Connecting Customers to Create a Virtual Power Plant — Episode 126 of Local Energy Rules

Cisco DeVries:

And that’s what’s so special about Resi-Station is that OhmConnect has figured out over these years, how to make hundreds of thousands and soon millions of individual homes, individual customers act together like a symphony and reduce energy a little bit in each home, but overall, a large amount in a very meaningful way that is predictable and dispatchable.

John Farrell:

When is a power plant something other than a hulking facility with smokestacks? One alternative is the power of thousands of people acting together. That’s the idea behind Resi-Station proposal for a 550 megawatt virtual power plant that we use smart electronics, solar and energy storage owned by thousands of California electric customers, to deliver as much electric capacity as half of a nuclear power plant. Joining me in late January, 2021 to discuss how Resi-Station fulfills a vision of interconnected customers is Cisco DeVries, CEO of OhmConnect. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a bi-weekly podcast sharing, powerful stories about local, renewable energy. Cisco, thanks so much for joining me on Local Energy Rules.

Cisco DeVries:

Oh, it’s such a pleasure to be here. I’m really excited to be talking with you. Thank you.

John Farrell:

I just wanted to start with a little bit of your history. You know, you’ve had a fascinating career arc in energy work. You started in Berkeley as the chief of staff with this sort of pioneering idea about helping folks address clean energy financing by doing it on their property taxes, an idea that really took off. And then, unfortunately it was kind of squashed by some federal action or maybe not squashed, but curtailed, but really what got you into the clean energy space to start with like what’s driving you, what’s your interest here?

Cisco DeVries:

No, my very first efforts into energy was actually when I was an appointee of president Clinton back at the U.S. department of energy. And one of the first things I worked on in that job was an announcement related to new refrigerator standards. And I can’t tell you that I was super excited to get that assignment – at the time, that did not seem like the kind of rip roaring new cool stuff I wanted as a newly minted appointee. But I think my first true energy efficiency love was the refrigerator. And really just to understand the importance of both what California did initially, and then the U.S. did in terms of refrigerator standards, the incredible story of how much better refrigerators are, how much cheaper they are, bigger they are, how much less energy they use and how many billions and billions of dollars people have saved because of that. So it was kind of a wake-up call to the small, boring, under the hood stuff that really makes a huge difference in the energy world. People love talking about science and technology and it’s great, you know, um, fusion or whatever else might come, but really the unsung hero is, it’s things like the refrigerator. And so that kind of got me down the energy efficiency and energy road. But you mentioned that I had joined the chief of staff to the mayor of Berkeley, California. And I’ll tell you what got me down really focused on this as my career was Al Gore. It was The Inconvenient Truth. And, you know, I watched that movie and I just lost it and thought, well, this is a thing that deserves a lot of time and attention from every level of government and every level of business. And I started working on it. How do you start solving problems? How do you start knocking down things that are in the way of fixing these problems? And that led me to first to financing, uh, how do you pay for solar and efficiency and later here to OhmConnect.

John Farrell:

So I have to say, I love that you brought up the refrigerator. I’ll probably try to find that chart that you can find out there on the internet that just shows that incredible fact that you can buy like a refrigerator that’s twice as big as one 20 years ago, and it uses the same amount or less energy. I just, it is really one of my favorite stories as well in terms of the success about how government can help us live better by requiring things of manufacturers. But that’s, let’s jump and talk about OhmConnect. So I had heard of OhmConnect before reading about this Resi-Station project, you know, mostly as a company bringing smart technology and to help folks reduce energy use by turning off devices. So you think about like a smart device, like a smart thermostat that can, you know, turn down the heat or the air conditioning when I’m not home (back in the days when we left our homes.) I mean, first of all, share with us a little bit about what OhmConnect does broadly, but then why the interest now in aggregating customers together in this model of sort of a virtual power plant?

Cisco DeVries:

