavily on the cost of natural gas.
The results for the electric company are shown in Table 10. Table 10: Electric Company Single Input Variation Cost Analysis Results Electric Company Cost - Varying Indivual Parameters Baseline Annual Cost = $1,297 PercentPct Input Parameter Decrease DifferenceDiff Increase A_e_init $1,175 -9.37% $1,418 G_elec $1,288 -0.63% $1,305
PercentPct Difference 9.37% 0.63%
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In the cost of electricity estimation, the variation of the initial price by 10% causes a larger change in the minimum and maximum annual cost of electricity than changing the slope by 10%. This indicates that the initial price plays a larger role in determining the annual cost of electricity from a time value of money standpoint. The results for solar panels are shown in Table 11. Table 11: Solar Panel Single Input Variation Cost Analysis Results Solar Panel Cost - Varying Individual Parameters Baseline Annual Cost = $3,064 Percent DifferencePct Input Parameter Decrease Diff Increase P_s $2,897 -5.46% $3,231 C_s_inst $2,897 -5.46% $3,231 C_s_rpr $3,063 -0.04% $3,065
Percent DifferencePct Diff 5.46% 5.46% 0.04%
5.4. Varying ROI The following cases use different values for the Return on Investment (ROI) input parameter to show the dependence of the results on our choice of this input. The results for 10% ROI are shown in Table 12. Table 12: Annual Electricity Cost with 10% ROI Annual Cost - Varying ROI (i = 0.1, n = 10) Bloom Box $1,437 Electric Company $1,305 Solar Panels $2,370
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The results for 20% ROI are shown in Table 13. Table 13: Annual Electricity Cost with 20% ROI Annual Cost - Varying ROI (i = 0.2, n = 10) Bloom Box $1,665 Electric Company $1,289 Solar Panels $3,788 In both of the varied ROI cases, the electric company annual cost is the lowest. However, in the 10% ROI case, the cost difference between the Bloom Box and electric companies is smaller than the baseline case. The percentage difference between the annual cost of the Bloom Box and electric company is shown in Table 14 for each of the ROI inputs. Table 14: Annual Cost Difference Varying ROI Annual Cost Percent Difference Between Bloom Box and Elec Company ROI % Difference 10% 9% 15% 18% 20% 23% In the 10% ROI case, the annual cost for the Bloom Box is 9% higher than the electric company cost, where the difference is 18% for the baseline case with a 15% ROI. The 20% ROI case yields a 23% cost difference, showing that the lower the ROI, the smaller the difference is between the Bloom Box and electric company costs.
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5.5. Bloom Box Cost Strategy In an effort to identify strategies for Bloom Energy to maximize price competitiveness in a comparison with electric companies, we investigated possible cost reduction alternatives. The results are discussed in this section.
5.5.1. Bloom Box Purchase Price Importance After identifying that Bloom Energy will need to find ways to reduce costs in order to increase its chances of success, we tested different values for the reduction in purchase price. In order to reduce the expected cost of electricity from a Bloom Box to the $1,297 baseline value of electricity, a purchase price reduction of about 67% is required. This is a considerably large reduction in price, and may be unreasonable, especially if other cost reduction methods are more effective.
5.5.2. Bloom Box Maintenance Cost Importance If Bloom energy is able to offer a warranty that covers the maintenance costs, the cost of electricity using a Bloom Box is reduced to $1,311, requiring less than 10% reduction in purchase price in order to beat the electricity companies in the baseline case. Furthermore, if the price of natural gas decreases by a level of 20% from the current predictions, only a 50% reduction in maintenance costs would be required to beat the electric companies.
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5.5.3. Government Subsidies While a reduction in natural gas price could come naturally, another option is government subsidies. Currently, the solar industry is helped greatly by government subsidies, especially in California. If governments decide to pursue fuel cells as a technology that is worth promoting, subsidizing natural gas is one of the alternatives. For example, if the government subsidizes natural gas costs by 35%, no reduction in maintenance cost or purchase price is required to reach a Bloom Box electricity cost of $1,276, which is a cost savings over the baseline electric company price.
This might offer a more attractive option for governments looking to make a move toward clean energy. Currently solar power benefits from government subsidies in California, but other regions are limited by cloudy weather and seasons. However, there are no climate limitations for fuel cells, so local and state governments around the country can consider the option to support Bloom Energy fuel cells by offering subsidies on natural gas.
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6. Economic Justification 6.1. Executive Summary Our Company and Products Our company seeks to help shape the future of clean energy. There are numerous different clean energy technologies currently in development, but progress requires investment, whether from private investors or government support. Identifying which technologies are the most viable for the future is a large effort, but this information helps direct funding to the optimal technologies. Using our analysis, customers can avoid spending time and money evaluating numerous investment options as well as avoiding poor investments. We will form a research and analysis firm that produces reports on relevant clean energy topics. Our first product is a research analysis report entitled "Cost Analysis Comparison of Bloom Energy Fuel Cells with Solar Energy Technology and Traditional Electric Companies". The project objective is to compare the Bloom Energy fuel cell, an emerging technology, with other energy sources and produce effective analysis that can be used to decide the future source of energy. This study includes an analysis of the Bloom Energy solution and shows how it can fulfill energy needs while, at the same time, helping keep the environment clean. The Bloom Energy solution is designed to be reliable, very clean, and low cost, compared to competitors.

