By Katie Fehrenbacher, GigaOM

Updated: The most talked about company in cleantech in 2010, fuel cell company Bloom Energy, announced Thursday morning that it’s launching an offer for 10-year electricity contracts with no upfront payment for the Bloom Box fuel cell itself, which usually costs between $700,000 to $800,000. Calling the service “Bloom Electrons,” the product is basically like a power purchase agreement, which are common for the renewable energy sector and utilities.

Bloom Energy, which has raised at least $400 million from investors, is saying that over a 10-year period, it can offer its customers electricity contracts for its Bloom Boxes for a cost less than standard grid power. Bloom says “customers can immediately save up to 20 percent on their energy bills,” and that Walmart, Staples, Coca-Cola, Caltech, Kaiser Permanente and BD have signed up for the program.

Update: According to VentureWire, Bloom has “quietly raised about $100 million more in equity in the past few months . . . according to two people familiar with the matter.”

While Bloom didn’t specify that customers will only save that kind of money in California, or only in states with aggressive subsidies, it seems like the math would work out that way. Lux Research has estimated that the cost of electricity over a Bloom server’s 10-year life is “$0.08/kWh to $0.10/kWh (when running as base-load for 24 hours a day), including government incentives and assuming a $7/mmBTU natural gas long-term contract.” Without subsidies, Lux predicted “electricity would cost $0.13/kWh to $0.14/kWh, with about $0.09/kWh from system cost and about $0.05/kWh coming from fuel cost. Note that this is high compared to average retail U.S. electricity costs of roughly $0.11/kWh.”

Perhaps removing the upfront fee will bring in more customers, though Bloom Energy founder KR Sridhar has maintained that the payback on investment for Bloom Box customers is 3 – 5 years in energy cost savings. Sridhar confirmed to me that the 3 – 5 year claimed payback is with the California and federal subsidy.

If you’re not familiar with the Bloom Box product, it’s a fuel cell that looks like an industrial-sized refrigerator. Fuel cells are kind of like chemical batteries, which combine solutions to create a chemical reaction that delivers electricity. Fuel cells have been under development by hundreds of manufacturers in the consumer electronics and auto industries for decades, but have remained too expensive and have been unable to break into the mainstream.

The nine-year-old Bloom launched last year to much fanfare, at an event with a list of customers like Google, and eBay, and with speeches by its celebrity backers: Kleiner Perkins’ John Doerr and Colin Powell.

The Bloom Box sucks up oxygen on one side and fuel (natural gas, biomass, etc) on the other. Bloom bakes sand and cuts it into little squares that are turned into a ceramic, which are then coated with green and black “inks.” Using a special process, Bloom creates these ceramic discs and stacks them together interspersed with metal plates of “a cheap metal alloy.” The bigger the stack, the more power the Bloom Box will create.

Bloom is having a live press conference to talk more about the announcement at 10:00 a.m. PST at Caltech. Watch it if you want to follow the news.

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