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

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.

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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.

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.

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.

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.