#5.2: Virtual Power Plant (VPP) Hackathon

#5.3: Virtual Power Plant (VPP) Hackathon

Summary In this final installment of the 3-part series, Ben [http://linkedin.com/in/benjaminhilborn], Jack [https://www.linkedin.com/in/jkerbymiller/], and Charles [https://www.linkedin.com/in/cjurczynski/] wrap up their exploration of virtual power plants (VPPs) with a deep dive into development strategies. They bring their coffee shop-focused VPP concept to life, tackling questions like: How do you stack revenue streams? How do policy incentives like the IRA shape the economics? And how do you overcome the challenges of site control, permitting, and community buy-in? Turns out, the answer sometimes lies within a bite of mincemeat. Episode chapters: * (1:07): Intro to guests * (3:55): VPP hackathon catchup * (5:12): Policy influences on project feasibility * (16:38): De-risking projects * (23:49): People are key * (30:23): Project finance * (41:25): Making money on projects * (59:10): Resources to go deeper Help us out! * Subscribe, share and rate the show wherever you’re finding this podcast! * Apple podcasts [https://bit.ly/inDERmediateApple] * Spotify [https://bit.ly/inDERmediateSpotify] * Give us feedback: We’d love to hear from you via email, inDERmediate@gmail.com [inDERmediate@gmail.com] * Follow us on social media * inDERmediate on Twitter / X [https://twitter.com/indermediate] * James Gordey [https://twitter.com/james_gordey] * Ben Hillborn [https://twitter.com/BenjaminHilborn] * Wyatt Makedonski [https://twitter.com/wyatt_yy] * Charles Jurczynski [https://www.linkedin.com/in/cjurczynski/overlay/about-this-profile/] Music Our incredible intro/outro music is the song Ticking, by artist TINYou can stream the whole song and the rest of their catalog here: Episode transcript Well welcome back everybody to this next episode of the intermediate podcast. today we're talking about project development and all the, all the ins and outs of it. we're going to do our best to frame this as a bit of a follow on to our, coffee shop that we, that we talked about in the, in the previous two episodes. but if we stream, of course, we'll still try to make it, fun and entertaining. And, today we have with us, my co-host, Charles Shensky and our guest, Jack Kirby Miller. Jack, I have to say, do you want to say a quick hello? Hi, everybody. yeah. Excited to be on. And, I get to spend a lot of time with Ben and excited to spend some time with Charles as well. Yeah, likewise. Thanks, for coordinating. It's been good to be here with you and and with Jack. And I'll just, like, super brief background. I think a lot of people know generate, as an investor, operator and owner, distributed generation assets, we do so much more than that. And, a big part of my day to day role is in what we refer to as delivery, encompassing development and construction of assets. so any portfolio that generate buys from a developer, where there's still leftover construction or development work to do comes through our team. So hopefully I have a little bit of experience in that space that I can I can speak to. Amazing. And, Jack, you've got, you've got a good amount of background in the space as well. Do you want to give a quick primer on yourself? Yeah. So I spent my early career working in the built environment, developing energy efficiency projects. decided that looking at first cost and the decisions that are made around it, we need a better financial tools and, spend some time in finance, all in, early stage clean technologies and, managed, spend some time, at Swell Energy, the distributed energy storage developer, which, you know, operating across the US, and their structured finance team. And that's really sort of informed my opinion on, what it takes to get lots of little assets out there, really quickly. And I think hopefully I can bring a bit of a different perspective if you're thinking about development from, you know, the the extremely distributed versus, you know, 1 to 5, ten, 20 megawatt scale. so, yeah, I work, Ben and I work together at Pearl Street, and, I wish I had been at your VP. VP coffee shop because, I work a lot with our, VP programs. so. Yeah, happy to happy to be here and excited to dig in. Amazing, amazing. Well, a quick recap. So in our, in our VP episodes, we, we kind of dove into, finding a niche in the, in building a BPP. And we came up with the idea of a, a virtual power plant, specifically designing a program for coffee shops. And the, the outcome of that was that we wanted to deploy solar and batteries to coffee shops, around, around certain metros in the US that aligned with, you know, a high solar generation potential, you know, high density of coffee shops and, and, you know, friendly, friendly environments for, for actually deploying VPCs. And so now that now that our motley crew has decided that this is our niche, this is where we're going to go now, we have to figure out how are we actually going to build this thing, where's where's the money going to come from? How do we structure projects? and how do we go from this idea of a virtual power plant to a physical operating virtual power plant? and we we do talk a lot about policy, here on intermediate. And that's possibly one of the, probably a good place to start. And I'm wondering if either of you guys want to, want to talk about a little bit about what you've seen around policy that influences the feasibility of, of putting together a project like a, like distributed assets in a BPP. I'd like to give people a framework first for when we talk about development and demystifying. I think sometimes this is even lost in project finance, community and people who are quite adjacent. Really, development is everything that comes before you start construction, and that's a lot. There's a lot, a lot of paperwork that you have to do, and you're really dealing with people and you're dealing with communities and neighborhoods. And so where we start is land. You want to get site control. You want to know where are you going to put your project. And we have the right to to rent that land out or own it. You want your permitting to make sure that you are allowed to put it there. According to the local zoning and bylaws and things, and there's a lot of work that goes into that. And then you want your interconnections. So you want to know that if you're building a power project or if you have a connection to the grid that you're able to to give electricity or take electricity back, assuming it's a power project. The fourth