You are listening to Redefining Energy.
Your co hosts from Berlin Gerard Rey and from London Laurent Sag.
Today I'm redefining Energy. We are going to talk about vpp's virtual power plants, especially focus on North.
America, and we're also going to talk about Lasagnia and lots of lots of Yes Jah, we hear a lot about VPP and more and more so virtual power plants. We hear about deer distributed energy resources, and of course as the grid becomes more intermittent while the lord is going those vppd A platforms. I think they provide a critical role by shedding demands sometimes for a few minutes, to alleviate the straits on the grater exactly.
I think they're a really important part of not just the grid going forward, but also of buildings and of really just if you want to save money, you have to have some form of MPPs. And now they also enable a whole new different business models. Very very exciting area.
Yeah, I mean talking about buildings. I saw that Shander Electric signed a kind of dr contract with Shell were talking about hours. So it's not part of a platform, it's a direct contract, but it really shows that we're starting to move the needles when it comes to building, which is great.
Absolutely.
So we brought in one of your friends and her name is Dana Geranzi. She's based in Bulder of Colorado, and she's the CEO of a platform called Bultas.
Which is one of the needing dr platforms in the US.
Let's listen to what Dana has to say. Dana, welcome to the show.
Thanks for having me.
Guys. Maybe I just kick off by the team. Today is going to be virtual power plants VPPs. They're all the rage, but sometimes I don't even know what they are, even though I've been meant to be looking at them for years. So what are they doing?
I don't think you're the only one. They're everything. They're everywhere, all at once. But seriously, they do have a very very broad definition. It might be helpful first to unpack what distributed energy resources are because the simplest way I would describe a virtual power plant is it's an aggregation of distributed energy resources that can serve in lieu of
an actual power plant. So it's not virtual. I've heard really smart people refer to it as a distributed power plant to dispel the notion that there's anything virtual about it. These are real assets, and we bring them together and we aggregate and orchestrate them like a power plant. Meaning when the grid needs more power because people are using
more energy, it can do one of two things. It can either turk and on a power plant, or we can help on the demand side reduce load and use people's distributed resources like energy storage, building management systems and the like, and in aggregate, all these things together form a very very reliable, powerful resource that we call a virtual power plant because it's not a physical central fossil fuel burning power plant. That's what we call a VPP.
Well, we should call it probably a DPP digital power.
Plant, digital, decarbonized, distributed. There's a lot of D words, but I think we've landed with Z. We do a lot of things with v around here. My company is Voltus, so we're pretty okay with it too.
If I go into details, because I love the details here. How do you get a signal from the market, Like a few minutes before, a month before, the day before via computer, somebody's coorting new said we need to giga what or something? How does it work?
Yes, yes, and yes to all of that. Markets have so many different layers. There's future planning that can happen years and years in advance, and we can sell into those markets and commit to grid operators that we will reliably bring resources of whatever volume we procure, whatever volume they need, we'll bring those resources to them and we'll say, hey, in three years, this is going to be there. It's the equivalent of committing to building a power plant. Those
are often forward capacity markets. Then there are everything from monthly procurements we participate in to day ahead and real time markets, which are probably terms from layer to most people in the industry. And so we go all the way up through like instant frequency response. And so if you think about the grid, it needs to be planned at the macro phase. We got to know the lights are going to stay on a few years from now, and that there's enough stuff being built, and then it
needs to be operated. We need to know what we're going to do tomorrow, what are were going to eat tomorrow, We need to do that. We need to do that food sh and then in the moment, if it needs a little bit more juice, we also need to give it bad And so there are all these different markets. They're called different things depending on whether you're in North America or Europe or what country. Sometimes they're called balancing markets.
There's reserve markets to just make sure that we always keep the lights on, and so in a very very practical sense on the time side, it's e all of the above, we do all of that. You also asked about how we receive the signals. That's a very very technology forward, complicated question. The simplest way to answer it is that they're truly digitized signals. So we receive signals as if we were a power plant, how much does
the grid need? And when we're then serving in the middle as a platform, we pass those signals through to our assets and were able to control everything from a smart thermostat up through a building management system to large industrial processes and data centers. We send those signals through simplify it dramatically. Grid has very complicated parameters, but what we're doing with our customers is making it extremely simple according to their operational flexibility. And then we marry it
all together. We bring a bunch of Tetris pieces in and deliver what the grid asked for, and we're in the very very fortunate business of paying our own customers to do this, so it's actually really fun. People say, well, how do you get paid, But we actually talk about our customers as the end users, and so the grid pays us, yes, as if we're a power plant. But I get to pay my customers every day, which is really cool.
