Frontier Forum: Unlocking next-generation VPPs

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In the mid-2000s, Ben Brown worked at Constellation designing efficiency and demand response programs. DR was gaining traction in the residential and commercial markets, but the resource and the technology behind it looked a lot different than today. Well, I think one of the biggest changes is we don't use pagers anymore. Ha ha ha. I understand there are red phones still occasionally though.

Yeah, I that part I don't work on as much uh anymore. But yeah, no, I think that the biggest evolution for sure is now more and more that we have connected devices as part. Of what homes and households have been adopting to help kind of reduce energy costs and have more control over comfort in their homes. And using this as a great way to engage and positively build real a trust with customers, I think has been one of the biggest changes over the last 15 years.

There are now tens of millions of smart thermostats and smart water heaters across the U.S., and they've opened up a vast opportunity for managing demand that wasn't available in those early days. In 2012, Ben went to Google, where he worked on the company's smart home and Wi-Fi platforms. And later, after Google acquired the smart thermostat maker Nest, he led the development of new energy offerings. There, he saw the potential of another emerging tool, machine learning.

You could see the power of these tools used towards a consumer product experience that was just really unique. The original Nest Thermostat used machine learning to predict heating and cooling needs and respond to some dynamic factors like weather, which set the foundation for Google's demand response offering, and the technology has radically improved since then.

And that has evolved a lot, obviously, over the last 15 years, where now the capabilities of anticipating when electricity prices are gonna be going up or down. having unique insight into in terms of like the thermal model of your home, having unique insight into like all the complexity around the grid and grid congestion and how that's gonna evolve over time. That is exactly the type of things that AI is really, you know, kind of really helps it sing.

That work brought Ben to Google Labs, where he worked on large language models for energy and finance applications. And that's when he saw the other side of AI, the energy demands. And you could absolutely see just how energy intensive these new LLMs were going to be, right? Like if you think about the idea that maybe as each individual having kind of an AI co-pilot, that's the equivalent of like having

Hundreds of millions of new HVAC systems all of a sudden being put onto the grid. I mean, obviously we'll find efficiency, but it is an interesting kind of like analog to think about from just the infrastructural perspective and what it needs to do, what we would need to do as a system to support all these new really compelling use cases.

Today, Ben is the CEO of Renew Home, a company building a new kind of virtual power plant that helps households save money while offering reliable grid capacity at scale. And he says we're now at a moment when all these converging forces, ubiquitous smart devices, powerful AI, and spiking utility demand, are setting the stage for a new generation of VPPs.

There is going to continue to be, you know, more and more of a challenge as our system tries to struggle to grow to meet that demand, not just on the aggregate basis, but really on the distribution and locational basis. And I think that's also what's very unique about things like virtual power plants or DR versus just citing large uh central power plants. I'm Stephen Lacey. This week, a conversation with Renew Homes Ben Brown. It was recorded live as part of our Frontier Forum series.

AI and electrification are driving load growth at levels we haven't seen in decades. The Department of Energy projects will see a 200 gigawatt peak on the US grid by 2030. So I caught up with Ben to talk about designing VPPs in this new era. What role can they play in addressing the grid's urgent needs? I deeply believe that we're in the infancy of how impressive and how powerful these use cases can get.

You talked a little bit about the limits of demand response. Can you talk about why you think it offers diminishing returns as a one-size-fits-all solution? Yeah, so I think when we think about traditional DR as what was originally constituted maybe 20 years ago plus where in which we had like direct load control. The canonical example that like folks think back on is those old uh AC compressor switches.

where kind of essentially you'd have something sent out to a system to turn off the compressor and so a household be like turning up turning down the thermostat to get cooler and nothing would be happening and it would just lead towards frustration. And so when we first launched Rush Our Awards twelve years ago.

