Bloom Energy Corporation (BE) Earnings Call Transcript & Summary

And good morning, everyone. We're back with our latest panel here. So we're going to pivot a little bit from some of the big industrial gas companies here, and we're going to move now back to the up and comer in the space, we'll call it Bloom Energy with Scott Reynolds, Managing Director. But admittedly, Scott, I think, goes by another title called hydrogen guru over at Bloom and, frankly, has been a longtime afficionado of the subject and is frankly exceptionally well spoken on it. So for those who've got questions, ping us any which way you'd like, e-mail, chat, Veracast platform, however it works with you.

Now with that said, Scott, with that introduction, no pressure, do you want to describe in brief the fight? What is Bloom, right? I think a lot of people are familiar with some of these larger companies. They may not be familiar with Bloom's fuel cell technology today. And then subsequently, how do you position that technology? What is the aim here to provide a hydrogen...

Julien, just cut out, maybe I'll pick it up. So Bloom is, by revenues, the largest fuel cell company in the world. So much progression, we're bigger than our 6 largest competitors combined. So big, scaled-up fuel cell company. The company got started by a group of NASA scientists who had been developing lots of different kinds of fuel cells, for example, for the Gemini program and for the Mars mission. And KR Sridhar, our founder, designed fuel cells to enable the hydrogen economy on Mars, making hydrogen and also running on hydrogen. And so the company has been around since the early 2000s. Our first product was designed actually to run on natural gas rather than running on hydrogen because hydrogen back then, way too expensive. We've built a huge platform with 500 megawatts of these fuel cells installed around the world. We've deployed billions of dollars of this equipment. And we're at the point today where, because of our scale, we're deploying new capabilities of the technology, quite frankly, the capabilities that KR was working on back in the Mars mission days to both make hydrogen run on hydrogen, make all different kinds of hydrogen. And what's great about the strategy we've deployed to scale up and get the cost down is we're really now in a position to capitalize on all that scale to really bring a host of hydrogen solutions into the market, not only green hydrogen, which everyone is very focused on, the electrolyzed water, but things like pink hydrogen, which is when you integrate it with nukes, there's going to be probably more new power in the world going forward. And also things like blue hydrogen, which is when you use carbon capture, even gold hydrogen was something that we've created when you put in biogas and you put the resulting CO2 underground. So we're really focused on lots of different kinds of hydrogen solutions right now taking our scaled-up platform. And what's great about that is the costs look really attractive now that we've really scaled up. So we're really excited about this. We've -- I've been working on this for kind of 20 years here. And we think that as renewable prices continue to go down, that there's going to be, as we said in our Hydrogen Day a couple of weeks ago, we think this opens up a $300 billion TAM for us in the next couple of years. So Bloom is a company that's really capitalizing on a long history of executing on a growth trajectory to bring down costs and using that reduced cost platform to deliver a host of hydrogen solutions in this developing hydrogen economy. So it's great to be here. Really excited to talk to you guys about that. Happy to take questions and get into the details here.

Hey, I don't know if Julien has reconnected yet. I'm just going to go for some questions.

[indiscernible] go for it, Aric.

There he goes. But maybe, first and foremost, we've been hearing a lot of discussions throughout the conference with a lot of focus around PEM versus alkaline. So you guys have your solid oxide fuel cell electrolyzer. Can you talk about your SOFC electrolyzer and how that compares versus PEM and alkaline, where your core advantages are, I guess, the nuance around much higher efficiency? But are there specific applications where SOFC is particularly well advantaged relative to [indiscernible] that have been discussed at the conference? And are there certain situations where SOFC would be less advantaged?

