The Exchanges

Q way to leverage, sometimes leverage DERs, and sometimes not, right? I mean, I guess just turning off your system, like the original version of demand response was basically going to industrial customers and saying, like, shut down now when we have a system peak. You're not really leveraging DERs to do that, right? It's pretty, pretty manual, but it's a, it's a market mechanism into which DERs can participate sometimes.

A Yeah, I, I certainly agree with that. I think demand response has evolved in itself, or DER monetization has evolved over time, where it started off, you know, historically, um, really with a more manual process, right? Where we had Manual controls, maybe phone banks and things. There's some truth to, to those stories that are probably lodged in many people's heads, but it has since become very automated where really every signal C power sends out is an automated signal. And what I would argue is it's quickly moving towards optimize, uh, optimized or optimization where, where it's not looking, it's looking at what product could make the most value for the grid and for the customer at any, uh, specific time. So that's really where the, the communications and controls have evolved. Um, there's been a, a bunch of other kind of evolutions. I would say on the regulatory side, it used to be, regulators used to be fairly skeptical. Then we got to FERC seven four five, where, where it was, demand response was firmly accepted by FERC as, as a resource. But we've kind of even moved past that to where it's being encouraged with orders like FERC 22 22. The D are types that have participated. You know, classically, they were industrial loads, maybe HVAC. They really expanded to DG, um, things like energy storage, microgrids, even EVs now, certainly thermostats. Um, so we're seeing a lot of …

AI assessment note: “Yeah, I, I certainly agree with that. I think demand response has evolved”

Q or figure out what the relationship is between DERs that are active on the grid and the concept of demand response, which has been around longer, I think, Then at least the term DERs, but there's a fair amount of overlap between the two. So do you distinguish between those two things, or do you think of them as being, one is like a market mechanism to enable the other?

A Yeah, I think it's important to distinguish personally. I probably didn't historically, but, but when I joined CPower about four years ago, I found it really important to distinguish because demand response means a lot of different things to people. Um, to many people, demand response means, um, Um, seasonal peaks or running, um, controlling demand to avoid seasonal peaks, um, and really capacity product. But, but what it means to me is really modulating demand to provide any type of grid service, whether that be a capacity energy or an ancillary product. And in fact, we have gone and started calling it DER monetization. A, to avoid that confusion, but also because we're starting to see opportunities for DERs to inject into the grid if, if they do have that ability, um, which is going past where, where I would classically, uh, define demand response.

AI assessment note: “Yeah, I think it's important to distinguish personally.”

Q markets, that's an ISO, an independent system operator. In other markets, that is a utility. But there's somebody who's responsible for maintaining supply and demand balance on the grid. And then there's a bunch of stuff in between that I think is sort of complicated and depends on the situation. So how, how do you think about layering the stack from bottom to top of, uh, an aggregated DER monetization?

A Yeah, I think it's probably a great place to get grounded here. More than a stack, I kind of think of it as a sandwich, as you kind of alluded to. Um, on one side, you have the customer, the home or the business that adopts DERs and devices assets, and let's just call them suppliers of flexibility. On the other side, you have the grid that needs flexibility, and we could certainly unpack that a little bit, but, but those are buyers of, um, flexibility. And how are they connected? Some customers are, are big enough, understand markets well enough, and, and really active enough to go out there and, and just connect themselves, right? So they, they take their own DRs and connect to grid, but that's, that's really the exception. More often, there's, um, a kind of, a, a middle ecosystem inside that sandwich, and, um, and that's really chiefly what, what's often called aggregators, or sometimes CSPs. Um, and here, um, You know, the aggregator has a few advantages or services that it provides the, the customer and the grid. Um, the first of those is it, is it kind of spreads the fixed cost, call it regulatory technology, M and V expertise and, and compliance over a greater kind of base. So it, it just becomes more economical. Um, the second is on the portfolio side. Certainly having, um, if you have one resource connected to the grid, there's a ton of Performance risk, but if you have…

AI assessment note: “More than a stack, I kind of think of it as a sandwich”

Q open, fairly free market that allows lots of innovation at various different scales and with various different resources. Um, but nothing is that simple in the electricity market ever. So I'm curious where you think we are on that journey. Like, relative to when you started doing this, are things simpler now, uh, in order to monetize DERs? Are they more complex? Is it, has it not changed at all?

A I'd say it's slightly simpler, but probably not moving quite fast enough. Um, luckily I believe in exponential change, so, so we'll, we'll speed up on the back end. But, um, It's not really a technology challenge. We, we have technology. We, we talked a little bit about pairing different loads and putting them together. We talked, um, what we haven't talked about is we, we do a lot of site level optimization with the larger clients that, that really allow, uh, a battery or a microgrid to, or even loads that's controlled to find the, the most optimal way to be dispatched hour by hour. So that might be going to a grid or it might be a bill saving kind of mechanism like a Demand charge management or time of use. Um, so, so that's not a technology problem, which I think is where it's often confused. Maybe it's a scale problem as you develop technology. You know, it's, it's expensive if you don't have scale. Um, but as scale comes at that technology, you know, it's, it's a fixed cost, but, but really at SeaPower, we're not seeing that. We, we have the technology to do what we need and can certainly develop more as it evolves. Um, Where I do think it, there's issues is on the data side, right? There's a lot of redundant costs there, um, where we have to often put in our own meter, even when there's a AMI deployed. Um, and that, that's always bugged me, right? And so that, that's, you…

AI assessment note: “I'd say it's slightly simpler, but probably not moving quite fast enough.”