Thanks. And it’s important to note that while many of us are still at home and we’re using a lot more energy, things have changed in COVID. And it’s really interesting. Now we have 150,000 customers in California where we see their real-time energy use and it is tremendously different than it was a year ago. And it will continue to be, I think, a different for a little while still. Look OhmConnect, you could think of what we do is having two really key components. The first is behavioral, and this was really the bread and butter seven years ago, as the company started off always, we had the dream that we could control devices and thermostats and everything else, but the technology wasn’t quite there yet. And the tools to make that happen in real time consistently wasn’t there yet. And so the company really started on having people do it through behavior. How do we get people to make individual choices at key times to save energy when the grid is congested? One of the things that I’ve really been impressed by is how hard it is to get people to think about energy at all, and then how to get them to do anything about it over and over again is near impossible. So what OhmConnect did to sort of make it fun? Pay people. So it’s lucrative, the economics align, it’s a game, all putting all the sort of behavioral and economic incentives in place, and you’re just continuing to work them over and over again until we had a way that captured people’s attention and kept it over time. So that behavioral foundation, which was built on the customer app, I think was really critical because that gave people some information about what the grid needs and how to engage with it and what parts of their home actually use the most energy. And so that allowed us to then transition over the last couple of years to very heavy device load, getting people to connect their thermostats, but also really focused on simple things like smart plugs that we’ll send you that connect to your refrigerator or your wall air conditioner, or maybe at your home entertainment center. So just really simple, easy to install pieces of technology that give us meaningful control at scale. So that combination of behavioral and device I think is what’s made what we’re doing now possible and the scale possible. I think that’s been really important because I think too often, people start from the idea of what does the, what does the energy world need and not from what does a customer need to do this?

John Farrell:

Before we forget to circle back and ask you about policy… I think I have a question kind of queued up about this in terms of how this happens. I want to talk a little bit more about the Resi-Station project and kind of give people a vision of what’s going to happen, but then kind of circle back to like, how do we make this happen? Cause I’m thinking right now just about work, we’ve done with some utilities here in the Midwest that keeps saying, well, we can’t do any more demand response. We can’t figure out how to save more energy and they don’t do any of this stuff. Like there’s no smart plug devices. There is a smart thermostat program, but it’s not even connected to the utility. It’s just something that you can use. And so clearly it’s great to hear you explain how, you know, you had to wait a little bit for the technology to be there, but now it’s here and it’d be great to see utilities use it more. So let’s, let’s talk about this Resi-Station. I mean, this is an incredible concept. It’s basically saying let’s connect… You’ve got all these individual customers that have these smart devices, their thermostats, maybe some of your customers have solar. They’ve got their refrigerators or their air conditioning hooked up to this. You’re talking about 550 megawatts. As I mentioned in the introduction, that’s like half the size of a nuclear power plant. That’s enough electricity to power, a small city. How can you make a power plant virtual? How are you connecting all these folks?

Cisco DeVries:

So this is one of the most difficult parts of my job. And this industry is that we are all just trained for very good reason, to think of a power plant as a big hulking building, probably with smokestacks, that puts electrons into the grid and moves kilowatts and megawatts. But the thing is that the grid doesn’t care, whether it’s supplier, what it cares about is supply and demand are equal at all times. And whether you get to that equilibrium by adjusting the amount of supply up or demand down is irrelevant. Now, renewables don’t adjust on the supply side anywhere near as well as traditional fossil fuels. That’s one of the challenges of our zero carbon transition. So here’s this great moment where we can use the basic physics of the grid to solve basically the one problem renewables have, which is their intermittency. Now the good news is Jon Wellinghoff and folks at FERC. Now a decade ago, really smartly before I’d ever thought of these things said, you know what? We need to make sure that the wholesale markets in the country reflect the fact that supply and demand should be treated equally. So in other words, a megawatt of production from a power plant should be treated the same in energy markets as a megawatt of reduction, right? It should be treated the same in the market. It should be paid the same. All elements should be the same. And this was, these were rules that came out of the federal government a decade ago. They were challenged all the way to the Supreme court at the time. And, but they persevered and they’re here. So the real challenge now is not that the markets don’t theoretically value supply and demand the same or that the grid doesn’t value supply and demand the same, the real issue here is how can we make this federal rule and the physics of this real?

How can we make demand dispatchable, predictable and reliable? How do we network lots of little savings over many, many customers all at once in such a way that it looks like a power plant is active on the grid, rather than being sort of unpredictable little bit going on across lots of different homes. And that’s, what’s so special about Resi-Station is that OhmConnect has figured out over these years, how to make hundreds of thousands and soon millions of individual homes, individual customers act together like a symphony and reduce energy a little bit in each home, but overall, a large amount in a very meaningful way that is predictable and dispatchable. So I can talk to you a little bit more about how that actually plays in, which is that it’s not like we’re one big power plant. It’s even better than that. It’s like we’re hundreds of little power plants located all across the state. Each one is bidding into the system operator for California, the CAISO, 10,000 times a day. So we are putting together this system that says, we are constantly telling the state’s grid managers, how much energy we have and at what price and where, and they are constantly telling us exactly what they need and when and where. And so when that happens and we dispatch, they can be sure that we’re going to show up with everything from a couple of megawatts in Fresno to a hundred megawatts statewide when they need it. And when they tell us to get active and that makes us, to them, look like a power plant. Literally we register and operate as if we are power plants with the grid manager. And that is something that has taken a very long time to get right and get to the level that they can trust and that we can deliver consistently.

