SAN JOSE, California - Silicon Valley start-up Bloom Energy on Wednesday unveiled a new fuel cell technology that can power buildings, positioning the energy generators as an alternative to the electricity grid.

Questions, however, remain about the long-term adoption and viability of a technology that has been around for decades but has yet to see mass market commercial applications.

Bloom's solid oxide fuel cell has managed to attract powerful early adopters, including Google Inc, eBay Inc, Coca Cola Co, Wal-Mart Stores Inc, FedEx Corp and Staples Inc.

Fuel cells are not a new concept and often have been touted as the ultimate clean technology to power vehicles.

Most major automakers have spent billions of dollars in researching a hydrogen-powered fuel cell for vehicles, tempted by the idea of a car that uses no gasoline and emits only water vapor.

That research is now mostly on the back burner, given the expense, transportation issues and volatility of hydrogen gas.

Bloom's energy generating boxes cost $700,000 to $800,000 and run on a variety of fuels, including natural gas. Each of energy server provides 100 kilowatts of electricity -- enough to power about 100 average U.S. homes -- with roughly the footprint of a parking space.

Bloom's fuel cell works by converting air and a fuel source -- such as natural gas to a range of biogases -- into electricity through an electrochemical process.

Even running on natural gas, the systems are over 65 percent cleaner than a typical coal-fired power plant, the company said.

Customers can expect a 3- to 5-year payback period on their investment in the boxes with the electricity costs working out to about 10 cents per kilowatt hour, including all subsidies, said Bloom Chief Executive K.R. Sridhar.

The average retail price of electricity in United States in 2008 was 9.74 cents per kWh, according to the Energy Information Administration. Residential customers on average paid 11.3 cents, commercial customers paid 10.4 cents and industrial customers paid 6.8 cents.

After eight years of development, Bloom Energy unveiled the fuel cell at a media briefing that featured political and business heavyweights including Google's founder Larry Page, Wal-Mart's Chief Operating Officer Bill Simon, and Ebay's Chief Executive John Donahue.

Former Secretary of State Colin Powell is a board member of Bloom, which has raised over $400 million from investors including Silicon Valley powerhouse Kleiner Perkins Caufield & Byers, as well as Morgan Stanley, NEA, and Northgate Capital.

Sridhar, The former NASA scientist, said the Bloom Energy Server, as he calls it, is different from hydrogen fuel cells as it uses lower cost materials, has greater efficiency and is more easily deployed and maintained.

The core of our technology is simply sand that is available in plenty, Sridhar said, showing off a small photograph-sized plate.

But the key to the future of Bloom Energy, which offers a 10-year warranty on the product, lies in whether its fuel cells would function robustly over time and whether they can ramp up manufacturing.

EBay Chief Executive John Donahue said the company, which is using five of the Bloom boxes at its headquarters in San Jose, decided on the product as it made economic sense.

We are talking to Bloom for other facilities, he said.

Google founder Larry Page said he was a big supporter of the technology. The search giant was Bloom's first customer in July 2008 and uses the fuel cell to power a building on its main campus in Mountain View, California, a facility that includes an experimental data center.

I would love to see us having a whole data center running on this, Page said.

(Reporting by Poornima Gupta; Editing by Richard Chang)

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