A lot of the intent there was to say, hey, if we could prove out that customers with more control, the idea that they can always change the thermostat, adjust, always get to a different comfort set point in their homes. Um, with more control, you have a much higher opt-in rate and you would be able to get more folks enrolled uh while still providing similar incentives for um peak shifting and peak reduction.

uh that we could we could achieve much larger rates of folks and through larger numbers we would actually be able to deal with smaller opt-out rates uh across the entire population. And that was proven out, I think, really well over the last twelve years with

kind of the evolution of DR in terms of what we thought for rush hour awards and DR two.0 type of concepts. I think where we're at now though is that those were really targeted towards, you know, peak hours of the year, right? You know, maybe 40 to 60 hours a year.

um where we were really just dealing with a really, you know, a heat wave. Now obviously we're seeing one, you know, more variable weather throughout shoulder seasons. Like the last couple weeks, we've seen a lot of kind of uh heat waves or cold waves.

And that all of a sudden stretches the grid in unique ways. And so there's a lot more hours of the year where you're dealing with these kind of mini peaks on the system that the system really wasn't built for. And so how do we kind of, you know, leverage more of an ongoing continuous resource to support that?

But then I also think that, you know, the idea when we start to incorporate in some of the distribution and locational value of these things, where in which You know, there's actually a lot more value continuously throughout the year, you know, hundreds of hours of the year, where in which folks can customers can save more money by helping support the grid in unique ways that would be different from traditional infrastructure.

uh is also really compelling and I think a really good um a really good direction for us to be going in.

Okay, so tell me about how continuous demand response works this these subtle personalized continuous shifts. How does it actually work? Yeah, so I think a huge part of it comes down to this idea of control and personalization. At the end of the day, like as part of its core, specifically for a smart thermostat. It wants to do its job, its job and its promise to a household is to optimize comfort while minimizing cost.

And so when we think about kind of extending that more holistically, traditionally that was just really around efficiency because we didn't have time-varying pricing. In the world we're moving to, where in which we have more now time of use rates, and we also have more stress on the system on a continuous basis, where in which uh households can benefit from reducing that stress and getting rewards for that.

it makes sense for us to lean much more into this idea of personalization and really going deeper around, hey, we understand the unique rhythms and habits of your household, like kind of the flow of your day and where you're going and you know, kind of what your preferences for temperature are during a given day.

And we also have anticipation because you have to remember like specifically heating and cooling is uh an asynchronous optimization, right? It's something that like we want to get the house to the right temperature in 30 minutes or an hour. And so kind of have to ne be able to project what the next couple of hours of of cost and grid congestion and your time to

temp or time to heating or cooling your home based on the thermal envelope. All of those things are really well incorporated into something that, you know, through deeper personalization and optimization, That we can do that's really targeted to households in terms of their preferences and minimizing their costs. And so back to this idea of continuousness.

Um, the only way to do that well is by really getting these things right and being highly personalized for households so that we can incorporate all these benefits to be able to deliver the core promise, which is you're comfortable. all the time and we are minimizing your cost and helping supporting deeper aspirations that you may have around minimizing your consumption of of carbon rich energy or uh minimizing the stress on the grid and these other things that you might also care about as well.

And what are you looking at for opt in rates so far? Yeah, so I think that's one of the biggest things that like At its core, we can talk about these things, right? Like it's a really, it's a cool concept to talk about it in the abstract, and I think a lot of the industry has for a long time. And what has been really unique, I think, across the industry is what we've been able to prove out through opt-in rates.

And so we have actually seen both opt-in and engagement that we're getting nearly 75% of all new NES thermostat customers that install a device are opting into energy shifting. And what's great about that is that it's not only that happening in terms of engagement and opt-in and opt-in, we're also seeing nearly all of those folks years later still engaged and still leveraging it and having really high satisfaction around it.

And so to me, you know, kind of proves out the central point that we've been trying to articulate for a decade, which is With users having more control. and a better experience in their home, you actually can get to an order of magnitude higher engagement and opt-in rate than what we have seen traditionally, right? If we think about like the traditional demand response programs from fifteen years ago. you know, the industry was probably seeing 10 to 20 percent opt-in rate.

