The Exchanges

Q That too, but actually before that, who are the customers that participate? I mean, I think that the expansion from it's, you know, uh, Jill Schmo running a factory to, like, a pretty wide array today is interesting. So, like, if I look, if I were to look at the Voltus platform today and the customer set on the platform, like, how would you, how would that pie be split?

A It'd be, so to give you a sense, there'd be over 50 different verticals just within commercial and industrial, and then there'd also be residential. So going, uh, Maybe smallest to largest. You'd see everything from an electric vehicle in a home to a smart thermostat to, uh, mom and pop kind of retail shops, big box stores, any kind of commercial load, school districts, wastewater treatment plants, on up through larger industrials, maybe first larger real estate building, commercial real estate is huge in particular in areas like New York, on up through Industrials and on and on, steel manufacturing facilities, massive loads. Those are, as a sidebar, the original large loads, in my mind, were like the paper mills, paper mills and the steel mills, and then there was crypto, and now we're seeing the, there was always data centers of the quote-unquote traditional sort, and then cloud compute, and now we're seeing the AI data centers kind of at the top. So that's the, it really runs the gamut, and in many ways, that's the strength of the portfolio. You can take things that maybe have operating parameters and constraints and pair them with other things, or other customers that have similar but different constraints, and now you can respond to what the grid needs by Tetris-ing these things all together.

AI assessment note: “there'd be over 50 different verticals just within commercial and industrial, and then there'd also be residential.”

Q Can you talk a little bit about geographies today? Like, where, it's sort of national to an extent now, and thanks in part to those FERC orders that you described that happened a few years ago, but is there significant concentration in some regions over others? Is there a significant pricing differential in terms of the value capture in some regions over others, or is it all pretty uniform?

A Let me answer volume first, and we'll come back to pricing, because they're slightly different answers. Uh, we very intentionally Built the company thinking that we wanted to be in every wholesale market in every territory eligible across North America. So that is true today. We have some markets that have emerged as just larger than others, but it's, it's by and large owing to the size of those markets. So you'll have your PJMs and ERCOTs and New York and SPP being bigger than, for example, the Canadian markets. But that's because of percent penetration against the peak load, not because that we've Really seeing that one market is where we're going to concentrate. And that's a business choice for us. There's other aggregators you'd ask that say they're heavy in one market or another. Um, but because of the second part of your question, pricing, pricing can get a little crazy out there. Anyone who's watched the PJM auction for years knows that, well, one year you think it's happening, and then the next year it's this, and it goes back and forth, and you might find a trend line over time. But if you're trying to run a business, it's really, really, really hard. And so the best way is to adopt more of a portfolio. So we have a portfolio of portfolios, and that's how we built the business is approaching it through the lens of the actual risk management and the fact that we are exp…

AI assessment note: “Let me answer volume first, and we'll come back to pricing”

Q Maybe staying within the CNI world for a minute, because I know this will be different for residential, um, talk a little bit about the resources, like what is being dispatched, generally speaking?

A Yeah. So it's still a lot of load control on top of things that are now what we would call behind the meter assets. So let's just talk load control for a second. The first thing we'll often do when we talk to a customer is take a look at their electricity bill with them and run through it and make sure that we're understanding, all right, well, how much energy are they using? What are their demand charges, which are sometimes a shockingly high portion of the bill? Uh, and so anything that's drawing energy is eligible to be something that can use less energy, and the more that things are connected to things like building management systems, the easier and more technology enabled this becomes. So there's still a lot of take commercial condition space, just load control as a DER itself, as part of the VPP, and now we're starting to throw around the acronyms, but I'm, I, I fall into the, like, all-inclusive category. And so there's a lot of that, and then there's behind the meter assets, and that can be a generator behind the meter. It can be battery storage. Increasingly, energy, the battery energy storage systems are one of our top growing verticals, and that just relates to the basics of the cost curve coming down. So that's, that's everything. It really runs the gamut.

AI assessment note: “it's still a lot of load control on top of things that are now”

Q Right. And that's like an annual auction, right?

A Annual, biannual, there's seasonal, even, even talking reserves. Uh, if you just, let's go to operating reserves for a second. That's, that's daily. It's a day ahead or a real-time market in some markets. Uh, but you're still, and so there's an, there's an hourly price associated with providing reserves to a market. That is pretty spread out. Little bit ebbs and flows here and there. Reserve markets actually can sometimes be higher, uh, in those, in those shoulder seasons because of shortages of other resources. So that spreads it out. And then when you're talking about like the energy payments themselves, we have a lot of customers who respond economically. And so it's only when pricing goes above X that they want to curtail because that's their threshold. That's their, what we call strike price. And so for those, that's like you're clipping the peaks of pricing. And so you got to look at like, yes, if you're going to have a heat wave in the summer, there's going to be a lot of money made there if you have a polar vortex in the winter. But as a general Trend is a general observation. These things are getting spread out. Now, layer on top of that, we're also seeing more of the, what we would call, quote unquote, traditional capacity programs being dispatched regularly. I lost count. It used to be that that would be crazy to not know how many times PJM dispatched ELRP this summe…

AI assessment note: “Annual, biannual, there's seasonal, even, even talking reserves.”