Comment [LPW1]: Check the slides. You have not included all of the required sections in the executive summary.
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Green Technology Analysts Company<your company name> provides energy research analysis consulting services to the business and investment community. We assess the viability and characterize the strengths and limitations of emerging energy related technologies and strategies. We help reduce the need for businesses and investors to identify optimal energy energy alternatives and investment opportunities. Problem Statement It is difficult to predict what clean energy technologies currently in development will be successful in the future. It is vital to identify which companies have the most potential, before investors decide on large investments. Our Solution Our company helps to solve this problem by conducting the technical research and analysis that allows a clear and direct comparison of emerging technologies. Whether it is accurately defining the current state of a product or forecasting into the future, we highlight the important results in making effective cost analysis comparisons. Value Statement The cost of the research and analysis, without including the cost of running the company, can exceed $25,000, yet we will sell our reports for under $2000. Therefore, companies that purchase our products will save over $20,000 in research costs per report.
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Customer Base Our potential customers include companies looking for information to help make wise investments in energy research and development. We will also sell to technology companies deciding on which new projects to pursue. Finally, we will also sell reports to government agencies that require energy research to help in designing clean energy legislation.
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Market Size The size of the energy technology consulting market is estimated at $2.85 billion annually [23]. TGreen technology for producing clean energy has proven to be a significant business opportunity, and it is growing rapidly, even beating other early technology revolutions like telephony, computers, and the Internet [10]. The funding for energy development is necessary to support the growing market for clean technology. This has led to the emergence of new markets for energy and the growth of de-centralized generation and distribution systems. Within this context, the use of a clean technology, such as fuel cells, as a generator of electricity for the residential market, is a significant market opportunity. In order to support the growing market for clean technology, investment in research is necessary. As an example, the total venture capital investment in clean energy in 2010 was $7.85.1 billion [16]. Additionally, the Department of Energy recently supplied a $1.4 billion loan to a single clean energy company, BrightSource [16]. Competitors
Comment [LPW2]: Start by saying something like, The energy technology consulting sector represents a <$X> billion dollar business opportunity. Then back up your statement with a few examples or references.
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There is a growing number of competitors in the market, but our plan puts us in a strategically beneficial position, because we streamline the analysis efforts and supply our reports at a lower cost. Some technology consulting companies, like Markets and Markets, sell their analysis reports for more than double our price.
Startup Cost and Payoff We are estimating an initial startup cost of $24,000 for our company, with additional $250,000 investment over the first 1.5 years. We seek an initial investment funding of $275K for the first year and a half of operating expense and growth. We do not anticipate additional funding after the initial investment period because of $1 million in anticipated net profit in the subsequent year. The investment funds will be used to hire the management, technical, and administrative staff < major positions you plan to fill>, and to cover startup, legal, and utility costs required up to the break-even point. Break-Even Point We expect our break-even point to occur during the fourth quarter of 2012, at which point we will have sold approximately 600 reports. This includes the first report, as well as one follow-on analysis report every six months. Revenue at Three Years At the end of year three, we expect to reach a cumulative revenue of nearly $3 million, which will yield an estimated cumulative profit of just over $1 million to that point. Our annual revenue at that point is projected at $1.7 million.
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< state other major expense itemsThis will cover our maximum cumulative loss, explained in more detail below, until we reach our break-even point after at the 1.5 year point. At that point, we will have sold 600 copies of research papers and will have made up for all of our losses. One year later, we expect to have a $1 million profit.
Management Team The management team consists of 3 managers from San Jose State University. These managers are from multi-cultural and multidisciplinary backgrounds. Together they fill the rolls of Chief Executive Officer, Chief Technology Officer, and Chief Marketing Officer.
Comment [LPW3]: Usually you talk about the experience of key individuals you plan to hire. You want to convince the reader that you are pulling together a strong and experienced management team.
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6.2. Problem Statement Global concerns about fossil fuel stocks and the climate have stimulated governments and industry to explore the development of alternative sources of energy. According to US Energy Administration, onlyabout 8% of the renewable energy is used for producing energy used in the United States comes from renewable sources [34]. This needs tomust be increased in the future, but this cannot happen without substantial investment, research, and development. The problem addressed in our reports is the difficulty in identifying the best technologies to support. This is an essential stepmust be done before investors are willing to invest the necessary capital for developing such technology. For example, the research done by the Power Economics division of GE Energy guided a total of $2 billion of investment in clean energy in 2010 [22]. It is also necessary for
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government planning agencies in the effort of shaping clean energy legislation for the future.
In addition to the problem of finding investment, green technology companies, such as Bloom Energy, must plan for their economic future. The Bloom Energy Bloom Box is still in development, and its final cost to customers is still uncertain. Our research addresses the challenge of identifying which design decisions are the most important early in the development process. These are challenges that will not only be faced by Bloom Energy, but also by other companies considering entry into the market.