And so if we think about a world where in which we can engage a much larger population and then be able to have personalization, like there still might only be 20 to 30 or 40 percent that want to kind of maybe trade off more comfort for higher rewards or cost savings. And that's great and we can segment out that population, but it means we can it would be great to still have the other 40 or 50 percent engaged, even if the optimizations are are more subtle.

So there's this very sometimes very intense debate in the industry w about uh utility control or customer control, uh, you know, i along the spectrum of distributed resources and you are firmly believe that customer control can bring better outcomes. Why? I I think it's important for us to not look at that choice uh through a singular lens, um, which I also think can be somewhat flawed sometimes. So to me, customer control is a feature, not a bug.

And the reason I say that is because the more customers feel empowered, the more they feel engaged. in this overall part of supporting the energy system, dealing with kind of rising challenges to the system that have been increasing costs for a lot of folks in terms of, you know, the increased demand that we've been seeing across holistically, but also some of the

the climate-oriented challenges that we've been seeing. And so having customers engaged and part of this is a really important feature because they now feel more empowered and the collective part of the solution going forward. And so I think that's just a one fundamental thing that it I think sometimes gets kind of overlooked. The second important thing to my mind is if we're trying to build a resource, when we think about like the power plant side of the virtual power plant um analogy.

A lot of it is actually you're trying to build a resource that can per that can perform for 15 years plus, right? If that's kind of us trying to say that a residential aggregated resource is as good as a natural gas power plant.

And I think if we're trying to try to push in that direction, in order for folks to want to engage and be supportive of the system longer term, they have to feel like they're in control. If they don't and we kind of s if we kind of don't have trust in that system and we don't kind of in continuously engage and reward customers around that.

then it's one of those things that we could see folks um peter out of that over time. And then it does not have the same kind of benefits that you would think about from a power plant in terms of longevity. And then I think the last part about it is the whole benefit of a distributed system, you know, from like, you know, kind of all of our, you know, backgrounds and statistics and whatnot is like the power of large numbers, which is the reality is.

When you give individuals control or a long system and you have hundreds of thousands of customers or a million customers, You know, stochastically, we can predict how these things will perform in aggregate. And so actually having control the entire time leads towards. less of these kind of asymmetric outcomes where all of a sudden something happens because people are in control and it's more stochastically predictable versus another outcome which would go the other direction.

So there are many models that are approaching batteries as uh core to virtual power plants. And and you really think that HVAC systems represent a really important resource. So you talked about why you're focusing on HVAC. First, that you're expanding to all these other connected devices in the home, how do you see these grid interactive devices evolving over the next five to ten years as part of the foundation of the VPPs you're developing?

You know, we tend to sometimes get really excited by you know, kind of silver bullet technologies or we get excited about something that feels like is a new a new um evolution that is not actually has not had a you know massive adoption yet, but feels like if it did have adoption, it would have a bunch of you know beneficial characteristics in terms of supporting the the needs we have going forward. This is a all hands on deck moment.

We have, you know, it's very different than where we've been for the last couple of decades, as you mentioned. We have mostly had flat demand. And so now as demand is increasing and increasing substantially and is going to increase substantially for the coming decade. Um, you know, we really do need to look at all of the solutions that are in front of us.

And so to me, the idea of not incorporating what is by far kind of the largest existing set of resources and infrastructure we have in the country, which is the 80 million plus central HVAC systems and 80 million plus. hot a hot water heating systems that is existing, thermal storage infrastructure that exists across our country would just be kind of insanity to me, um, given this this the size and the scope of the problem. It doesn't mean that as we are adopting EVs,

uh at scale. And as we are adopting more and more battery uh storage at scale on the Resi side, that we shouldn't of course incorporate those are those are gonna be critical resources. They have a lot of different um benefits and characteristics that does kind of thermal storage from HVAC or from hot water heating. But we need to leverage all of those.

because, you know, from the benefits of both the scale that we need and the adoption curves that we have to ride, it is important that we're having a solution that is, you know, benefiting from the fabric of those things working together in concert.

I presume a VPP is a lot more cost effective than a natural gas peaker and a lot faster to deploy. You're looking at a moment when it's really impossible to get equipment goodness knows what's going to happen with tariffs to make build out more expensive. So tell me about Uh comparing a VPP to like say uh an alternative gas peaker option for a utility, how should they be evaluating these things against each other?