Sure. So first thing to remember is that a solid oxide electrolyzer is a solid oxide fuel cell just running reverse. Batteries can charge and discharge. So it's sort of like that where in one direction, we make power, and we put power into the same fuel cell and turns into electrolyzer. So we -- our advantages in making power are also some of our advantages in making hydrogen. The biggest of those, as you mentioned, Aric, is higher efficiency. So depending on the application, we think we can be between 13% and 31% more efficient at making hydrogen, and that means we make better use of the kilowatt hour that you put in, and that means a lower cost of produced hydrogen come out. So fewer kilowatt hours per kilogram of hydrogen. We also have a huge amount of scale and experience, which we can deploy to really going faster. And so we have a big manufacturing footprint. We have a very rigorous supply chain and quality program. As you scale up this stuff, it is hard. We've already done that on our fuel cell platform. Because of the scale-up and the nature of the technology, no precious metals, we have a lot of friends that work in the PEM industry, and I'll tell you that one of the challenges is precious metals in the actual fuel cells themselves, things like platinum and iridium, iridium being one of the rarest things on earth. We're getting the cost out of that, does have challenges associated with it. We don't have those challenges. So when you look at our -- the pace of our cost reduction on fuel cells, and therefore, the pace of our cost reduction on electrolyzers, we've been going about the same pace as solar, which is a 28% learning rate. Every time our cumulative volumes double, our costs have come down 28%. So that is a huge advantage. It's almost twice as much as other kinds of fuel cells like PEM when you look at the data. And then the final point that's really differentiated is we have a lot of flexibility, which gets into your use case example. So there isn't just one niche where we think that solid oxide is going to be a winner. There's actually a whole host of applications where we think solid oxide outperforms really when you dive deep into the numbers, and I head up our structured finance team in addition to the hydrogen work. And so we've done a deep dive on the numbers, really modeling out our technology and other folks' technology in a very rigorous way. And as we do that, we see 6 things where we think make a lot of sense for us to really lean into. So the first thing is making green hydrogen. So especially as renewable prices are relatively high today versus where they're going to be in a decade, better efficiency, like I talked about, gives you a lower cost of produced green hydrogen. As we've run the numbers, we think that number looks like between 9% and 17% better versus other technologies. So the first market is...

And Scott, actually, if I can jump in there real quickly, to put you on the spot. When you talk about better efficiency, because I -- we were talking about this earlier. I want you to make the point very succinctly. What is that dollar per kilowatt equivalent, right? Because your fuel cell is more expensive than your electrolyzer solution in theory. Talk about that because we hear about these other PEM costs that are a lot lower than what you guys talk about today, but elaborate on that.

Yes. No. That's a really good question. I was going to make that point. So the thing to remember, and this is critically important, when you're doing the math on the cost of an electrolyzer, here, I'm talking about capital cost, is that the per kilowatt capital cost, because people always talk about per kilowatt, is different for an electrolyzer than a fuel cell. And the reason for that is when you say per kilowatt, for a fuel cell, you're talking about per kilowatt of power. That's power out. And as I said before, when you run an electrolyzer, you're doing the reverse. You're putting power in. You put in more power than you take out, and it turns out that factor is about 2.4. So if I take my cost today -- we talked about this on our Hydrogen Day in detail. If I take my cost today, just rounding is about $2,400 a kilowatt. And given that re-rating alone gets me to $1,000 a kilowatt electrolyzer. And then in addition to that, I can take out some equipment that I would use in a fuel cell, things that process the natural gas, for example. I'm not running on natural gas. I don't need that. I pull that out and a couple of other things, I'm down to just today about $900 a kilowatt for an electrolyzer. We talked about this in Hydrogen Day. And so we think with some more time, some more scale, some more cost down, we said this on Hydrogen Day, we have a lot of confidence we get under $600 a kilowatt for capital cost for an electrolyzer. And most of that, as I said, is just the convention on re-rating in addition to the steep learning rate that I'm talking about. So that's why we're so excited is when you run the math and you look at the delivered cost of hydrogen with that equipment, that's where you get better cost per kilogram of delivered hydrogen or levelized cost of hydrogen as we've run our analysis. That's what I said before, it's about 9% to 17% better versus competitive technologies for green hydrogen. And it doesn't take a lot of engineering to do that. Just takes a re-rating that happens as a function of how you operate the price.

Well, talk about that, Scott. I mean that's important to you. I mean where are you in commercializing this, getting this product to market, right? Because that's so critical. And obviously, if you build it, they will come. The demand is coming, I suppose. But really, where are you guys in getting this product to market to offer it? And when you say, for instance, I'm just going to pick on the number you said, $900 a kilowatt, I think, you said today. Is that something you could deliver? And how quickly, right? And how does that compare today, that 9% to 17%?

Yes. So let me describe what it takes to get a solid oxide fuel cell turned into a solid oxide electrolyzer. And the quick answer is not a lot, and a lot of it is just flowing stuff out. Like I mentioned, the diesel tanks where we used to process the natural gas, don't need those. Just pull them out. And then what you do need is power electronics that's bespoke for electrolyzers. We have in-house power electronics design teams. They're fantastic. They'll do a good job. That's not hardcore engineering. It's blocking and tackling. We need things like a vaporizer to put in there. That's not hard technology. So the operationalizing of going to -- from a fuel cell to an electrolyzer is very kind of -- I won't say prosaic for my engineering colleagues. But in terms of making a fuel cell work in the first place, that's hard. Turning a fuel cell into an electrolyzer is not hard. So that hardware is something that we've got a lot of familiarity with already. And in fact, our early systems that we built back in the early 2000s made hydrogen. So if you go back and you look at our hydrogen data, there's a picture of our CTO, Venkat, standing next to a system that made hydrogen. So this is not a lot of engineering. We're talking to partners about this right now. We're demoing the stuff to make sure we really understand as we scale it up. And as we make it, we make it with quality, we make it with regularity. We use the same points of assurance and so forth and working out the supply chain. So this is easy stuff to do. You're going to hear more about our demonstrations next year and what those demonstrations look like and in what applications. But going back to the applications question, there's a few others that are worth talking about that I think are really exciting and high potential and also where there are economic advantages to use [ them. ]