Among your clients, I've seen Walmart, So the grid is going to send you a signal. I guess you have different type of client. Some it's probably easier to take than others. It's a bit like lasagna. You get the lower part we can call every day, and others it's going to be more complex. And then yeah, tell the guys. Okay, so sorry guys your fridger, I need to the temperature of your fridger, your frozen food a bit higher, or
I need to the light so sorry. I mean that's why we have you here, is to get those type of answers.
I've never heard lasagna before. I might take that one. I like it. I mentioned tetris, like the notion that you're putting together, you're weaving, or you're stacking different types of assets that can do different types of things, and that the net result is actually more positive when you take all these different things at different strengths and weaknesses. The sum is better than the parts. That's what we do. That would argue the sum of the lasagna is better
than any individual part personally. But to your actual question, it depends. You could get anybody from the energy industry on any podcast, ask them a question and the answer is probably it depends. But what that means here is even in the case of a big box retail store like Walmart, depending on what the grid means and depending on the store we can and the circumstances, we can
do different things. So that might look like we've control integration with an HVAC system, and that's simply changing the temperature. Even within that world, there are different use cases. Increasingly our assets are used to drive renewable penetration on the grid. So what happens when the wind for just a second stops blowing unexpectedly or the sun goes behind some clouds. You need a really quick backstop balancing resource and might
only need it for ten minutes. For ten minutes, you can do things with HVAC that do not impact occupancy, meaning people don't notice if it's sixty eight or seventy two degrees I'm seeking in fahrenheit. You'll have to excuse me. But people don't notice for ten minutes because the thermal load of the space is such that it doesn't truly
impact their comfort. And so we actually can take a lot more load off the grid for quick response balancing type events per store than we can for very long emergency summer heat wave, winter cold snap, multi hour duration dispatch, and we know how to accommodate and how to flex accordingly with our assets. Similarly, increasingly lots of stores have
behind the meter assets. So behind the meter asset means something like a distributed generator, more and more energy storage, and so if you have an asset like that, you also can do a lot of things very very flexibly. But you need to understand the parameters of the battery, and first and foremost, you need to understand what is the customer. Their primary reason for being the primary reason for a big box retail store is to make sure that people who go in that store are comfortable and
want to buy things. So we have to respect that first and foremost, and that's what we do when we put together the understanding of different industries and customer sets that we work with and how we can leverage controls and technology to marry like this is what they can do, and this is what the grid needs, and then you take all the pieces and you make lasagna.
Danik, can I ask you to talk about the supply side, because a lot of what you've talked about up to now as demand, and in particular, just maybe how you see solar and storage going forward, noting just I mean just incredible cost reductions we've seen over the last eighteen months, and obviously performance improvements as well.
I agree. So I started in this industry almost twenty years ago, and every year we underestimate the growth of renewables. The cost decrease of renewables storage is following the same curve, and so the debates become how low will go, how much renewable penetration can we get to. But there's a well accepted trend that's happening now, which is great from a climate point of view. Keep in mind there's also tremendous load growth happening. For the first time in twenty
thirty years. We are using more and more and more electricity. That has to do with our electrification of everything, electric vehicles. We're moving things to the electricity sector. We're also adding load more and more data center load AI. So when we started this business, we definitely did not forecast just the tremendous amount of growth that a data center loads
would bring. So you have that, and then you have solar and storage and wind and all these other assets, and I just think we need everything, and I'm glad we're doing everything. I don't think yet it would be a wonderful problem to have that there was just so much solar and storage that we didn't still need demand side flexibility. But like anything, you're going to get to a diminishing returns on your cost. The last one percent of hours are going to be extremely expensive, extremely expensive
to continue to just put batteries on the grid. And so in any world that I see, I think it's still really economic and for the greater good to have some flex on the demand side as well. It's just the optimized equation. On top of all of that, we've also got a grid that's getting old, it's aging, we're seeing signs of stress. The worse the climate stress gets, the more signs of stress we see, and so we need to be able to do all of these things.