Comment [LPW4]: So how will your report help Bloom Energy make its decision?
6.3. Solution and Value Proposition Our solution to the problem facing investors and government planners is to conduct the market analysis that will identify the clean energy sources that are most likely to succeed in the future. By doing this, we can not only save customers the months of work of time and money associated with doing the research themselves, but we can also help prevent large economic loss by helping them avoid bad investments. This research article will help others conducting similar kind of studies by reducing their investment in terms of time and money spend.We estimate the cost of analysis alone to be around $27,000 to produce one report, without including the cost of running our company. By purchasing one of our reports for under $2,000, our customers are saving around $25,000 over doing the research themselves. The cost of the analysis is
Comment [LPW5]: State how much you can save a company by hiring your services.
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estimated using our schedule that requires 135 eight-hour days to produce one report. Estimating labor at $25/hr yields a total cost of $27,000.
We also offer our reports at a lower cost than our competitors. Comparing to ABS Energy Research, for example, the price for 16 energy analysis reports listed for sale on their website ranges from $700 to $8,500, with an average price of over $2,800 [11]. Our cost of $1,800 represents a savings to the customer of 35%.
Green energy technology companies will benefit from our research reports as well, because our results include a sensitivity analysis showing which cost elements can most effectively drive down overall product costs. Bloom Energy, currently still designing the residential version of the Bloom Box fuel cell, is still developing its technology. Our report serves as an independent investigation for what cost reducing reduction strategies will provide the highest probability for developing a cost competitive product.
Comment [LPW6]: How?
6.4. Market Size The total clean energy venture capital investment in 2010 was $7.85.1 billion n, up 45.7% from 2009 [1611]. Additionally, there are 10,209 green technology companies in California. In each case, investors can benefit from the analysis reports that we will
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generate. It is reported by IbisWorld that the annual market size of energy consulting services is $2.85 billion [23]. Over the last 10 years, the Cleantech Group, a clean technology consulting firm, has provided consultation to 9,000 investors and 6,000 companies [8].
In addition to private companies, government agenciess are potential customers as well. There are 22 states that already have some form of green energy regulations that are based on energy research like the analysis that we will be doing. The federal budget includes $5.4 billion in clean energy research annually [36].
Comment [LPW7]: You alos need to discuss the market size for energy consultants NOT just the market size for green energy. You need to do a bit more research on the market size.
6.5. Competitors Our competitors are firms that are already producing research papers in the green technology area. These include both private companies and universities engaged in clean energy market research. One of the most prominent competitors, mentioned above, is ABS Energy Research who also sells analysis reports online. Two other competitors that sell research reports online are GTM Research and a company called Markets and Markets. Some clean energy companies like Clean Edge Technology and Clean Energy Report offer a different kind of service, by selling subscriptions to access their analysis results on their website, rather than buying reports one at a time. 6.6. Customers We provide our research analysis report services on green technology to many companies who are both developing technology and investing in the research. We plan to be able to
Comment [LPW8]: You must name your competitors, the nature of what they do and in what way they are comprtitors.
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sell to any level of management from top corporate managers down to individual analysts. The customers that are developing technology include existing companies interested in implementing green technologies, small manufacturing companies (potential suppliers), and start-up energy technology companies. Bloom Energy is one example of a start-up company that could use our analysis to help direct their product development. Other examples include BrightSource Energy, a solar company, and GreatPoint Energy, a company working with natural gas.
Comment [LPW9]: Name your potential customers and why they would want to hire you.
Companies that support the research include investors who want to enter into the market of green technology, analysts who are interested to explore information about renewable and clean energy, and consulting companies who are marketing for green technology. Companies in this category include those like Accel and Kleiner Perkins, who invested $50 million in Opower, a clean energy company [16]. Even individual investors like George Soros, who invested $1 billion in clean technology, will be interested in our research [37].
Furthermore, we plan to sell to government agencies aiming either to plan clean energy legislation or to invest in technology development. The California state government is a good example, because they offer large subsidies for solar power, but could stand to benefit by switching to a more effective technology, if one is identified. We plan to be able to sell to any level of management from top corporate managers down to individual analysts.
Comment [LPW10]: Name your potential customers and why they would want to hire you.
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6.7. Cost As founders of our research paper reports company, we must consider several types of costs involved in starting a business, one-time fixed costs, recurring fixed costs, and variable costs. Variable costs are recurring expenses that depend directly on the number of products sold, but we are planning to sell our reports online, in order to eliminate the cost of printing, in addition to supporting our goal of promoting a green environment. Since we are planning to sell reports in digital format, we expect only negligible variable costs, so they are not included in our financial analysis.
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6.7.1. Fixed Startup Cost Part of our fixed costs includes the one-time, non-recurring startup cost. Typically this includes the expenses incurred for purchasing office furniture, computers and initial legal fees. For designing and maintaining our company website, we will be hiring one expert on a contractual basis. This will be a one time job and we do not anticipate any ongoing expenses related to the company website. Table 15: Fixed Startup Costs 1 2 3 4 5 Items Computers and Electronics Furniture Startup Legal Fees Software Website Total Cost ($) 10,000 5,000 2,000 2,000 5,000 24,000