one, and this is where I just wanted to jump into this, into what Ben was talking about is your revenue. And this is going to be really key when you want to go get financing someone to give you millions and millions of dollars for your coffee, VP, coffee shop, PPV, revenue is going to be different for every project. It could be a PPA, which is perhaps the simplest approach. I'm. I'm looking at you. this could, but it could be multiple different layers. Right. And one of the big layers in this, particularly if you're using newer technologies that can sometimes be a bit more expensive, for example, batteries or EV chargers, if you're incorporating them into your VPP. There is so much incentive money to defray the upfront costs of the equipment, and that is a big part of what makes the economics of this project pencil. And it'll be different at different places. To bring this full circle back to Ben's point, is getting there, is that a lot of this is policy and regulatory driven? Well, policy driven, regulatory, not so much. it is the I.R.A., the Inflation Reduction Act of 2022. It is the IJA, the infrastructure, infrastructure investment and jobs Act of 2021. And together, these account for over $1.5 trillion into infrastructure in the US built environment. And probably more because a big chunk of these, these policies were to extend tax credits, which are a financing mechanism that form the basis of building these projects as well. And it's a real expansion that people say could go much further beyond the I think its budget is $369,000,000,000 billion. the industry expects it to generate a lot more than just 369 billion. And these are, our tax credits. So we can go into that later on. But there is a lot of policy that drives the revenue for, these projects. And I skipped over it a little bit, but on the local level, you've got municipal considerations. So there is policy at the state and local level that can drive where we might choose to site of VPI as well. I actually yeah, I would definitely put a lot of emphasis on that local level. development is almost always except for the of skills where I have worked. Right? Development is almost always a ground game. Right? for those like if you're building, VPI, you need to concentrate enough distributed assets in a concentrated geographic area to be able to provide meaningful load to utility that's working in a much higher level. And so paying attention to the friendliness of that local geography, the utility service area, that's really important. A lot of the work that we do right is identifying where you can, pull different. Right. You're obviously going to be using, you know. Yeah, there's there's some flavors to this as well. Right? A lot of VPNs, specifically are not owned assets. Right. So you have a contract with an asset that was already installed. So, to operate it and provide energy services to the grid. if you're looking at trying to bridge the gap to close the financing, where you can have a VPI that's owning its batteries is a, third party that provides services, you're going to need to be able to stack a number of those different revenue streams, right? Obviously, the, tax benefits, state level incentives and then hopefully incentives, or, revenue streams from the utility service service area you're inside of. so there's this idea of like, you know, multiple overlapping geographies that that are going to have an impact on what, what policy environment you're in. And I just want to tie this back as well to the, the coffee shop VP is that you'll think of maybe the coffee shop or the coffee shop owner. The person who owns the building is being your host, who you're renting land from. Effectively, you're putting all your equipment onto their site. but then they're also you're kind of like your base customer. You're trying to do something that gives them value. You're trying to lower the cost of, running air conditioning or covering their Wi-Fi electricity bill or whatever. You're trying to bring down their energy bills to make it cheaper. And a big part of serving that customer with cheaper energy bills, because at the end of the day, they're going to make this decision based on that. Well, hey, is it cool? But also, hey, does it send me money? And so in order to drive that down while, you know, imposing a very big cost upfront to get all of this various different equipment and to, to retrofit and get electricians in there kind of twiddling with wires in order to reduce that cost. You're defraying that with these incentives, with these, these cash flows that have been created by the regulatory structures. So that makes it at the end of the cheapest for your core customer. Would that that person. I'd actually so in this specific instance and I think it's representative. So throw a hand up if I'm diving in too deep into these details. But in, in many like one of the biggest values of distributed resources is resilience. so coffee shop is actually a good example, but I've seen this with, universities with, you know, any, any, any, any business that that relies on refrigeration, business interruption is a massive cost. and it's a huge risk. And so if I were looking at developing this coffee shop, coffee shops, you know, they're distributed throughout a community, when our power goes out and we no longer have wireless internet throughout it. You know, for folks that work from home, like coffee shops, become a center where people go to gather, and so, like, you know, that actually could be some really high revenue days that you're missing out on because, you know, your your, your power is down with the rat, with the remainders. That's actually a pretty good way to look at, sort of a baseline justification of, of getting some assets and some services provided. so it isn't policy dependent. It's interesting where there's a similar concept on both sides of the equation here, where on the customer side we're stacking reasons for, but we're stacking values for why you want this. there's, there's resiliency, there's lower energy, there's the cool factor, so on and so forth. And on the product development side, we're also stacking revenue streams to, to make the, make the project make sense. you know, stacking in an incentive with your PPA, with, you know, other, other pieces. and it's kind of interesting that there is there's commonality between both sides of, that both the seller and. The customer here. So we've said we've set the policy drives revenue. And, Charles, one of the things. That partly and