You mentioned data centers, and obviously these are a game changer, and you could actually look at these data centers and say, isn't there a problem for the system, or they could be incredibly helpful to the system, because you could say that they could become the biggest virtual power plants in the world.
Yeah, I think it's even more than that. So yes, they could, if they were truly going to be completely flexible, be the biggest virtual power plants in the world. I don't think the economics are there for them to want to do that right now, they would make a lot more money running the data center. However, they're facing the problem of not being able to bring the data centers online because depending on what utility territory they're in or what region they're in, there simply is not enough supply.
And so I look at it as a huge opportunity because now you have big tech, big money focused on this problem that we need to figure out how to do the energy transition. And so it used to be this very walky thing that some of us worked on and talked about, and nobody knew what I was saying when I went to dinner with friends. And now not only does everybody understand the problem, at least to some exit.
But you have big tech with both big wallets and a huge desire to help us solve this problem, and many of them want to do that in a clean way, and so it's an opportunity. And I think we'll look back on this and see a huge inflection point where there was so much attention and so much desire to do this the right way that the funding just started really transforming the way that we all do this.
If we switched to market structure regulation. There was a few years ago Firk called the twenty to twenty two Can you explain a bit to what that is and did it change anything for you?
In the US, Furk issued order twenty two twenty two. It was back in twenty twenty. It's been a number of years now. Twenty two twenty two was huge for setting the right direction of how these wholesale markets should be treating resources on the demand side. So we'd had prior Firk orders. I'll spare the audience, but we've had prior Firk orders that say the demand side should be
treated equally to this apply side. A megawat not used or a nega loot if you will, is just as valuable as a megawat that comes online should be paid accordingly.
But we never got as deep into the smaller assets such as electric vehicles, battery storage, and the rules and regulations around them can get very, very complicated, and so twenty two twenty two was an effort by Ferk to say, these assets are extremely valuable, and we want the different transmission operators and independent system operators that we have in North America under fur jurisdiction anyway to do certain things. We want it to be possible to bundle them all together.
And sometimes when you get into deep regulation, you can get death by a thousand pets. One of the reasons I was excited about twenty two twenty two is it's an effort to avoid that. So it's not that we can't do demand side without twenty two twenty two. We've been doing this for a very long time. This is what Voltas does all day long. But there are things that will briefly gears and ways that we can access assets in certain markets that today we can't and smaller
and smaller assets. Residential becomes more and more of a growth market as we see the order make its way through regulation. Am I excited about how quickly it's been happening. No, we see some of the ISO say we'll be ready in twenty thirty. The order came up in twenty twenty. Guys, come on, So I think there is this like both genuine real excitement and optimism and also a deep desire for urgency. And let's get going on some of these things that we're seeing play out right now.
At the beginning of our conversation, you said that you would send the money back to your clients, which is great and it's a great proposal. What is it like you managed to cut their bits? But what five?
Depending on the sector, their bills can be a huge portion of their out there. So there are certain industries, heavy industry crypto loads for example, where energy is their number one expense and so we can go really deep into that and so it really becomes energy sector dependent how much we can cut their bills. Twenty percent is a good role of sun.
Nice nice DNA. You're welcome, Yeah, twenty percent. I find your product extremely interesting.
Energy spent Who doesn't want because not all energy is created equal. We're going to stick with food for a second, right, So you go to a salad bar and you pay by the weight, and it's like, how is the cucumber worth the same amount as the salmon? It doesn't really make sense. It's not really correct. So not all hours
are created equal on the grid. Overnight, when you have baseload running, sometimes pricing goes negative, and so really understanding that nuance taking the burden off of the customer to understand when and how they're going to use energy. Two certain hours are going to really hurt them. Demand charges can be off the charts sometimes understanding that that hour is just not the one. An equivalent for someone who just never doesn't know anything about industry is uber surge pricing.
Can you wait five minutes and not pay ten times the price for that uber you want it to take most of the time you can? And so part of what we do is just deeply understand the economics of our customer, what motivates then, and what are their non starters.