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6.7.2. Fixed Recurring Cost Fixed recurring costs are expenses that will need to be made on a periodic basis, but do not depend on the number of products sold. These are expenses that are incurred for marketing & advertising costs, utility bills for Internet and electricity usage, employee salaries and expenditures on the various surveys that need to be done from time to time. These costs may increase over time as we grow, but are not dependant directly on the number of reports sold. The detailed breakdown of the fixed recurring costs for the company is shown below in Table 16. Table 16: Fixed Recurring Costs Monthly Cost ($) 40,000 16,000 2,000 1,000 1,000 500 500 500 200 200 200 100 50 Quarterly Cost ($) 120,000 48,000 6,000 3,000 3,000 1,500 1,500 1,500 600 600 600 300 150 186,750
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1 2 3 4 5 6 7 8 9 10 11 12 13
Items Salary Benefits (40% of Salary) Rent Travel Legal Advertising Office Supplies Insurance Utilities Internet Maintenance Telephone Other Total
As shown by this analysis, the cost of each report is project to be about $400,000 over a six month period.
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6.8. Price Point We have chosen a price of $1800 for a customer to buy one copy of each research report. This number has been obtainedwas reached by analyzing data ofobserving the price of similar articles reports published in the past and the time we spent with our employees on this particular projectchoosing a price that offers customers a lower cost, while still yielding profits for our company in a reasonable amount of time. We found that we could start with this price and still hit a break-even point at the 1.5 year mark and stay profitable from that point forward.
Comment [LPW11]: Provide references to publications that support your claim of a price point of $1,800. An investor will not simplytake your word.
In general, this our price of $1,800 represents at leastts approximately a 10% reduction in price, per report, but in many cases, up to a 50% lower price. In these cases, we have a significant giving us a price advantage. ABS Research, for example, sells energy reports at an average price of $2,800 [11]. Another company, GTM Research, sells solar research analysis for $1,995 per report to Solar Energy Industry Association (SEIA) members and $3,995 for non-members [24]. The SEIA annual membership dues range from $250 per year for the smallest companies to $55,000 per year for the largest [30]. We found that we could start with this price and still hit a break-even point at the 1.5 year mark and stay profitable from that point forward.Markets and Markets sells their reports for $4,650 each [12]. Our price gives us a clear advantage over these competitors, by offering customers analysis at a much lower cost.
Comment [LPW12]: Provide references to publications that support your claim of a price point of $1,800. An investor will not simplytake your word.
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6.9. SWOT Assessment Evaluating the Strengths, Weaknesses, Opportunities and Threats involved in any project is an essential planning tool. Below is the SWOT analysis for the this particular Green Technology Analysts Company<your company name> . Table 17: SWOAT Assessment Strength Helps to minimize time & cost for conducting similar research Highly effective material at low price Potential for a very large customer base Opportunities Growing popularity of Bloom energy fuel cell market Research on understanding views of the application developers Huge market for low cost and sustainable energy products Weaknesses Little information is available on potential new competitors Few contacts inside the product companies on which we are conducting our research work Threats Competition is rising with more companies coming up in this area of research report publication Maintaining our selling price and the margins when new companies enter the market
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6.10.
Investment Capital Requirements
As this is a research project, we will need to have large sum of money to keep the company up and running during the initial phases. We have estimated an initial investment of $250,000 $275K (see executive summary) to reach our break-even point. This initial cost incurred for this project has been divided equally amongst three team members Alina Adams, Amrita Chowdhary and Vashudha Subbaiah. This money will be used to cover our initial expenses (i.e survey cost, advertising cost, technical resource wedges cost, utility bills for internet and electricity usages) before we reach the break-even point. We will reach our break-even point when total cumulative revenue would covers our cumulative costsinvestment. We estimate this point will be reached when we have sold approx. 600 research reports. This is expected towould be around the 4th quarter of CY 2012. The number of copies sold for each version of the report will initially increase and then eventually decrease as new reportser versions are released. At the break-even point, we will have paid off all our initial costs and will be able to sustain the recurring expenses and our profitability at the same time. A year after our break-even point, wWe are expecting annual revenues of about $1.71 million with an annual profit of $1 million.
Comment [LPW13]: I dont believe you will make $1M in profice on $1.1M in revenues. Think about the definition of profit and revenues and redo your calculations.
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Comment [LPW14]: Please redo. I dont believe your profit number which means this graph will change.
Figure 9: Break-even analysis
6.11.
Personnel
Management The three members of our project team will all participate in the management of our research company. Each team member will have well-defined roles in managing the company - Chief Executive Operations Officer (Alina Adams), Chief Technology Officer (Amrita Chowdhary), and Chief Marketing Officer (Vasudha Subbaiah). All three of us have the necessary skills for managing this company:
Comment [LPW15]: A CEO needs business experience not so much technical experience. Are you really the best person for the CEO position? Rethink this.
Masters degree holder with GPA of 3.0 or above Excellent knowledge in engineering management Excellent technical skills
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Excellent verbal and written communication skills Thorough understanding of computers and theirits operating systems Excellent Mathematical skills
Comment [LPW16]:
We will hire a Chief Executive Officer with more business experience from outside the company. Apart from the management team, we will also need seven experienced employees is with different areas of expertise. Here is the breakdown of these positions: Software Engineer 1 (part time) Technical Engineer 2 IT Engineers 12 (part time) Administrative staff 1 Accountant 1 (part time)