Actually, do you want to talk about that for a quick second? I mean just to preempt it. I mean what are the niche applications that work best for your solid oxide solution relative to PEM, right? And I'll give you a leading one, right? There's been discussion about, for instance -- well, you know what, I don't want to lead anything, but you could talk about the key dynamics of one versus another, and you run with it.

I'll tell you the other kind of 5 that we're really interested in. One of them is integration with nukes. So one of the advantages that solid oxide has is the up rates of high temperature. And if I can get that heat from somewhere else, then my efficiency advantage that I mentioned before goes up. So if I can integrate it with nukes, that gets me what we think is about 30% efficiency advantage versus other kinds of electrolyzers. And so when I look at what's called pink hydrogen, pink hydrogen being when you put in power, not from renewables, but from new power, which is also 0 carbon, we think that we can be 16% to 24% more cost advantageous running pink hydrogen. And that's because I can get excess heat from a new plant. I integrate that work. I integrate that heat. There's a little bit of extra cost to do that heat integration work that's baked into our model. And because of that, we think that we're looking at as low as, depending on the cost of power, as low as $1.38 kilogram hydrogen -- pink hydrogen by 2030. So that is game-changing number in terms of making the hydrogen economy go. So that's really exciting. We're talking to partners about that right now. There's a lot of academic literature about really tapping into this advantage for solid oxide technology with the advantage of the heat you can't get with PEM or alkaline because they run at lower temperatures, so it doesn't help. There's also other cases where we think heat could matter, places like steelmaking where steel mills in Europe, for example, might need zero-carbon hydrogen. If I can take that heat, same kind of advantages in terms of efficiency and levelized cost of hydrogen. So that's another use case where pink hydrogen -- we don't see anybody else competing there. And that's a really big deal because there's a lot of new power in this world and a lot of people say you need more nukes for decarbonization. So that's a really interesting example. There's also other examples in transportation, for example, where if you're going to make on-site hydrogen, you imagine a gas station that has a power feed. So you're taking grid power that's increasingly renewables, and you're turning it when there's excess power, or even when there's not, into stored hydrogen so you can, say, refuel a long-haul truck. Distributed power is going to be more expensive than wholesale power so the price of the power is higher, so the value of the efficiency is higher. And that's a market where hydrogen value is also higher because transportation fuel, say, at $4 a gallon of gasoline is equivalent to $4 a kilogram of hydrogen equivalent. So if you can get to, say, $2 a kilogram of produced hydrogen, then you've got a real cost advantageous, cost competitive solution there. And our higher efficiency in that application, we think, is a real advantage. And the final thing I want to talk about is actually using natural gas to make hydrogen. But if you equip it with carbon capture, you can also make zero-carbon power, and that's a place where we actually do this today when we make electricity. And we've announced that we're introducing a carbon capture module that grabs the CO2 that allows us to put that underground to make low-cost blue hydrogen. We actually think that for blue hydrogen that we can beat competitive technologies by something like 20% and make $1 a kilogram blue hydrogen with carbon capture. And if you layer in some biogas, that makes that carbon negative. We think we can do that for $1.30 a kilogram by 2030, which is 50% more efficient than other kinds of things like BECCS or bioenergy with carbon capture. So across the board, all these different kinds of applications, all these different niches, we think we have strong economic advantages in these different markets.

Interesting. All right. So let's talk about this. So when -- let me come back to this. How do you think about the scaling of this technology, right? And then there's a little bit more about your go-to-market, et cetera. I mean what applications do you see first, whether that's an alignment like the Venn diagram, your technology advancement and advantages relative to what the marketplace demands today, right? I mean is this the trucking opportunity? Is this the rail? Is this -- I mean, run for it. Tell me, where do you see the most key opportunity.