John Farrell:

We’re going to take a short break. When we come back, I ask about the value to customers of participating, how this project and OhmConnect services can help address racial inequality gaps, and what rules and policies are needed to make this possible across the country. You’re listening to a Local Energy Rules interview with Cisco DeVries, CEO of OhmConnect, about the Resi-Station 550 megawatt virtual power plant.

MIDWAY PITCH

John Farrell:

You’ve already talked about some of the benefits of having this structured with lots of little guys, as opposed to one big power plant. And I think about utility resource planning process where you’re talking in front of the commission and you’re debating like, should we build a big power plant or should we do small stuff? I mean, it seems like there are some technical advantages, which is you have, you’re dispersed all over the state so that you can be providing benefit in lots of specific locations, as opposed to just one place where that one large hulking power plant would otherwise be located. Is it also saving money for energy customers writ large? And are there particular benefits for participants like the folks who have these smart devices and are participating in the market thanks to OhmConnect?

Cisco DeVries:

Yeah. I love starting with the customer first, because that’s the only way to do this. And I think that’s been one of the big challenges. So almost everybody in our world, John, calls them rate payers. You know, we like to think of them as like families or customers. And at the beginning we give them control, right? They sign up, but they can opt out. They can choose which devices are under control for what times and what events. And then yes, they saved money on their energy bills. In general, we see our customers saving about 5% or so on their energy bills, but that’s not actually the benefit that we deliver. We deliver it… We just pay them.

We pay the money. We say, look, if you reduce an amount of energy during this moment, when we need you, we’ll pay you for it. And the reason we’ll pay for it is we’re getting paid for it by the grid, by the grid managers and by through CAISO. So that, what that really means is we’ve aligned the economic interests of the grid and the economic interests of our customers perfectly. When it’s worthwhile for the grid for people to reduce, they’ll pay for it. And we make that possible. So we have customers that will make anywhere from 50 to a hundred, to sometimes hundreds of dollars over the course of the year, simply by looking at the text messages we send about reductions they should make or giving us control of their devices and thermostats and appliances together. When we put all of that together, it looks like hundreds of —  today, it looks like over a hundred megawatts to the grid. It’ll be over 500 megawatts when we’re done building up Resi-Station. But each individual user, all they know is they’ve been given a target. We’ve said, Hey, normally you’ll use two kilowatt hours. You know, at six, between six and seven tomorrow, can you use just one please? And in which case we’ll pay you and it’s all straight off their meter.

So we know what their usage is. We know essentially what it would have been, and we know what they reduced. And so everybody can, can move from a theoretical construct of did they reduce energy or whatever to I’m measuring exactly how much you reduced. And I am paying you or rewarding you for those reductions. That is a mind-blowing change compared to what traditional demand response has been. And it’s really important to focus on that. Now, when you go to the utility, traditional demand response from utilities is an emergency switch, right? It’s like an emergency, break glass and let’s cut some air conditioners off and people hate it, right? It’s fine. They get paid to do it in a lump sum, Hey, $25 for the year. And we can turn off your air conditioning for a few hours a few times. Our customers love it. If we don’t call an event, they start to getting into like, Hey, I want to get paid. Where’s, where’s my hour. Where’s my event. It really turns that on its piece. And then from me, from our relationship to utilities, it also changes we’re no longer a program of a utility. We’re a supplier. So we deal with the supply side. So the side of the utility that saying, Hey, we need to contract for 25 or 50 megawatts for this summer. They look at us as a supplier. Hey, that’s great. We have some cheap, available local power. And so it really changes the entire conversation with customers. It changes it with utilities. And right now the hard part is we’re trying to change it with the regulators and we’re making progress, but we still have work to do.

John Farrell:

We’ll get to that in just a few minutes here. Cause I would like to talk about policy, but first I feel like both taps into your history and working for city government, as well as what ILSR focuses a lot on the local level. You’re doing this project in California. You’ve got a lot of cities in California in particular that have ambitious renewable energy commitments. You have the community choice energy agencies that are aggregating on a decision-making level of a lot of municipalities. Is there a role for these community choice agencies or for municipal governments in helping to advance this concept? You know, what role can they play?