Yeah, so I think the there's three things. So one is time to market, which we've talked about. So like if you're, you know, if you're still waiting on a turbine for until 2032, that's one. Two is definitely cost effectiveness. You know, if you look at the Bradle report, it's a good example of that. Uh we believe that uh VPP similar capacity resource

Would be sixty percent of the cost of a natural gas peaker investment. And honestly, that's probably outdated because now we know that natural building natural gas um peakers are even more expensive over the last few years just because of the wait times uh and some of the uh the the additional costs that are going into it. And it would be e f and a VPP would also be 40% of the cost of a utility scale uh battery um uh investment.

So we believe those, you know, for the first two, timeliness, cost effectiveness, and honestly the third thing, which I think also just gets overlooked a lot, is the distributed nature of the resource. We've talked about that, and that's actually something that is not getting incorporated nearly enough. But we all know a huge part of our challenge going forward is updating.

the distribution infrastructure that we'll need uh on an ongoing basis, especially with new use use cases coming online with more um, you know, EV charging on on the edge. um more home electrification. These are challenges that are definitely going to be a key part of our distribution challenge going forward.

And so I think that the um the decentralized nature of a VPP represents when engaged properly and incentivized properly with homeowners, uh represents a huge benefit that honestly will be dependent on, you know, going forward.

So you got a plan to build out a gigawatt of capacity in Texas. What uh what are the phases of scale for building that much capacity? You know, what's beneficial about the partnership we have with NRG in Texas, which we announced earlier this year, is that One, we have a large existing customer base of NES Thermostat customers as well as other platform partners that we have, in addition to, you know, obviously a large, uh, huge, large um base of NRG retail customers. Uh in Texas.

And so what's nice about it is that when fully engaged and brought together, um, that already represents a fairly large resource um of the uh where we're starting from in terms of you know getting towards that one gigawatt goal. But a huge part of getting to the one gigawatt goal will also be, you know, starting to give access to low-cost and no-cost thermostats, smart thermostats across, you know, NRG's existing user base and growing user base.

also deploying other uh targeted technologies, whether that's batteries, EV chargers, really thinking through how we support folks along the home electrification journey. And so You know, we we definitely have a great scale of households and engaged households across Texas. And so a large part of what we're going to be pushing as quickly as we can on with a great partner in NRG is really just distributing these technologies to folks.

So what has changed the most since you've been working on this in terms of how utilities and grid operators view these resources. So I mean I think you know the last fifteen years has been first phase, which we talked about, was proving when we think about when we launch rush hour awards. Then it was about proving to utility partners that if we gave more control to users, we would actually build a much larger population of folks that were enrolled, that would be a much more reliable resource.

I think we approved that up very effectively, getting to over one point five million thermostats. um enrolled in programs, over a hundred plus utilities. I think that was a really important phase of like moving the model from non controlled uh resources to a place where uh customers had control. So I think that was the first model. I think the next step of where we've been proving out why we launched Renew was proving out that small, subtle energy shifts with deep personalization across.

you know, m millions and millions and millions of households would actually have a even bigger benefit, both from a peak perspective, but also from a continuous perspective. And to me, like that is a huge part of what we've been engaging with partners on over the last two years, which is, hey, let's prove out that this resource has huge benefits.

that are not necessarily what we had thought about before, that if we think about an even larger population, the 75% of folks that are getting into these, you know, now that are enrolling in Energy Shift, how do we think about kind of a more deeply personalized, continuous way of engaging with those folks? uh that prevent that provides a much larger resource across the country. So like a good example on that one.

And we've talked about this. The reason we've been really public about the numbers is to try to help with this, you know, kind of this chicken and egg question. And we've been really clear that saying, hey, we have over five million households that have enrolled.

uh which represents capacity resource that is shiftable across the country. So, you know, not just in Texas, not just across the programs that we've already enrolled folks in, but there's there's capacity sitting across on the sidelines across the country. And I think the reason we've been public about that is just saying, hey, we wanna let you know that most likely in your market there are probably fifty to three hundred megawatts of resource ready to go.