Well, what we are -- there's obviously a lot of stuff that we haven't announced, which is really exciting. But let me talk about what we have announced that's really cool. So the first thing to think of in hydrogen is that there are a lot of folks early days saying, "I want hardware that can run on hydrogen. I'm going to use hydrogen to decarbonize power grid, for example. I need power assets that can run on hydrogen." And that's one of the reasons we've been so focused on Korea as a market. The Koreans are doing a lot to really drive on decarbonization because they don't have the solar and wind resources that the U.S., for example, has. So we have a fantastic partner in SK, one of the biggest companies in Korea. We have done a ton of business in Korea with SK. And we have, this month, our shipping hardware that will run on 100% hydrogen to Korea. So that's happening today. And we see all sorts of applications in Korea where more and more, they're pushing fuel cells for decarbonization, they're pushing on hydrogen. So we think that's really impressing that hardware works. It either has shipped or is close to shipping, and it's shipping this month. And so that's happening right now. And that takes our existing hardware that today can run on 50% hydrogen. We've made some slight modifications so it can run on 100% hydrogen. So that's a real impressing thing, and we expect a lot of focus on 100% hydrogen power in Korea. So that's really impressing. The other thing that we've announced publicly is that we have a partnership with Samsung Heavy Industries to build powertrains for surface ships. And what's neat about this, it kind of tells you the story of how we see this space evolving where the initial interest has been on -- if I can just run a ship on LNG, which a lot of tankers already have on board, I can dramatically cut my emissions and meet the maritime standards for decarbonization and air quality going out into the future. We're working on that now, and we've announced that. That hardware is in development. It's got a little bit of a slower cycle time because with all the qualifications it has to go through. But what's neat about that is that when we -- whether we start running on natural gas or a blend of hydrogen and natural gas, as you know, every 5 years or so, we take our power modules back to the factory. We refurbish them. We put them back out in the field. We recycle or refurbish almost all the content in there. And as we do that, we can make this -- tweak engineering changes. That thing is upgradeable to hydrogen. So you can imagine a shift that might start off on natural gas, but when the price point is there on hydrogen, boom, I switch out, and then my surface ship goes from running on -- goes from running on natural gas to hydrogen or even ammonia, depending on what the economics look like. So this kind of flexibility of the hardware is something that I just mentioned is one of our 4 distinct advantages, and that really comes to play in some of these things that are happening live. But behind that, there is a lot of activity going on around making electrolyzers, around making blue and gold hydrogen with utilities. All this stuff, quite frankly, my dance card is very full, having conversations about which of these is going to happen first. And so I've told you what we said publicly, but a lot of this other stuff is close behind it.

Now let me ask you to clarify that, if I can.

Sure.

Just in brief -- all right. So what about ammonia as something that you guys can use as well in the context of shipping here? We've heard about it earlier. Can you talk about that? And also what about the -- what about all the heat with solid oxide cells? I mean how problematic is that or an opportunity is that in the context of electrolyzers or fuel cells, if you can speak to it a little bit?

Yes. So let me touch on heat first. So the neat thing about heat is that, especially if we're making hydrogen, that the heat is a -- it's a source of energy. So we can use the heat in order to make more hydrogen. And that's when I was talking about the pink hydrogen, that's something that we can definitely do. And also, like I said, it's an application that works in things like industrial processes like steelmaking. So if there's a source of heat, we can utilize that heat and make more hydrogen. But there are other ways of actually making heat as a byproduct of making power where we can do combined heat and power as well. So we actually have a hardware capable to capture some of the byproduct heat to do CHP. Early on, the applications for heat were kind of limited and so forth. So we haven't really focused on that as a business, but that capability is there. And that kind of -- the heat really tells the story about the flexibility of the platform so that I can adapt it to any given situation for what the customer wants. So if the customer wants heat, we can give the customer heat. If the customer has heat like in steelmaking, we can use that heat. And so on the ammonia point, it is -- it's unclear whether ammonia or hydrogen will be the sort of fuel of choice for long-haul transportation. There can be other organic hydrogen carriers that are ways of utilizing hydrogen as a molecule. The neat thing about solid oxide, for folks to know, is that whether it's hydrogen or it's -- we've even historically looked at military logistic fuels, diesel, methane with higher ethane content in it, carbon oxide, these are all fuels for solid oxide fuel cells. So they run at high temperature. So they sort of gobble up and easily convert a lot of different fuel types into energy. Even the hydrogen today in most of our fuel cells run on hydrogen because they take natural gas, we turn it into hydrogen and run on that. So solid oxide as a platform technology is really neat because it can operate on a variety of fuels. Whereas to go to the question earlier about PEM, PEM is really -- really needs pure hydrogen to operate as a fuel, which is why you don't see it much in applications like for baseload distributed generation. So the flexibility of solid oxide means it can run on a variety of fuels. It can output a variety of output, whether power or hydrogen, which really is neat, because the core Bloom strategy, to come back to this, is all these applications turn into volume opportunities for us. We picked distributed generation first to really get our volumes up, to get the cost down, and we've done that. Like I said, a 28% learning rate, which is right on par with solar. Now that we've done that, all these different capabilities turned into different volume opportunities for us, which we talked about on Analyst Day yesterday. And the more volume we get, the more cost down we get. The more cost down we get, the more cost competitive we are and the more volume it creates. So KR, our CEO, likes to talk about this as the flywheel because good thing happens in terms of cost, and a good thing happens in terms of volume up, and a good thing happens in terms of getting more customers. And that's really what we've been doing over the last 10 years of commercialization, is to drive out cost of the platform, to increase new pieces of functionality and to use that to get more customers to drive more costs out of the platform, which is why when you go and you look at, and KR talked about this in his comments at the Analyst Day yesterday. When you look at the academic literature about solid oxide, there's been a ton of excitement about it because of this very thing, lots of applications and low-cost platform. And what's neat about where we are today, and quite frankly, if you're looking to buy Bloom stock, what's neat about it, is we've done all the hard work of getting this stuff operationalized, not only making the hardware operational, but then building the factories and scaling it up and getting the quality to be there. And so now that we're at this point today, we're starting to introduce these new applications, which will drive further volume potential for us.