The detailed requirements and job skills for each of the above positions is given below. Software Engineer Will be responsible for designing, developing and maintaining our website. All our reports will be sold online and hence this is a very critical aspect of our company.
Master degree holder in Computer engineering with GPA of 3.0 or above Experienced in HTML, .NET, SQL, PL/SQL
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Excellent technical skills Excellent verbal and written communication skills Thorough understanding of computers and its operating systems Excellent Mathematical skills
Technical Engineer Will be responsible for conducting surveys of the various customers and production facilities related to our field of work. They will also be responsible for analyzing and documenting the information and data gathered as part of this exercise.
Master degree holder in Chemical engineer with GPA of 3.0 or above Excellent technical skills Excellent verbal and written communication skills Thorough understanding of computers and good in MS-Office Excellent marketing skills
IT Engineer Will be responsible for collecting and storing all the data that has been gathered as part of the various surveys. They will also be responsible for maintaining our network, database servers and the web servers.
Master degree holder in Chemical engineer with GPA of 3.0 or above Excellent verbal and written communication skills Thorough understanding of computers and good in MS Office
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Experience in maintaining and designing large scale networks consisting of web and database servers.
Administrative Staff Will be responsible for managing all the issues related to our work place. This includes maintaining our office supplies, calendars etc.
Excellent verbal and written communication skills Thorough understanding of computers and good in MS Office and MS Project
Accountant Will be responsible for all our finances related to our business activities, tax filing etc.
Must be CPA certified Excellent verbal and written communication skills Thorough understanding of computers and good in ms-office Excellent mathematical skills
6.12.
Business & Revenue Model
In order to sell our research paper, we will first need to market and publicize it using the online discussion forums, technical groups, blogs and the social network websites. We also plan to present our work in a few of the technical conferences around the country. This will increase the awareness regarding our product in the research and developer community. Online websites selling goods using the b2b (business-to-
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business) or the (b2c) business-to-consumer models are doing well and we plan to use the same model for selling our research work as well. Additional revenue can be earned by placing advertisements on our website related to the research paper we are selling. These advertisements can be about some of companies selling the product for which we are doing research or another products catering to the same market segment.
Comment [LPW17]: This is NOT a discussion of your Business model. It is a discussion of a marketing strategy. A business model describes the nature of your business and where and how you plan to position the business in a competitive market.
Based on our business model, potential customer information, competitive information and the value proposition of our product, we have decided to sell our research paper at a price of $1800 per copy.We will start operations by selling the initial research report generated during this project. A new report will be generated every six months and the expectation is that the number of reports sold of each version will initially increasese for every new revision and then decrease afterin a couple of quarters. We will keep all previous reports available online, but we expect their sales numbers to drop off as the data gets older. We plan to grow the size of the research staff after the three-year point, and the size of the increase will depend on how well we meet our profit goals.
Comment [LPW18]: How will you sell your reports? Will you sell online after a credic card # is input? Will you accept surface mail orders? What if someone wants to know if they can ourchase a portion of the report. Will you have a customer report support group to answer questions?
While there are competitors in the market, our main competition strategy is our price. We plan to sell reports of similar content and quality at a 35-50% price reduction when compared to our competition. This is a strategy to gain customers and market share initially, while building our company reputation. After our initial success, we
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will have the opportunity to sell reports at a higher price if the decision is made to do so in the future.
In order to reduce printing costs and run a green company, we will sell our reports online only, at first. If we get more requests for hard copies than we expect, we will revisit this decision. We have included the cost of designing the website and will staff software and IT engineers. These will be part-time positions at first, but may need to be changed in the future. Our current plan is to sell the reports as whole units, and questions about the process will be handled by the administrative employee. Orders placed by mail will be accepted, and will be entered into the computer system by the administrative employee.
6.13.
Strategic Alliances/Partners
We are working as a team in developing and marketing our research paper. We do not intend to enter into any sort of partnership with other companies at this time.We have several options for strategic Alliances and Partnerships. While we are currently not planning to form a partnership, we have considered the option and plan to keep it
Comment [LPW19]: This section is not intended to discuss whether you do or do not plan to form partnerships.. This section should discuss who you MIGHT form strategic alliances with if and when the opportunity presents itself OR- your business model fails and you need to find an alternative way to survive. Please update this section.
open in case our business model needs to be restructured. One of the strategic alliances that we have considered is making our analysis available to students at a reduced cost by partnering with university libraries. We would offer a subscription service to university libraries on an annual basis. Students at the university would then have access to our research. This will give them an opportunity to become
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acquainted with our company and provide a form of a trial version that will end at the end of their time in school. Then, when they enter the work force, they will already be familiar with the quality of our work and will be willing to buy new reports at cost.
Another partnership option that we have considered is allowing some of the larger research companies to sell our reports on their websites. They would get a percentage of the sale, but we would keep the pricing such that we still make a profit, although smaller, on the sale of each report.