We work with electric school bus fleets. There's probably no price at all that will convince that fleet not to take the kids too in front school, But when the buses are sitting there overnight, when they're sitting there during the day, now the price point is much lower, so really understanding that, marrying it with what the grid needs and then having the lasagna and biass nets. You know,
I'll get some lunch after this. That is how it can work because you do not need to reduce twenty percent of the hours to reduce twenty percent of your cough.
And dand what you've just touched on there as a whole area mobility. Very interested to hear your view on the use of these electric vehicles, whether they're buses, trucks, or vehicles now on how you see that going forward.
I see the growth of electric vehicles and in particularly large fleets as another resource for the grid. And again you have to respect to primary use case. School Buses exist to take kids to and from school, the same way that the walmartn't exists, so that people can go and buy what they need to buy. But those are sitting grid resources. They're ddrs on wheels, and they have things they can do to really benefit the grid. Why would we not squeeze out and increase the utilization rate
of these assets that we have all around us. It's just an extremely inefficient system. If you really look at our system, We've got buildings and all the load control that they can do. You have electric vehicles just battery storage on wheels, and you use them for fractions of their actual capability. So the most efficient way as a society that we can get more out of our existing infrastructure is to make better use and have secondary intertiary
use cases for these very capital intensive assets. Batter Is are expensive, and so when we can go and partner. We have partners in the battery storage space, and the partnership goes like this, Hey, you're selling an expensive stink. Let us help you make it cheaper for your clients. That's compelling too, So we do a lot of work. It's not just that we go directly to the client that's buying a battery. We're also going to the developers and helping them bring a cheaper solution.
Data. I'm going to put a bit your system to the test. We've seen the recent auction for capacity at PGM reach crazy prices four times. I mean, what's your interpretation of that and how can you help.
I noticed that data point too, was it still is huge talk of the industry. A couple things. One, it's the market working. So credit to PJM for sending a price signal to the market that incentivizes people to come build. What's happening right now, everybody wants to build in PJM. What's pgm's problem. They need more capacity. That's at the highest level, that's how a market should work. So we now have this price point. We have a couple other
problems though. Here in the US and probably everywhere, there's an interconnection queue, and there is simply a time lag to build new assets. It is hard to build a new power plant quickly. It's hard to put anything on the gride quickly when you also have to go through the interconnection queue. VPPs are already in the ground like, they're already there. They don't need to go through an
interconnection queue. The stores already exist, the school buses are already out there, the buildings already have their building management systems, there's storage going in behind the mean or stuff like that. These assets exist and so it's a matter of connecting them. So that brings me to the second point, which is this is a tremendous opportunity for VPPs to rise to the occasion, and that's what we're all talking about. Voltus,
our peers. How can we grow, how much can we grow as quickly as possible because we're one of the only asset types that can move that quickly. And the next auction already is coming up in December. That's how I view it. This is the first time we've seen a realcific numerical data point, first major time. There's data points all the time, but it's the first really newsworthy frost the ocean data point of this phenomena we're seeing where we now have huge load growth for the first
time in decades. The reason Boltus exists, in part is to build out these resources in a way that continues the energy transition. We exist so that the penetration of renewables can become more and more and more. But you need that load side flexibility day night.
You've created vert Us eight years ago, and I guess you started with a simple software. How has your software evolved in the past eight years? And now, of course we hear a lot about AI. Are you using AI? How does it work?
So our technology platform is central to the primary reason that we exist, which is we want to maximize value for our customers and our partners, and so we do that through technology and some of it is out of necessity. We talked about how we have to interconnect with the grid, We have to interconnect with the assets with the advent of the AI, and as we continue to build out the tech, what we're doing is using AI for example, to maximize that revenue. So this stuff gets complicated quickly
and there's a learning component to it. How can we, for example, forecast customer loads better, How can we forecast what the grid will need better? How can we marry that all so that in real time. We just actually had a press release about our AI Adjusters what we call it, and that product's feature, for example, is adjusting in real time to the forecast of what our loads are doing to make sure that we're squeezing everything out.