Aric, do you want to go?

Yes. Scott, so a quick clarification and a few follow-up items here. So unlike PEM, your SOFC fuel cells are able to run on ammonia, just as a clarification, yes?

Yes.

It sounds like yes, but...

Yes. [indiscernible] but that's right.

Okay. I just wanted to confirm that. And do you have any specific views on the pros and cons of using ammonia versus liquid hydrogen for long-haul transportation, like, for some maritime opportunities because we have folks on both sides giving their respective pitches. Curious to hear if you have any perspective there.

Yes. I think what's going to happen is the economics will dictate how this plays out. Like, all of our customers today, when we're looking -- when we look at the solutions that work, it does come down to economics, which is why we've picked specific niche applications, large applications with lots of volume potential. Like I talked about, we see a $300 billion TAM from this. So these are -- when I say niche, these are not small markets. But as we've done our analysis, we're focused on what's going to be economically advantageous to us and to users. And so when it comes to what a surface ship will run on, there's a lot to play out in terms of what does it cost to move hydrogen round? What are the processing costs for ammonia? And then there's a lot to learn about operating in both fuels that we just don't know today. And that's why rather than pick a specific thing today, our point of view is you learn a lot when you scale up. You learn a lot that you expected to learn, then you learn a lot that you don't. So flexibility -- or if you think this way like I do, optionality is really valuable when the opportunity is high and the unknowns are still relatively great. And so that's why we really focus on the flexibility of our platform. So independent of what you want to run on, we can [ do it ] and we -- because of our scale, we think we're going to be able to do it economically and more efficiently, which means more economically than other application or other kinds of fuel cells.

Got it. And then just some clarifications on SOFC as a technology from the electrolyzer perspective where -- I guess, not SOFC, just call it solid oxide electrolyzer. Can your solid oxide electrolyzer withstand the intermittency of green power input? That was something that a lot of the PEM electrolyzer folks are emphasizing as a unique advantage for them. And separately, is SOFC electrolyzers scalable? Or is it better suited for smaller applications, I call it, on a distributed basis where efficiency is more valued as you're alluding to earlier?

Yes. No. Those are 2 really good questions. So the quick answer on intermittency is it's fine for us. And that's for 2 reasons. One is that we can -- what's technically called load follow. So we have the capability to do that. And what's critical is that it does take us a while to heat our systems up. They're on high temperature. But once we've done that, we have a very, very fast load following capabilities, and we also can drop load really quickly. So we've talked to utilities. We've also had this -- quite frankly, it's a misconception, and it just comes from not knowing how to operate the hardware. We say, guys, we can do this. If you tell us you don't want to be electrolyzing, we'll turn the thing off, and we'll just go into what we call hot standby them. It sits there, and no problem. The other reason we can do this is because it's relatively easy to predict when the solar -- when resource is going to be there. So if we want to -- if it takes us a couple of minutes to come back to temperature, that's no problem because the thing is generally hot. It's very well insulated. So it has the capability to respond. So the idea that the fast cycling is an advantage for other technologies is maybe old understanding. So that's the answer to the first question. With respect to the scaling, what's neat about the platform is we can make a couple of hundred kilowatts. We can make a couple of hundred megawatts. It's the -- it's like saying that a computer can't be a data center. Like, a data center is just lots of computers. So a huge gigawatt size power plant running on natural gas with carbon capture, let's say, which is something that we've modeled a lot, that's the same Energy Server, just lots and lots of them, just like a data center's lots and lots of blade servers. Same thing. So that ability to scale up and scale it down and be modular is actually something that our utility customers are very, very interested in because the same hardware can be powering 1 gigawatt plant, but it could also be 5 megawatts at a substation. So scalability, yes. Ability to load follow and deal with intermittency, absolutely.