Q of Whatever modern version of demand response there is. Is it, I think what changed in PJM in part was like the rules around capacity accreditation. You could probably tell me all the details there, but is the rate limiter like achieving sufficient value from the grid operator? Is the rate limiter finding enough of the right customers on the demand side or what stops this from 10 xing tomorrow?

A It's all of the above. It's all of the above. So some of it is, yes, the higher the pricing goes, the greater the adjustable market, because now things pencil out for nearly 100% of things, right? There's also just time. So how quickly, I get asked this all the time, like, well, well, if you just had endless resources, how quickly could you do things? But there's still just a limiting factor of the time to, to, to just go out and do it. Uh, there's the rules. You alluded to the, uh, The ELCC and all the accreditation changes. And so there was a, there was a lot behind the scenes more than meets the eye around, well, more total megawatts showed up, but because of the way they counted it, fine. Um, I can't really speak for others. I mean, we grew year over year. So one of our takeaways was, uh, okay, well, well, well, that's great. Like we have more space now. And so we're going to go out and have more to offer customers. And, um, The last thing is, I do think people don't always keep in mind that it's not like one, it's not a one bite at the apple moment. So PJM has the forward auction, which is one way to procure capacity, and then they have their incremental auctions. So as you approach the delivery year, what will happen to pricing, and are people kind of I don't want to use the word withholding. That's a, you know, bad word in the industry, but are people kind of just waitin…

AI assessment note: “It's all of the above. It's all of the above.”

Q Better data access on the customer side, like load data, better access on the utility side to know when it's going to be dispatched. What's the data that would unlock something for you?

A Yeah, so when we think about like the residential portfolio, for example, um, so C and I, we go and we install either, either there's a way to tap in through APIs and, and get customer data through something the customer already has, uh, leveraging our API platform, or we go and we install what we, what we lovingly call our vaultlet device, which sits on top of the utility meter and streams real-time data to our platform. But data is very important. When I think about the growth of our residential portfolio and what's, I think you used the term rate limiting there, uh, it's, it's the lack of access to, and I'm going to air quotes here for the listeners, smart meters, right? So we deployed all these smart meters, we rate-based them, and then it's like, well, can we please use the data from them? But no, uh, in a shocking amount of territories, it's actually quite hard to Gain access to that even if you are the consumer. And so there's some basic stuff around data access, uh, and unlocking some of the smaller assets that now pencil out. So some of this, it's now really worth it for smaller assets because of where pricing is. And so how do we make that happen? What's the rate limiters? There are still some, some regulatory, uh, tweaks, if you will, that I would like to see.

AI assessment note: “it's the lack of access to, and I'm going to air quotes here for the listeners, smart meters”

Q of additional capacity in order to set your data center at the size that you want in this location, utility or load serving entity. You tell me the aperture. That matters? Is it the balancing authority? Is the deliverability window smaller than that? And we, Voltus, will go originate a hundred megawatts of capacity from a variety of types of resources in the region, or is it some other process?

A The earlier, the better. So the sooner you can get in on the planning process, the better. You want to be, like, past the point of understanding what the problem is. So to your point, like, let's just say for sake of example today, the problem is some zone. Pick an ISO. PJM ISO. Um, so let's just pick PJM. So the problem is in some zone, uh, and we're talking to a data center who wants to develop something in zone A. Uh, well, the utility there says, well, I just don't have enough capacity. In this zone. Um, and the alternative is that they'd have to go buy it in the auction and it's going to be very expensive for everybody. Okay, great. Well, what if we built an incremental VPP in that territory and transferred the accredited, the, the PJM accredited market, market UCAP megawatts. So that was a mouthful, but like after all the accreditation stuff, after the who's it, what's it's of what type of resource it is out pops. A UCAP megawatt. And it's called something different in every territory, but that's, that's like the unit here. And so we go and we build those units, and then we transfer it to the utility for, and there's no, there's no financial transaction there. The financial transaction is that the data center's paying for it. So the utility gets the capacity. The data center funds it. We go out and we build it. And incidentally, longer term price signals are great, uh, fo…

AI assessment note: “The utility gets the capacity. The data center funds it. We go out and we build it.”