Q want them for other reasons, and then they happen to be able to be monetized on the grid. Um, is it now a, you know, much more even split across a wide variety of resources that are actually participating today, or is it still predominantly, you know, the old school CNI industrial load, and now we've got little pockets where stuff like thermostats and EV chargers and microgrids are participating?

A Yeah, it's, well, it's a good question. Um, maybe to start with, I think it's the vast majority of participation is load. Um, is it the old school industrial load or, or some new more automated load is I think where you've probably seen the, the biggest transition or the biggest megawatt where things like building automation systems have enabled you to, to really run those buildings almost as if they were batteries or, or maybe that's a poor, Analogy, but, but run them as a resource and run them all automatedly, or in some cases, in many cases, customers don't want Um, us to have direct control, so we send a request and they have to click okay, right? Like, yes, this is acceptable, but, but that's fairly, you know, those are kind of the, the two more automated ways. Is there some industrial processes out there that they shut down? Yeah, at some price, it makes sense for, um, a steel plant to send home a shift, right? But that's, you know, especially with today's pricing and productivity, that, that doesn't happen that often. You should think of those types of assets as good for one, two, maybe three dispatches a year, where, where we have some programs that are dispatching 60 times a year. Um, just to, to circle back on, on kind of the other side of that, the device and asset side of that equation, still small, you know, from our standpoint, where we're, um, you know, I'd say j…

AI assessment note: “the device and asset side of that equation, still small”

Q and what you're saying is over probably roughly the equivalent number of years looking forward, by twenty-thirty or so, EVs will reach something like 20 to 25%, more than a sixth, right? So the, the pace of growth of EVs as a grid resource, you're saying, will be faster than the pace of growth of all these other things, thermostats, behind the meter batteries, microgrids, over the past seven years.

A That, that's correct, and I'd put batteries right behind EVs, um, and, and, but, but we're still seeing these things get deployed. Battery numbers are a little closer in my head, but But right now, I don't believe there's a market, or in the US, a market meeting in ISO or RTO that has, um, over a gigawatt hour of batteries behind the meter, installed behind the meter at CNI locations. I think if you looked, there's three or four markets that are, are going to, that are projected to install over a gigawatt hour or over the, the next, in five years. So, and several of those, many of those markets will tap, break that gigawatt hour. So, Yeah, the, they haven't been deployed yet, right? They're still coming. I mean, they have been deployed, but it's a bit of the law of small numbers. If you have, like, one battery, you have two, and then four, it's good. But now we're going to get to the other side of the exponential growth, where we're, I think, you know, partially spurred on by the IRA, and maybe accelerated by the IRA, but we're going to see, um, some pretty big deployments there, and same things with EVs, and whether it's Buses, um, or, or other kind of commercial fleets or, or really personal vehicles.

AI assessment note: “That, that's correct, and I'd put batteries right behind EVs”

Q Right, ok, and so it was this big, big deal. At the same time, a lot of people were saying, well, let's, let's be clear, this is the start of what is going to be probably a long journey to implement, to do the rulemaking processes, and so on. So we are What, more than five years hence from the order itself. What has happened since then?

A Well, a lot has happened. Um, maybe so. Um, and, and certainly we're encouraged by the progress. Um, but I, I still do think it's going to take some time to, to see the full effect and considerably more time, but maybe. Maybe just to come back to what it is, there's kind of, probably kind of two core innovations here. The first is to allow heterogeneous aggregations. So I don't need to put a bunch of batteries together and sell that as a resource. I could put a battery and a thermostat and some load together, um, if I could put it together for the right, um, to fail the programs requirements. So that's great. Um, And that's big, and then maybe in the longer run we're talking, it will allow for, for DERs to inject again, or not again, but allow DERs to inject it, and I think that's going to prove super important, as we talked a little bit about. But as you said, devil's in the details. What's taking so long? So maybe it's a quick update here. All six ISOs and RTO proposals have been filed with FERC. Um, two have approved, have been approved. That's New York ISO and Cal ISO. Uh, the other four are pending. And, you know, with Glick having held his last session late last year, uh, we're, we're hopeful to, to FERC, um, commission can continue to make progress, but, but what's holding it up? Um, there's, there's really an assortment of issues here that, that we're hoping that FERC w…

AI assessment note: “All six ISOs and RTO proposals have been filed with FERC. Um, two have approved”

Q you know, three different intermediaries to take a slice of the pie. So, I guess one thing I'm curious about is, do you think that it should be, do you think that this should be a really streamlined market, um, Where there's a customer with a DER, there's somebody in between interfacing with the grid, and then there's the grid. And if so, how do we get to that point?

A Well, maybe just to start first, I think you're right, particularly with like really small quote unquote pixels like Resi, um, for, from our experience, we are not that we are not really the aggregator there. We provide market access and we work with Resi aggregators. Um, and there's also often a software later in between that may or may not be owned by that, that Resi regulator. So it does get complex. Um, Where I'm not sure I agree is on the cost side, and is there enough to go around? Um, and I, I think that's been true historically. Um, I think it depends market to market right now of where we are, but we're starting to, to see those value streams emerge, and what we're really seeing happen is, a thermostat's a great example. If a utility wanted to do a resi demand response program 1520 years ago, they would Drive a truck to your house, put in some little box that has a, you know, some type of communications, pack it in, and really is a switch for your, your HVAC system. I don't know what it costs, but let's say it costs a thousand dollars to roll a truck. Now, they take a smart thermostat that costs, I don't know, wholesale, 50 bucks, maybe a hundred bucks, put it in a box and send it to you for five 99. So their, their cost went down 80, 90% to, to do that install, and that's making it lower. And that's the install cost. But now if you look at the actual customer acquisit…

AI assessment note: “Where I'm not sure I agree is on the cost side”