Okay. And one last one around -- yes. Let me just -- first, so you were discussing some of your partnerships earlier with SK obviously as well as Samsung. Can you just talk about how you think about further strategic partnerships? We're hearing a lot about that throughout the conference. What would you be looking to add through potential partnerships here?

What would we be looking to...

Like, what kind of functionality is the value, which you'd be looking to add that you don't -- or are currently looking to, like, integrate into your capabilities that already exist via partnerships? So obviously, like you have SK, you have Samsung already. What else are you -- what will you potentially be looking for in other partnerships?

Well, let me tell you what's great about our SK partnership, and it's something we're certainly looking to replicate in other ways in both different parts of the world because we talked to -- we just hired a fantastic ex-GE exec as our Head of International Business Development, Azeez Mohammed. So we're looking to replicate partnerships internationally. But what's great about SK is that there's -- we've moved real business with them very, very quickly. So there's been huge amounts of deal flow in a short period of time. So we're solving a real need for them. So we look for partners that have real problems that we can address and that have scale, that think big like we do. So the scale thinking and the real business to do in the near term, that's a keen interest to us partnership-wise. They also do a lot of logistics in-country. So things like actually constructing sites, SK will do, which is nice for us because it gives us revenue predictability. We ship an asset, recognize the revenue, and they do the rest. So that's fantastic. And so they do a lot of the kind of in-country work. So that's great. But they also have a very entrepreneurial, forward-thinking mindset about how the world is going to look like in the next 5 or 10 years. So we're looking for partners that are thinking about the future of hydrogen, for example, and looking at specific applications where the economics make sense and where, if we can get some demonstration done, then we're ready to deploy at scale. So also looking for partners that are kind of inventing the future together, like we are with SK in Korea. So those are the kind of the 3 ingredients where there's real business to do today. They take some of these logistics and infrastructure work that give us predictability and give them a source of revenue. And then there's collaborative work about inventing the future together. And that's true of SK, the inventing the future together also looks a lot like Samsung. So those are the kind of partnerships that we're discussing right now with folks. And that's again where we see more scale coming from because partner -- big partners like SK give us a lot of scalability and repeatability in applications where we think the numbers are.

Excellent. Hey, listen, I just want to go back, I get a question here coming in. And I think you can clarify this. So you talked about a 2.4 ratio on efficiency. So what exactly are you saying? Is that the efficiency ratio of what you get? All right. Sorry. Clarify that because some of the details...

Yes. I'm going to explain it again. It's a little bit technical. So if I have a fuel cell that's rated, say, just make the math easy, 1 megawatt. So what does that mean? It means I put in fuel and I get out 1 megawatt of electricity. So if I take that same hardware and, I say -- and we're going to run in reverse, I'm going to put in power and get out hydrogen. And the question is, what's the rating of that device? It's not 1 megawatt because you rate an electrolyzer in terms of its input power. And as it turns out, the ratio of the 2 is about 2.4. So that electrolyzer, instead of being 1 megawatt, would be 2.4 megawatts. So -- but it basically costs the same. So if that's a $2,400...

Can you talk about the efficiency then? So in terms of the efficiency of -- on the electrolyzer front, what's the efficiency of converting that megawatt inbound into outbound product, that is, in this case, it's just hydrogen?

Yes. So the -- so what we've said is that as you look at the electrolyzer efficiency that it's going to be, depending on what application we're talking about, 13% to 31% more efficient than some of these other technologies. We haven't given specific guidance about exactly what our efficiency is going to be because we're looking at a relatively small range. You'll hear more about exactly what it will be from us next year. But we have looked at what we think it's going to look like as we scale up, and that's where that efficiency advantage comes from. And so as we complete more of our testing, we'll be more clear about exactly what that's going to be as we put it into our public spec sheet. But what we do know is when we look at others, which also have a little bit of a range, that it's going to be better by that percentage.

But just to clarify, so what is the -- because I think we're getting confused about the efficiency. All right. So there's -- 2.4x is better in the electrolyzer conversion versus the fuel cell conversion in the power.

Yes. Two things. Think one is rated power, which dictates my cost per kilowatt. So that's what I just gave the megawatt versus 2.4 megawatts. The other one is the efficiency with which you turn that electricity into hydrogen. So think about that if you think about power as the heat rate for hydrogen. So it's -- the metric would be kilowatt hours in per kilogram of hydrogen out. So those are 2 different metrics. One is a function of what does it cost. The other is a function of what its heat rate or efficiency level is at turning power into hydrogen. They both have an impact on the levelized cost of hydrogen because one is a function of what do I have to pay for the hardware. The other is what is my fuel cost in terms of the power I put in and how does that translate into the delivered cost of hydrogen. Makes sense?