Um, we'd love to engage with you on it. And I think that that to me is really important because a lot of what we've been talking about in the industry is. If we support um incentives for programs and we build certain capability sets with technology, um then eventually we can bootstrap our way to a meaningful resource. And as we all know.

Unless we're talking, you know, in the twenty five to fifty plus megawatts in terms of actual resource, it's harder for um energy partners to see it as meaningful. And so the scale is really critical to speak to. And that's kind of why right out the gate, we've just been like, no, we already have a lot of scale. And now we want to scale it even more so that it it is meaningful enough for energy partners to engage with.

All right, so as we wind this down, I want to get your thoughts on either the tech or adoption trends that you think are going to shape the industry going forward. So you've been at this for a couple of decades now. Bye. Do you think is gonna drive growth or change over the next half decade or decade? So I think thematically we've talked about I've talked about control, could a good bit around like user you know needs for more control over our energy costs, more control over our homes.

Um, and I actually think control is a good theme. Control and empowerment is a good theme to think about when it comes to like technology over the next decade because when we think about generative AI. My view, having worked on this stuff, is that most everyone is developing tools that are meant to augment our capabilities and give us actually more control as people doing work, people um building businesses.

uh people trying to operate their, you know, manage their costs in their homes that like generative AI is a massive augmentation to skills. It's a great, very powerful tool that actually gives us more control and more empowerment. than than somehow trying to take it away from us. And so I think that is really critical because I think generative AI could, you know, I think people are worried that it would go the other direction. I actually think a lot of folks are investing in it.

I actually think it's the same thing when it comes to its potential effects on costs for customers and costs for the grid that we have to think about how we drive empowerment and control around giving households more control over their energy costs. because of the f effects of growing demand. That is another key thing that I think that if we don't push in that direction over the next decade of giving more control, more empowerment with solutions to customers.

folks will get more and more unhappy with rising energy cost. And so I think there's like a really good trend there around giving more control, more empowerment with more demand-side resources to households to help them navigate kind of a growing demand environment. um that we just haven't had to design for historically. And then I would say just lastly, I really believe because of the growing demand environment, that um the partnerships between, I actually feel like energy companies, utilities,

are going to have better, deeper relationships with customers. I actually think it will go in the other direction that we've seen trends-wise historically, where I actually think there's a huge opportunity to build to build really positive, reaffirming relationships between energy companies and customers.

um because of this more control over costs, more more empowerment to customers with how they're leveraging technology in their home to uh to mitigate costs and to have more control over the experience in their home like comfort. So all these things to me is like these are me looking at these challenges through an optimistic lens because I feel like that's what we're in the business of is trying to build solutions here. Obviously.

If we don't go in that direction, the the other side of that coin can be very pessimistic. And I'm so I prefer not to focus on that one. But I do think that these trends are coming. Like I I think there's a lot of folks who are you know, maybe don't aren't as aspirational about how much AI will grow in terms of its use cases.

I haven't worked on this stuff, I deeply believe that we're in the infancy of how impressive and how powerful these use cases can get in terms of tools and customer empowerment and use cases. So I just think that's like that is gonna happen. I also believe that like the benefits of home electrification technology around safety, around cost mitigation, around things like a better driving experience, which a lot of EVs just provide. These things are also going to be adopted.

And so these things are coming, and I think that's a great opportunity for all of us in the industry to uh be a huge part of that solution. Ben Brown, CEO of Renew Home. Thank you so much. I really enjoyed this. Likewise, Stephen, thank you so much for having me. This conversation was recorded live as part of Latitude Media's Frontier Forum with Renew Home.

And there is so much more. This is an edited version of the conversation. If you want to watch the full video with lots of listener questions about the design and operation of VPPs, head on over to latitudemedia.com slash events and click watch recording. There's a lot more technical conversation there. And if you want to learn more about partnering with Renew Home, visit Renew. Thanks so much for listening.