How San Jose mayor’s ally helped Bloom Energy skirt a natural gas ban

Two weeks before San Jose passed a landmark ban on natural gas for new commercial buildings, city officials introduced an exemption that benefited a local energy company, Bloom Energy, whose vice president is a personal friend to the mayor.

And the way they did it shows the stark difference in access granted to political insiders — as well as the extent to which city policy is swayed by special interests.

“It’s politics… We want everybody to have an opportunity to chime in, especially if you’re going to be directly impacted,” said San Jose Councilmember Raul Peralez, who voted against the exemption. “In theory, it makes sense… in real practice, it’s not very fair.”

Days before San Jose was set to vote on the gas ban, Bloom Energy launched a robust lobbying campaign behind closed doors — including a slew of emails, phone calls and meetings with city officials — that ultimately won the company a last-minute exemption amid the city’s plan for an all-electric future, an investigation by San José Spotlight found.

At the center of the lobbying campaign: Carl Guardino, the former CEO of the Silicon Valley Leadership Group, and a close friend of Mayor Sam Liccardo. He now works as Bloom Energy’s executive vice president of government affairs and policy.

Guardino’s influence in San Jose runs beyond his friendships. His political action committee, Innovation for Everyone, fundraised and spent nearly $400,000 in 2020 on re-election campaigns for Councilmember Dev Davis and former Councilmember Lan Diep. Both voted yes on the natural gas ban with the exemption benefitting Guardino’s company.

Guardino didn’t respond to phone calls and emails from this news organization. Bloom Energy provided a statement saying the city’s initial policy memo “needed several minor adjustments.”

Last-minute lobbying campaign

San Jose passed its first natural gas ban for new single-family homes, granny flats and multi-family complexes in October 2019.

On Nov. 5, 2020, the city released its first memo recommending the expansion of the natural gas ban on future commercial and residential high-rise buildings. The ordinance would exempt hospitals, food establishments and manufacturing facilities experiencing financial hardship through 2022.

The proposal was crafted after city officials spent a year researching the issue and speaking with more than 200 individuals from roughly 65 organizations, city leaders said.

In emails to city councilmembers sent in late November, Guardino and Bloom Energy’s lobbyists claimed that the company, headquartered in San Jose, was not made aware of the city’s plan nor its year-long outreach effort.

Within a week, Guardino, Bloom Energy’s Senior Manager Amy Mmagu and Executive Vice President Shawn Soderberg called Liccardo on Nov. 12. Lobbyist Jim Cunneen, hired by Bloom Energy, also made an unscheduled call to Councilmember Pam Foley on the same day. These were the first contacts between Bloom Energy and the city on the issue, according to lobbying reports — five days before the council was scheduled to vote on Nov. 17. That vote was delayed until December.

Guardino, Mmagu and Soderberg also met with Environmental Services Department Director Kerrie Romanow and former deputy director Ken Davies on multiple occasions in November. Romanow added a new exemption favoring Bloom Energy to the policy three days after their first meeting on Nov. 13.

The three Bloom Energy executives met with Romanow and Davies again on Nov. 16, when the second memo from Romanow came out with the exemption backed by Bloom Energy and one day before the council meeting.

When councilmembers opted to postpone the vote following a swift and fierce backlash from environmental advocates, Bloom executives, including Guardino, met with ESD officials again on Nov. 24, one day before the release of the final memo that extends the exemption benefitting Bloom Energy through 2024 — two additional years compared to the other proposed exemptions.

Between Nov. 12 and Dec. 1, the day of the vote granting the exemption, Guardino, Bloom Energy executives and two other lobbyists met or called councilmembers more than 20 times to solicit support for the newly-added exemption, according to emails and lobbying reports. Cunneen— who hired Pete Carrillo of Silicon Valley Advisors to assist his lobbying effort — was paid $22,000 for about a month’s worth of work on the exemption, according to city reports.

They had the most communication with Liccardo, Foley and former Councilmembers Diep and Johnny Khamis.

On the day of the Dec. 1 vote, Guardino emailed nine of 11 councilmembers. The city failed to release these emails under a public records request from San José Spotlight. All those councilmembers — except Foley — voted yes on the proposal to include the energy plant exemption. Guardino also had a scheduled call with Liccardo that day.

In total, Bloom executives and lobbyists, led by Guardino, met with or called councilmembers and city officials at least 26 times since Nov. 12. They also emailed city leaders roughly 20 times over the same period.

Guardino’s influence

A longtime influential lobbyist, Guardino has been known as Liccardo’s best friend for decades.

He was the mayor’s groomsmen at his wedding. They go on bike rides together often. The two enjoyed Friday night dinners and fire pit dates with their spouses at Guardino’s house dating back to 2015 when Liccardo first took office, calendar entries obtained by San José Spotlight show.

Guardino helped raise more than $500,000 to elect Liccardo in 2014.

Lobbying reports show the pair also talked regularly on the weekends starting in 2018. The calls were scheduled for almost every Saturday between January 2019 and August 2020 when Guardino was still CEO of Silicon Valley Leadership Group, an analysis by San José Spotlight found. It is unclear what they discussed. The calls are not disclosed on the mayor’s public calendar, but are reported on SVLG’s lobbying forms.

The mayor maintained his personal relationships do not influence his decisions. He said he first learned about the exemption from city officials and that he supported their recommendations, though lobbying records paint a different timeline.