Got it. Okay. That's...

Just...

Yes, go for it.

Just to clarify, when you say, like, running the 1 megawatt in reverse, so basically, it's like 2.4 megawatts but same cost, is that -- it sounds like that's a pretty key function in the difference on the dollar per watt cost of the electrolyzer, right? I mean, like, if you -- let's just high-level math, $100 million, 1 megawatt fuel cell, that would be $1 a watt -- I'm sorry, rather, $100 a watt there, I think, if I'm doing the math correctly. But if you do $100 million relative to 2.4 megawatts or around $1 million, that would be $0.42 per watt rather than $1 per watt, is that right? If I'm doing the math correctly there?

I think I'm not following your math very well. Let me give you a different example. So -- and rather than [indiscernible]

If you change the denominator from 1 to 2.4, is that right?

Yes. So let's talk specifics. So if my -- what we said on Hydrogen Day is our SOFC cost is about $2,400 a kilowatt today, what shows up on the P&L, et cetera. So if I re-rate that to be an electrolyzer, that becomes $1,000 a kilowatt of electrolyzer. And in addition to that, we think that the hardware will cost -- that we can pull parts out and that when we pull parts out, we get another about 10% savings. So on Hydrogen Day, what we said is our electrolyzer today is about $900 a kilowatt, going to, next couple of years, under $600 a kilowatt. So that's the -- those are not just theoretical math. That's -- those are the actuals. Makes sense? And so on your [indiscernible] math, that's what you put into your model for your CapEx cost when you look at the levelized cost of hydrogen.

And just to clarify on the levelized cost because I'm getting this question, what is that efficiency, like the kilowatt hours per kilogram, right? What is that number in the electrolyzer form?

Yes. We haven't -- like I said, we haven't publicly stated that just yet. What we have said is because we're doing some -- we want to do and complete some final testing before we release that. So that's to come. But we have a very good sense of a very narrow range for what that will be. And so when you -- when I take all of this -- what's really important is when I take all of this. When I take a capital cost, when I take my efficiency level, when I take assumptions about what the power will cost in a given application, the capacity factor, the asset we'll run at, these are all kind of key variables that drive this LCOH value. We think that by 2030, green hydrogen, depending on the input power cost, is between $1 and $2 a kilogram. We think for pink hydrogen, that's, call it, $1.75, plus or minus, a kilogram. For blue hydrogen, we think 2030 is $1 a kilogram. And gold hydrogen, again, which is when you blend in some biogas with carbon capture, $1.38 a kilogram. That would be carbon negative. So across all these different applications, what really -- what is really important, rather than all these assumptions, is what's the delivered cost of the hydrogen. And those are all numbers when you look at the research about what becomes economic in applications like power for interseasonal storage, for applications like long-haul transport, for applications like steelmaking. These are all competitive hydrogen costs to really make the hydrogen economy go. So that's why we're so excited about this is when we look at what...

And what inputs are you assuming? Just to put you on the spot a little bit because if you [ looked at ] the efficiency, what about the -- like what capital cost translates to your $1 to $2 a kilogram? Just lay that out, and then lay out also what your power input costs are as well since that's obviously a big input.

Yes. There's -- Aric grilled me on this the last time we talked about this. So there's a -- the -- we put out a Hydrogen Day deck that has a lot of his assumptions in it. So if you want to get deeper, that means you look -- but I'll tell you what some of them are. It's his job. It's good. We'll talk more about it later. But in terms of power, we think power gets down to somewhere between $10 and -- by 2030 by between $10 and $30 a megawatt hour. And it depends on where you are in the world. So there's -- this is -- this tends to be very geographically focused. We also think that the renewables penetration gets to about 50%. So you can run your electrolyzer, say, for green hydrogen at about 50%. That's an important variable. What we said publicly cost-wise is we see ourselves getting below $600 a kilowatt. And quite frankly, at that cost point, the capital cost stops mattering as much as what the power cost is and what efficiency you have. We've also modeled out, for example, doing detail bottoms up on what the installation cost for this will be because that's another element to this. And so when we put all that together, at sub-$600 a kilowatt and the efficiencies we think we'll get. We'll give you guys more guidance about this in the future. We're just narrowing the range. And we take those power costs, that's where we think we get to that kind of $2 -- $1 to $2 a kilogram level. And like I said, what matters more to that number is the input power cost more so than the -- some of this CapEx number.