6.14.
Profit and Loss Statement
Estimated expenses and sales are evaluated in profit & loss statement for Q1-2011 to Q4-2013. (3 Year) Table 18: Profit and loss statement Cumulative Number of Copies / Quarter 0 0 50 105 216 337 507 683 902 1121 1379 1634
Year 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013
Quarter 1 2 3 4 1 2 3 4 1 2 3 4
Cumulative Cost ($) 0 0 214,400 401,150 587,900 774,650 961,400 1,148,150 1,334,900 1,521,650 1,708,400 1,895,150
Cumulative Profit/Loss Revenue ($) ($) 0 0 90,000 189,000 387,900 606,690 913,401 1,229,221 1,623,259 2,017,673 2,482,446 2,940,521 0 0 -124,400 -212,150 -200,000 -167,960 -47,999 81,071 288,359 496,023 774,046 1,045,371
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Figure 10: Profit and loss data for three years As shown in the above graph, we expect to profitable from the 4th quarter of CY 2012. We estimate our profits to be around $1.1 million by the end of 2013.
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6.15.
Exit Strategy
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We expect to break even after the second year and have approximately $1 million in profit for the third year. We will try to grow the profit, but have just started on our venture for publishing research report for various products and solutions. At this time we are expecting our company to make a profit of about $1 million by 2013. We currently have no plans for selling this company or our intellectual property in the next 10 years. At that time we will estimate the value of the company and look for potential buyers along with the right offer price. Ultimately we would be comfortable selling our company along with the related copyrights for around $20 million 10 years from now. Until then our goal is to provide excellent service and material to all our current and future customersa conservative estimate for the next 7 years would be to simply hold the profit constant at $1 million. If we can at least do that, the 10 year profit will be $8 million. If we split this profit 50% to the investors and 50% among the 4 management officers., that represents a $4 million gain for the investors. This is a 1400 % return on the initial $275,000 investment in a 10 year period. That corresponds to better than a 30% annual return over the 10 year period. Considering that this is the conservative estimate for profit growth, we feel that this is a very attractive investment opportunity for investors. That also leaves a conservative estimate of $1 million for
Comment [LPW20]: An investor will want to know all of the different ways they can get their investment badk + significant profit. You MUST also provide a time frame over which an investor can expect to get their ROI. Do some research on how your competitors exit and provide justification about the most likely way your company will exit. You also must provide an anticipated ROI calculation.
each of the management officers as well at the end of the ten year period. At this point, we would consider selling the company for the value of another ten years of
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profits, or $10 million. However, if the profit growth is better than the conservative estimate, we will most likely not be interested in exiting, but rather running the company for a longer term.
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7. Project Schedule 7.1. Gantt Chart
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8. Team and Committee Structure There are three team members: Alina Adams, Vasudha Subbaiah, and Amrita Chowdhary. Alina and Vasudha are both in Engineering Management and focused on the financial analysis. Amrita is in Electronic Materials and Devices and focused on identifying what solar cell and fuel cell technology changes will have cost implications in the future.
Our faculty advisor is Mithal Albassam from the ISE department at San Jose State University. She has taught classes such as Financial Methods for Engineers and has a beneficial background to advise on the financial analysis techniques we are using. Her experience in academia has proven invaluable for the planning and organization of our project and report.
Our technical advisor is Karl Stahl from Tesla Motors. He has a MS in Mechanical Engineering from Stanford University and has worked on various engineering research projects at Stanford. He has provided helpful advice on the sections related to electricity generation technology.
9. Future Work This project report denotes the completion of our first analysis report. Future work in establishing our company involves setting up the office environment and officially
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creating a legally recognized company. Further in the future is effort of generating additional reports. Our plan, as described above, is to schedule one report every six months.
10. Conclusion We have performed a comparative cost analysis in an effort to forecast the future costs of three different alternatives for providing electricity to residential consumers. The comparison is between purchasing electricity from utility companies, using solar panels, and generating electricity with the Bloom Energy Bloom Box. In our analysis we have identified that Bloom Energy has the potential to develop a competitive product. In our cost estimates, we found that in some cases, the Bloom Box is the cheapest electricity source among the three alternatives. However, we have found that the Bloom fuel cell will likely need the right conditions or some form of cost reduction to be able to beat traditional electric companies. The annual cost of using a Bloom Box relies heavily on the price of natural gas, something that Bloom Energy has no control over. If the price of electricity increases more than the price of natural gas, Bloom has the best chances for success. However, we have also identified several target areas that Bloom can focus on, in order to decrease dependence on the natural gas market. If Bloom can eliminate or significantly reduce maintenance costs, then only a moderate purchase price reduction will put Bloom in a good strategic position. Finally, if the Bloom Box is a clean energy alternative that government would be interested in supporting, we recommend considering the option of natural gas subsidies for fuel cell users.
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11. References 11. Adamson, K. (2007). Stationary fuel cells : an overview. Amsterdam: Elsevier. Bakis, R. (2008). Alternative Electricity Generation Opportunities. Energy Sources Part A: Recovery, Utilization & Environmental Effects, 30(2), 141-148. doi:10.1080/00908310600628362.