Cisco DeVries:

I am at heart, a local government guy. I have worked at the federal government. I’ve worked at the state government. I’ve worked at local government and I am a big local government advocate. It is where the rubber meets the road. It is where you can make change in real time. And it’s where you can get a community together to do something in a very unique and powerful way. And we’re going to try and harness that for Resi-Station. So we have a plan to roll out local efforts in local communities, particularly in the central Valley, in inland part of California. So the inland hotter bits, we’re going to do a lot of local events, a lot of work with local elected officials and government officials and organizations. And there’s a lot of benefits to this. One of them, of course, is that many of these places have small polluting power plants already in them that maybe we can help get offline, right? If enough people in that community come together and work through OhmConnect, they won’t need that power plant to turn on as much. And hopefully at some point it can be mothballed entirely. Second, that community choice aggregators are already so active, across many parts of the state that, and they’re looking for supply, they’re looking for ways to engage with their communities. Their board of directors is, is actually mayors and city council people from the local communities. So there’s a great connection, now, that’s already made where local governments are taking control over their energy future, and we can help with that.

But the last thing is, it just makes economic sense. I’ll give you a very quick example. We went into Fresno, California a little while ago, where we had 1% of Fresno residential customers were part of OhmConnect. And we said, let’s focus on Fresno. We’re gonna, you know, this, we did this a year and a half ago before COVID, we’re gonna rent out some movie theaters and give people a chance to come to the movies. And we’re just going to create a community and engage organizations. And we went from 1% penetration to 5% penetration in Fresno in just a few months. And we did it with lower marketing and acquisition costs. So by actually connecting into a community and being part of it and engaging people where they are, we actually saw huge benefits in our growth and in Fresno, just to give an example, that meant that they got a lot more money, right? Those residents got paid more so on one day, August 14th, which is the first big day of our, of our flex alerts and the first day of blackouts in California last summer, we ended up paying $90,000 to our customers in Fresno on that one day alone. So then this is a nice sort of circle, right? Then they’re happy. They’re telling their friends, Hey, you got your power turned off. I actually just got paid to reduce my energy. They’re like, Oh. And so we saw referrals go through the roof, that virtuous cycle happens at the community level. And we’re going to double down on that.

John Farrell:

That is so great. Speaking of 2020, what a year. I think a lot of people are happy to see that in the rear view mirror, it was also in addition to some of the crazy stuff that was happening with California around wildfires and public safety power shutoffs. You know, it was, uh, nationally a year of reckoning around racial inequality. And we see the impacts of that in the solar and clean energy business as well, that African-Americans are far less likely to have solar, even when we account for income differences, et cetera. Are there ways that the Resi-Station project or OhmConnect can help address racial disparities and access to clean energy?

Cisco DeVries:

If there’s one thing out of everything that happened in 2020 that I hope we come away with and you know, of all the terrible things and all the difficult things that happen in 2020, I hope that our reckoning with inequality, racial inequality, economic inequality, is here to stay. I hope that we deal with this and, and that’s a big part of why I’m at OhmConnect and the work that we’re trying to do. It’s also a big part of why I think the state of California has really turned its attention to trying to support what we’re doing. So let me be specific. 40% of OhmConnect’s customers are lower income families. And most of our customers lower and moderate income all the way up are doing this, not because of the environmental benefit, they’re doing it because it makes economic sense. They’re proud of it for environmental reasons, but they’re doing it for economic reasons.

What I say is they do it for the money, but they tell their friends about it because they’re, they’re proud they can help the environment. That’s a great combo. And for many of our customers, they tell us, this is the first time they’ve actually seen a benefit from this clean energy transition. That’s a really powerful thing to hear as well. We also, for many of our customers lower income, we’re the, we provide them the first smart device they’ve ever purchased or ever been installed in their home. Usually a smart plug, sometimes a thermostat. So what we’ve really tried to do here is focus where there’s a lot of folks who are hurting economically, um, and without much effort or trouble participate in this clean energy transition and get paid. And that changes their approach to this whole issue. I think it’s essential for the politics of this, that we engage these folks that they see the benefit and that they appreciate and continue to support the transition to clean energy. But it’s also just the right thing to do as, uh, as we continue to go on, we, we need to make sure we democratize this transition and OhmConnect is really trying to provide a way that the economic benefits of clean energy get out to everybody.

John Farrell:

So I’ve been sitting on this question for a while, as someone who absolutely loves to wonk out on policy, which is how, how could this kind of project happen outside of California? What are the policies? You, you referenced a FERC decision almost a decade ago about helping to treat demand and supply equally in markets. But I look at California doing this and I think, Oh, this is amazing. What do we need to do elsewhere to make it work? And it sounds like that work is still ongoing in California. You kind of alluded to this earlier, we’re still working with regulators, but are there some important like state level or local policies that we need to see change that will make this possible and other places?