Got it. And quick clarifying -- I'm getting -- just [indiscernible] What are you assuming that $600 per kilowatt and cost of electricity in terms of having your SOFC, your electrolyzer at that high elevated heat to be able to operate at that level? Is that included in your metrics there? Just to be clear.

Yes. That's -- so that's -- and, like, literally, let me explain to folks how we do this. So there's -- people -- a lot of people do high-level math to figure out the cost of hydrogen. We think that's not precise enough. So the way to really do this is to say, what's the project? Who the buyer? What are the financing costs? When is it going to happen? What are my taxes, local property tax, insurance, all the way we put into a fully developed model. And we've raised billions of dollars of structured finance. We're really detailed about this stuff. So we are looking at what the CapEx is. In the case of green hydrogen, there's no extra heat coming from anywhere else because renewables don't bring that. So when we're modeling green hydrogen, we're looking at what the CapEx is and what the cost of that power is, et cetera, et cetera. When we model the nuke power, we do get some incremental heat that boost our efficiency advantage, like I said, to 31% better than what you get from, say, an alkaline fuel cell. So we've modeled that as well. But we've also modeled some of the incremental CapEx you'd need to do that heat integration work. So all of -- as far as we can tell, all of the project costs that would be necessary, including the heat, including extra equipment, including taxes and insurance and all that stuff, that is all included in this produced cost of hydrogen number that I'm saying.

Got it. Excellent. When do you guys think -- I mean, just to put you on the spot, I mean, because we're getting so many questions here. When do you think you'll provide more details about the efficiency of your product here? I mean I know you guys obviously have a pretty good sense to it. When do you provide more detail since people are keen to know?

What I will say is what we've been talking about, quite frankly, as some of my list of things to do. I'd rather spend time talking to customers than write white papers. But one of the things we're going to do probably the next, I don't know, couple of weeks to maybe a couple of months is to put out a white paper that details exactly what some of these assumptions look like. So people can tick and tie on the math because I know there a lot of -- and we want to do 2 things. We want to be transparent with folks. The second thing is I think there's a lot of underappreciation for some of the nuances of how to model the stuff so we want to make that really transparent to people. And if there's a debate about it, it's not a debate, but I think we debate because we understand how to do this pretty well.

Got it. Before we call it, because we're running out of time here, do talk for a quick second about what the fuel cell, your product today, where that cost curve is on a PPA basis. You're going out to customers tomorrow. In '21 and onwards, what are you guys saying about that? Because I think that's probably at the core of the debate for the stock today, if you will.

Yes. I know. I think that's -- thank you for brazing that. That's a really, really good point. So I hope I have Board folks with the sort of detail orientation on some of the structured finance degree, but we've applied that same rigor to say, okay, we're out [ curing ] existing product, existing configuration of what would we quote a PPA at. And we've been very public about this for our Analyst Day that just completed. So for -- starting next year, we're going to be quoting, and it depends on the state, but kind of on average, $0.09 kilowatt hour. And that opens up 28 states for us, kind of on average, because there's a distribution of power prices within each state. By 2025, we think we can offer $0.07 kilowatt hour. That gets you into all 50 states. That increases our TAM versus where we are today by 4x, opens up a $200 billion TAM. And again, it's how do we get there? We keep going down the cost curve on all the key dimensions that KR talked about yesterday. As we do that, it just not -- what naturally happens is we get to more and more parts of the U.S. market. And again, the more existing servers today we sell, the cheaper our hydrogen solutions are going to get as well. So we're really excited about it. This is -- for me, as somebody who's spent 16 years now at Bloom, I have -- I'm saying this with complete oner and on heart truthfulness, I've never been more excited about Bloom because the hard work of scaling up, the hard work of all that engineering, the hard work of getting a solid oxide fuel cell to work in the first place, which people will tell you is real hard, which is why there's no other commercialized technology out there, we are now realizing the potential that I've been working on for 16 years. And it is the -- and the market is coming to us. There's a wind at our back on this interest in hydrogen. And we've gotten very analytical about how to make it work. So I'm really excited. I really appreciate the opportunity to talk about this today and all the questions. And you'll hear a lot more from us on this point. But again, couldn't be more excited.

Awesome. Wow, it's a great place to call it. Thank you, Scott, so very much. Your enthusiasm is contagious. Wow. So with that, we will call it. Will be right back here. We'll keep it going. But Scott, have a great day. Enjoy the holidays. We'll speak to you very soon. Thanks, everyone, for sending your questions here, all right?

Thanks, guys. Thanks for [indiscernible]

We'll see you. We'll be right back in a couple of minutes here.