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Black, A. J. (2004). Financial payback on California residential solar electric systems. Solar Energy, 77, 381-388. 1. Adamson, K. (2007). Stationary fuel cells: An overview. Amsterdam: Elsevier. 2. Bakis, R. (2008). Alternative electricity generation opportunities. Energy Sources Part A: Recovery, utilization & environmental effects, 30(2), 141-148. doi:10.1080/00908310600628362 3. Black, A. J. (2004). Financial payback on California residential solar electric systems. Solar energy, 77, 381-388. 4. Bloom Energy. (2010). Understanding California's electricity prices. Sunnyvale, CA: Bloom Energy. Retrieved August 25, 2010, from http://www.bloomenergy.com/products/resources/ 5. Bloom Energy. (2010). Retrieved from http://www.bloomenergy.com/ 4.6. Bowman, M. S. (2003). Applied economic analysis for technologists, engineers, and mangers second edition. Upper Saddle River, NJ: Pearson/Prentice Hall. 7. Charters, W. W. S. (1991). Solar energy: Current status and future prospects. Energy Policy, 19(8), 738-741. 8. Cleantech Group. (2011). Retrieved from http://cleantech.com/ 5.9. Bloom Energy (2010). Understanding California's Electricity Prices. Sunnyvale, CA: Bloom Energy. Retrieved August 25, 2010, from http://www.bloomenergy.com/products/resources/ 6.Bloom Energy (2010), Retrieved from website: http://www.bloomenergy.com/
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7.Costs of sSolar photovoltaics. Retrieved Oct 22, 2010, from m Website: http://www1.eere.energy.gov/tribalenergy/guide/costs_solar_photovoltaics.html 8.10. De Guire, E. J. (2003). Solid oOxide fFuel cCells (Released April 2003). Retrieved from m website: http://www.csa.com/discoveryguides/fuecel/overview.php 11. Electricity market research. (2011). ABS Energy Research. Retrieved from http://www.absenergyresearch.com/energy-market-research-reports/electricitymarket-research-reports/fullreport-databaselisting 12. Energy and power market research reports & consulting. (2011). Retrieved from http://www.marketsandmarkets.com/energy-power-supplies-market-research4.html 10.13. European Photovoltaic Industry Association. (2010, November 28)). Application and classification of different types of solar panels. Retrieved from http://www.epia.org/publications/epia-publications.html
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11.14. Giresunlu, U., Gunerhan., H., & Hepbasli, A. (Mechanical Engineering Department, Faculty of Engineering, Ege University, Bornova, Izmir, Turkey2009).; Environmental impacts from the solar energy systems. Hepbasli, A.; Giresunlu, U. Source: Energy Sources, Part A: Recovery, uUtilization and eEnvironmental eEffects, v 31(, n 2)2, p 1131-138, January 2009.
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11.15. Haftl, L. (2007, April 20, April 20). Measuring new equipment return on investment (ROI). American Machinist. Retrieved from http://www.americanmachinist.com/304/Issue/Article/False/52770/Issue 16. Kuo, I. (2011). Record $7.8 billion year for cleantech venture capital in 2010, but two quarters of decline. GreenBeat interpreting innovation. Retrieved from http://venturebeat.com/2011/01/07/record-7-8-billion-year-for-cleantech-venturecapital-in-2010-with-declines-in-second-half/ 17. Makower, J., Pernick, R., & Wilder, C. (2007). Clean Energy Trends. San Francisco, CA.
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13.18. Ostwald, P. F., & McLaren, T. S. (2004). Cost analysis and estimating for engineering and management. Upper Saddle River, NJ: Pearson/Prentice Hall. 14.19. Pearce, D. W, Atkinson, G., & Mourato, S. (2006). Cost-benefit analysis and the environment: recent developments. Paris: Organisation for Economic Cooperation and Development. 15.20. Photovoltaics., (n.d.). Retrieved Oct 22, 2010, from Wikipedia Web site: http://en.wikipedia.org/wiki/Photovoltaics 16.21. Pogutz, S., Russo, A., & Migliavacca, P. N. (2009). Innovation, markets and sustainable energy: the challenge of hydrogen and fuel cells. Cheltenham, UK: Edward Elgar. 22. Power economics. (2011). GE Energy. Retrieved from http://www.gepower.com/prod_serv/serv/energy_consulting/en/power_economics .htm 23. Scientific, technical & economic consulting. (2010). Ibisworld Industry Reports. Retrieved from http://www.ibisworld.com/industry/default.aspx?indid=1428 24. SEIA/GTM research US solar market instight. (2011). Retrieved from http://www.gtmresearch.com/solarinsight 25. Sen, Z. (2004). Solar energy in progress and future research trends. Progress in energy and combustion science, 30(4), 367-416. 17.26. Siemens Energy. (2010)., Retrieved from the website: http://www.energy.siemens.com/fi/en/power-generation/fuel-cells/principlebehind-technology.htm
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18.27. Smil, V. (2010). Energy myths and realities : bringing science to the energy policy debate. Washington, D.C.: AEI Press . 19.28. Smithsonian National museum of American History. (2010)., Retrieved on March 15, 2010, from website: http://americanhistory.si.edu/fuelcells/
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20.29. SSEN Zekai. Solar energy in progress and future research trends: Progress in energy and combustion science Y. 2004, vol. 30, No. 4, pages 367-416 [50 pages] [bibl. : 150 ref.]: Elsevier Science 21.Solar Energy Costs., (2010n.d.). Retrieved Oct 22, 2010, from Solarbuzz Web sitem: http://www. solarbuzz.com/StatsCosts.htm 30. Solar Energy Industries Association membership. (2011). Retrieved from http://www.seia.org/cs/membership 22.31. Technology Roadmap. (2010). , Solar photovoltaic energy. Retrieved from http://www.iea.org/papers/2010/pv_roadmap.pdf 23.32. Types of Fuel Cells. (2009)., Retrieved on September 30th, 2009, from website: http://willyyanto.wordpress.com/2009/09/30/types-of-fuel-cell-pros-and-cons/ 24.33. United States Energy Information Administration. (2010). Annual Energy Outlook 2010 With Projections to 2035 (DOE/EIA-0383(2010)). Washington, DC: U.S. Department of Energy. Retrieved from http://www.eia.doe.gov/oiaf/aeo/index.html 25.34. United States Energy Information Administration. (2010). Energy prices by sector and source. [Data file]. Retrieved from http://www.eia.doe.gov/forecasts/aeo/early_prices.cfm 26.35. United States Energy Information Administration. (2010). Residential average monthly bill by census division, and state. [Data file]. Retrieved from http://www.eia.doe.gov/cneaf/electricity/esr/table5.html 27.36. United States Office of Management and Budget. (2011). Department of Energy. Washington, DC: U.S. Department of Energy. Retrieved from http://www.whitehouse.gov/omb/budget/Overview 1. 37. Whitney, L. (2009). Financier Soros to invest $1 billion in clean tech. Green Tech. Retrieved from http://news.cnet.com/8301-11128_3-1037394654.htmlWilliam W. S. Charters. (1991). Solar energy: Current status and future prospects, Energy Policy, Volume 19, Issue 8, October 1991, Pages 738-741, ISSN 0301-4215, DOI: 10.1016/0301-4215(91)90043-N.
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29.(1991). Guidelines for the economic analysis of renewable energy technology applications : based on the findings of the International Energy Agency Workshop on the Economics of Renewable Energy Technologies, Chateau Montebello, Quebec, Canada. Paris: The Agency.
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Cost Analysis Comparison of Bloom Energy Fuel Cells