Cisco DeVries:

Yeah, so it, look, this is a work in progress everywhere. And in many ways, California is actually not the best market for what we do. We’re really excited about the potential for our type of flexible demand across the East coast and Mid-Atlantic PJM New York area. So there’s lots of great opportunities to take the California Resi-Station model and actually do it better in some of these other communities. As you just mentioned, the question, the good news is that federal regulations already sort of require this. So we’re not trying to break brand new ground. The hard part is the measurement and verification and other regulatory environment to allow us to operate as if we were a power plant still needs to be improved almost everywhere, including California. The other thing that we need are smart meters. This only works because we have a source of truth on the actual energy use of the individual customer, and we can get it in a reasonable period of time. So having smart meters and allowing us to have access to that information is a critical threshold item. So smart meters are rolling out in New York. There are already throughout many parts of PJM and New England and other parts of the country. I think we’re at 60 plus percent now rollout. So we’re getting there, but access to that data and an agreement about how we’re going to measure and verify it is the critical component for our expansion and for others who might want to do the same kind of thing. So we’ll be working on that quite a bit and happy to talk out at any level of depth on this, but also we’ll probably leave it there in the interest of, uh, of simplicity. The other thing to note is it does, it, we can do this in places, in partnership with utilities as well.

And we are doing our very first one of those. We partnered with origin energy in Australia, launched nationwide about six months ago, and it is going great. The key thing there is the utility brought us in to do what we do best as their partner and not to micromanage and change everything. We’ve spent years figuring out how to engage consumers to do this right. Most utilities are very afraid to give us that rope, but I think we’ve proven that if given that space to run, we can do an incredible job in partnership as well. And I’m hoping that the experience in Australia with Origin is translatable and in the United States and other places where either we can’t do the things through the wholesale market, because it’s still vertically integrated, or it’s just simply a better option to go through the utility.

John Farrell:

I feel like I should make an obligatory plug for Mission Data. I follow them on Twitter and they’re in a constant battle to make sure that customers can work with the company of their choosing with their own utility data in order to see their own benefits. I mean, it seems like that is such a crucial piece.

Cisco DeVries:

Well, I’ll just say back in my, in my previous company, Branford, we did a billion and a half dollars of financing across the country, PACE financing, unsecure, anything, lots of different types of on-bill financing. And what I would tell people is at the end of the day, for better or for worse, we would have all their financial information, social security number, address, project, everything else. The only thing about that person I would not know is their actual energy use and whether or not the project they just financed or the benefit. And we’ve got to solve that. We’ve gotta be smart about customer protection of their data, keeping them in control, but at some point that information coming off that smart meter is incredibly valuable to the customer and they need to be able to see that. And that’s one of the things OhmConnect delivers is this is worth money. Let’s just put it to work.

John Farrell:

How can folks keep an eye on this project? Follow its progress, become a customer of OhmConnect?

Cisco DeVries:

Well, so the great thing about Resi-Station is when you turn on your power, you turn on your lights. You don’t know what power plant provided it. And similarly as a customer of OhmConnect or whatever, when you know, you’re going to see OhmConnect as your partner, and we’re going to make sure that you get the best possible deal. And we, we provide the best revenue and economic benefits to you. So to sign up, just go to OhmConnect and sign up. It’s really simple. It takes you like a few minutes, if you’re in California. Or you can sign up outside of California and we’ll let you know when we’re in that community. So feel free to do it. If you want to follow the progress of Resi-Station, we do have Resi-Station.com, Rezi hyphen station.com. You can also get there through OhmConnect directly, and we’re going to update people as megawatts come online. As we launch, as this goes live over the course of this year and built out over the next, it’s going to be a lot of fun. So feel free to keep an eye there or, you know, just follow me on Twitter. I like to geek out on Twitter. John has, you know, sometimes I just have to do a good energy geek thread and get that out of my system.

John Farrell:

Absolutely. Oh, we’ll make sure there are links to the Resi-Station website and OhmConnect and, and your Twitter feed. So folks can find all those things on the show page. Cisco, thanks so much for joining me to talk about this project. It’s really exciting to see what you can do.

Cisco DeVries:

It’s been a real pleasure and honor to be part of it.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules, with Cisco DeVries, CEO of OhmConnect, about the proposed Resi-Station and the opportunity for networked electric customers to replace or reinforce traditional power plants. At the show page, look for links to the Resi-Station website, OhmConnect, and an ILSR report “Sparking grid savings starts at home” that mentioned some of the same technology discussed in our interview. On our website, you can also find our community power map showing which States allow community choice energy and more local control of the energy system, as well as our interactive community power toolkit that provides stories, audio, and video examples of strategies for advancing clean local power. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.