It's really that optimization where AI can come in handy for us the most, and we look at it through the lens of value to the customer. And so that's how we think about our roadmap. That can be anything from expanding geographies to going deeper, to figuring out how to make that lasagniol a little better, a little faster and sell it for a little more money. But at the end of the day, that's how we think about things.
So Dana, can you take out your crystal ball and give us a view of how you see the future of this VPP market in the US and also the role of oldest and that.
My crystal ball involves VPPs playing an extremely central and pivotal role to bring us through do an energy transition where renewables play a much larger role in running the grid. If you think about renewables for a second, we've invented an amazing technology. Take a three inexhaustible clean resources on the wind, and through technology, humans have figured out a way to generate energy with it. It has one problem, which is that we don't necessarily control, at least not yet,
when the sun shines and when the wind blows. And so that's where VPP has also come in, is to enable that renewable growth DPPs. Five years from now, we'll look back and we'll say we enabled the load growth we needed, the electricication we needed. We did it with renewables because we brought online more flexible demand side resources, and we shore it up bridge reliability so that we don't have issues like blackouts and concerns about our grid infrastructure. And VPPs are central to that.
Dana, thank you. So much for coming on the show and shedding a light on what VPP is because now I understand better and really I wish the best for voters because you're one of the very important block that will help the success of the energy transition.
Thank you very much, Thank you guys so much. This was super fun. Glad to have helped.
So thoughts Number one, Dana is brilliant, a company is very successful. She has raised thirty million USD in ceric and I can't wrap my head around the profitability of such platform. And I'll tell you why. We had an air knock bought by NL two and fifteen million dollar into was seventeen. Has an air not really been growing or not? I don't know. We had a startup or Swell Energy went down after raising one hundred million dollar.
Our batteries, allies or those of those VPV platforms, because if everybody installed batteries behind the matter, after a while they said, you know what, I'll take care of it. So all this saying, I love what she's doing among the fence when it comes to the viability of such Madela, Let's.
Be clear on one thing.
If you have a demand response behind the system and what you're doing is you're just reducing load or using demand in a much let's a more intelligent way than that in the past.
That's for me a critical part of the system going forward, and a battery doesn't do that. What a battery does is it's doing one or two things. It's either enabling you to optimize self generation or optimize buying and maybe selling power to totle the system. That's what it's doing. But if we'd actually think the VPP should be combination of all of these, it shouldn't be just reducing demand,
it should be also the battery as well. And actually you're definitely seeing even larger batteries being put into this as well, because again it gives you even more opportunity as well. But I think the real critical roll of VPPs is we have got constraints across the grid across the Western world, and it's just that sometimes that peak how a demand can be enough to cause real problems. So what you're doing is reducing it all the demand side.
That's what it's doing. And you're right, if you had a battery there it might help, but it means that you'd have to fill up the battery to wait for that moment, and so I would say the shots in the metal. That would be the way I look at it. You can need both.
I only see a future if they act daily on the market, because if it's just to wait for cold snap in January or heat wave in July and the rest of the time the grid is sufficiently provided. I can't see a business model where basically you work twenty days per year. But if they act daily and optimize daily, yes, I see a lot of value in those.
VPPs without a doubt. Actually, by the way, quick clear again, it is optimizing demand up and down because up is going to become more important. We've got so many days that have negative prices, so you're going to have you need to be able to pun up to demand, but you also need to be put it down as well for the grid. But the other thing is we're totally witch is when you have batteries and self generation, it just changes the whole mix and the complexity of it.
And from the customer perspective, you can save an awful lot of money for yourself by having those optimization possibilities.
Exactly last, folks, before I let you go.
Oh no, listen, I I'm really excited by all these business models that are possible in the future, in and around this, and I think if I look at what's going to happen, I would see energy services just almost offering us a flat rate for our energy at this point in time, and they just manage every in the background, and you feel good and you've got low cost bill. That's how we're going.
Yeah, one hundred, one hundred percent. You need to have those platforms managing flexibility, the variability of the price and as you do for a phone skiption, have a flat rate. So that's your house. That's so much who finish, forget about it, we'll take care. I like that a lot exactly, and a lot of business would be exactly the same. Well on those wise world jib we thank Dana for coming and I took to you next week, look forward to it.
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