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Cost Analysis Comparison of Bloom Energy Fuel Cells

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Cost Analysis Comparison of Bloom Energy Fuel Cells with Solar Energy Technology and Traditional Electric Companies

Alina Adams Amrita Chowdhary Vasudha Subbaiah Amrita Chowdhary

2011 Alina Adams Vasudha Subbaiah Amrita Chowdhary

ALL RIGHTS RESERVED

SAN JOSE STATE UNIVERSITY

by Alina Adams Vasudha Subbaiah Amrita Chowdhary

APPROVED FOR THE DEPARTMENT OF GENERAL ENGINEERING

APPROVED FOR THE UNIVERSITY

by Alina Adams Vasudha Subbaiah Amrita Chowdhary

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Figure 1. Average annual US retail electricity prices in three cases [33]

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Figure 2. Fuel Cell Concept Diagram. [5]

Figure 3. Bloom Energy Fuel Cell Design. [5]

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Mobile unit can be moved easily

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3.2.4. Types of Fuel Cell: Pros and Cons

3.2.4.1. PEMFC (Proton Exchange Membrane Fuel Cell)

3.2.4.2. DMFC (Direct Methanol Fuel Cell)

3.2.4.3. SOFC (Solid Oxide Fuel Cell)

3.2.4.4. MCFC (Molten Carbonate Fuel Cell)

3.2.4.5. PAFC (Phosphoric Acid Fuel Cell)

3.2.4.6. AFC (Alkaline Fuel Cell)

2 DMFC (Direct Methanol Fuel Cell (DMFC))

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MCFC (Molten Carbonat e Fuel Cell (MCFC))

PAFC (Phospho ric Acid Fuel Cell (PAFC)

AFC (Alkaline Fuel Cell (AFC)

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Can use a variety of catalysts

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3.2.5. Fuel Cell Cost Components 3.2.5.1. Initial Cost

3.2.5.2. Maintenance Cost

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Package Cost ($/kW) 3120

Total Installation Cost($/kW) 3800

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Table 3. Fuel Cell Costs: Price per kWh [32]

Solid Oxide Fuel Cell + GT Hybrid (SOFC-GT)

5 MW:, 0.0954 $/kWh

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3.3. Solar Energy 3.3.1. Solar Energy Introduction

3.3.2. Types of Solar Energy

3.3.2.1. Passive Solar Energy

3.3.2.2. Active Solar Energy

Additionally, there are three types of active solar energy.

3.3.3. Solar Energy Pros and Cons:

Residential systems are (typically up to 20 kW systems foron individual homes.)

Ground.) Off-grid applications are (varying in sizes.)

department of energy, is illustrated in Figure 4, Figure 5, and Figure 6.

Figure 4. PV System Efficiency. [5]

Figure 5. PV System Capital Cost [5]

Figure 6. PV Cost of Energy [5]

Typical Installation Size