“My record clearly demonstrates that I don’t succumb to political influence,” Liccardo said in a statement to San José Spotlight. “I listened to many people on both sides. Of course Carl is a friend of mine—that’s not a secret. But Carl wasn’t my only political supporter.”

Bloom Energy’s access 

Romanow said Bloom Energy also sent city officials policy language related to the exemption. The city didn’t release any emails between Bloom Energy and the Environmental Services Department about this language, despite a number of requests from San José Spotlight.

That practice is considered unusual, according to City Hall insiders. City officials are supposed to remain neutral and not allow special interests to write their policy memos.

Romanow declined to say whether her memos or the ordinance included any language sent by Bloom Energy.

“We read it,” Romanow said, when asked whether the department used the language in city documents.

Romanow said it’s not unusual for City Hall to consider policy language sent by stakeholders. She said environmental activists and organizations also sent them language and insights to consider.

Romanow said the exemption fairly balanced local business needs — including the need for continuous power in the event of a power shutoff — with the need to wean businesses off of natural gas.

Environmentalists cry foul 

The exemption approved by the City Council allows Bloom Energy boxes, or fuel cell servers, to continue operating in San Jose. The servers are mostly fueled by natural gas and provide businesses with a continuous, alternative source of electricity. Prominent customers include Adobe Systems and the San Jose Sharks.

“In theory, fuel cells could be one avenue to creating a green alternative,” said Diane Bailey, executive director of local environmental group Menlo Spark. “Our concern is that the actual fuel cells in use are much dirtier and much more polluting… than they aspire to be.”

Environmentalists say the way Bloom Energy’s boxes are fueled and operated makes them more polluting than electricity produced by PG&E and San Jose Clean Energy. Traditionally, businesses use power from the grid and use diesel generators for backup power.

Linda Hutchins-Knowles, co-founder of the Silicon Valley chapter of the climate justice group Mothers Out Front, said they did an analysis comparing the greenhouse gas emissions from fuel cells to those from gas-powered electricity from PG&E with occasional use of a diesel backup generator. She said Bloom Energy’s fuel cell servers were three to four times worse in terms of carbon emissions.

“It felt like the city risked missing our emissions reduction goals in order to accommodate this company’s last-minute request to allow new San Jose buildings to use their gas-powered fuel cells,” Hutchins-Knowles told San José Spotlight.

Bailey, who’s studied chemical and environmental engineering, said Bloom Energy’s fuel cell boxes as they’re used in California today are run on natural gas drawn from hydraulic fracturing, or fracking. This method of oil and gas extraction requires the injection of highly-pressurized liquid into shale or rock, which can poison soil and trigger large earthquakes.

She said while Bloom Energy boxes do produce lower carbon emissions than diesel generators when ran for the same length of time, the fact that they’re run continuously — rather than on an emergency basis — makes them more pollutant than diesel.

“There are alternative sources of continuous power that are much cleaner,” Bailey said.

Bloom Energy spokesperson Jennifer Duffourg acknowledged its boxes are run continuously and are not meant to be a backup power source. But she added that they’re “fuel flexible” and can use biogas and hydrogen, meaning that customers do not need to keep using natural gas.

However, Bailey said swapping natural gas for hydrogen in fuel cell boxes requires significant re-engineering.

Peralez agreed that Bloom Energy’s fuel cell technology, at least as it’s used today, is not as efficient as diesel due to its continuous use. He said while Bloom Energy intends to move toward cleaner fuels, the current technology is still relatively inefficient.

“It was really an exemption to support their business enterprise,” Peralez said. “If we were going to ban that sort of technology, that’s a hit to their business model.”

Liccardo told San José Spotlight the adverse climate impacts are “likely to be very small” and the tradeoff is worth it.

“There is, at worst, a really small impact on GHG-emissions here,” the mayor said. “There are (according to our staff) no more than two dozen fuel cells in the entire city of San Jose. This is a very small, niche market for a small number of users who are extremely sensitive to power interruption, and they pay much more for that power than any of us would be willing to pay.”

Political implications

Peralez said city officials don’t normally introduce an exemption so late in the process, especially after spending a year studying an issue.

“I was surprised… that (Bloom Energy) would have such influence over a last-minute change from staff on policy,” Peralez said. “Your average Joe, who doesn’t have that type of knowledge and access to the system itself, is never going to have that kind of influence over a process.”

Vice Mayor Chappie Jones, who voted in favor of the exemption, said it’s important to balance the city’s climate goals with the needs of local businesses.

“I’m always looking for middle ground or compromise,” he said.

Jones said he could see how people might perceive the last-minute exemption as favoring political insiders, but said it’s a typical process at City Hall. “When our staff creates policy, we want to have input from all the key stakeholders in the community,” the vice mayor added. “You don’t want your staff to create policy in a bubble or in isolation.”

But Hutchins-Knowles said the exemption should have been studied longer. Mothers Out Front published a recent petition to remove the exemption for fuel cell servers and study of their greenhouse gas emissions.

“You can always come back later and grant an exemption if truly needed, but once a blanket exemption is granted, it’s hard to take back,” said Hutchins-Knowles, adding that the San Jose Water Company Board of Directors — which Guardino joined in May — wrote a letter favoring the exemption. “Bloom executives were given a platform that the general public and advocates weren’t given.”

Contact Tran Nguyen at [email protected] or follow @nguyenntrann on Twitter.

Contact Sonya Herrera at [email protected] or follow @SMHsoftware on Twitter.