customer demand drives revenue, right? So you're more on hand, you've got all this kind of you got incentives, you got tax equity, you've got, local, you've got utility programs all kind of policy driven on the, the wholesale or the like the, the energy market level. But at the end of the day, if we're talking about distributed like that, coffee shop has to have a reason to make that decision. Somebody has to make a business decision to say that I want to retrofit my coffee shop with all this equipment in a way that is going to lower my costs, be kind of cool, because I can show all the energy. Maybe it's going to be green and sustainable and renewable, and I'm also going to be resilient and the like. It'll be a decision from the business owner to say, I want to do that. And that that underpins whether or not the vfi goes ahead, and then it is up to a developer to make the business case or to make the numbers stack up in order to deliver that service to that customer. Right. And a big part of the numbers stacking up is the policy back end is the can we find enough money elsewhere to justify this massive upfront cost? So I just want to be clear, like customer comes first, but policy is a key driver of the total revenue. That's good framing. yeah. I think when you think about the, when you when you think about the development game, it's pipeline, pipeline, pipeline, right? Companies are valued at approximately, you know, yeah, the public companies are valued based on their pipeline in that space. and, you know, there may be some exceptions to that, but that's the general rule. and so it really does come to, you know, how do you a bring a bunch of like, how do you go out and sell to a bunch of distributed, business owners or residences or, real estate portfolios? And then how do you bring those, those that wealth of, you know, many different sites through the pipeline, to the point where they are, you've kind of. And I think maybe it'd be worth talking about what de-risking is, but where you do the rest of the project and that's ready, to either, you know, take onto your balance sheet and, perform construction or sell off and have someone else, perform that construction. So, yeah, I think. I think, yeah, I was gonna say there's, there's a couple of buzzwords here that I think, I don't know if we want to get into a, a developer's glossary, but de-risking is just one of those words that I think people really throw around when you're in project finance and project development. so I'd love to hear a definition from you. thinking about development generally, it's filling the pipeline and then everything else mostly is de-risk, de-risking the project. the kind of stodgy textbook definition is, transferring risk away from the project to the parties that are most capable of assessing and mitigating that risk through contracts. so, for example, big thing that, folks talk about for, like mid and larger size projects is yeah. And maybe it would be better to, to, to talk through that sequentially. Right. But you know, getting there's a bunch of data you need to understand about your, your, your site. So, what is interconnection going to look like from the outset? Are there any environmental concerns that need to be remediated that might result in costs? what is the cost of building on that site going to look like? and basically you can do a high level assessment of those and then move through towards land control, which means you have the rights to, develop that property. and then as you move through the later stages, you're kind of trying to, you know, set up and, set up, insurance, around, like long term performance insurance against hail, other hazards, and ultimately get to a place where you're able to get a, what you call like a turnkey construction contract, where as the project developer or eventually the project owner. you are not on the hook for delays in construction or cost overruns and construction. and you've passed that off to typically a third party firm that is going to be, procuring all the equipment and bringing it onto the site and installing it. And then, basically, applying to make sure that that can all go through and, and that you can, commission those projects and keep them running. To wildly oversimplify. yeah. I don't I don't want my lawyers building a solar project, but equally, I don't want my contractors trying to negotiate the, negotiate the finer points of a of a tax equity structure. So, I mean, obviously, I'm overexaggerating, but at every stage of the project, there are so many different skills, just like and I that example really illustrates the breadth. And you've got accountants and you've got bankers and you've got lawyers and you've got contractors and you've got, environmental consultants and insurance consultants, insurance advisors. And it's just what a developer does is coordination. It is making sure that all these work streams need to get done and allocating the roles and responsibilities to the person who needs to get it done right. And I really like to think about, responsible and accountable. I am trying to hold I use financial contracts to hold the responsible parties for delivering these workstreams accountable. And that means how much I'm going to pay you to do that job. But what happens if you don't do that job right? Like you're also on the hook. And so ultimately, I'm sitting here in front of my financial model, prima, I said at 2:00 in the morning trying to figure out how are we going to spend the money responsibly, but also what happens if somebody fails to perform their job and thinking through all the different, downside cases, as we call it? Like if there's something goes wrong, what, what what then has to happen. And so I'm trying to put myself in the shoes of different people. I can't do any of this stuff. You know, that's just that's the crazy truth is that I'm not I'm not an engineer. I'm not out there turning wrenches in the field. I'm not a lawyer. I'm not sitting in, like Manhattan high Manhattan office, like turning pages on a contract. Although I'm pretending to be every single one of those things at any given time. I am sitting across the table and say, that sounds about right. Right. And like, I'm learning this and I'm learning what I need to, what I need to know. And I am moonlighting as any one of these. But ultimately, I'm also working with a lot of people who are acting on my behalf. And you're kind of like the general, I guess you're trying to marshal all the different troops and make sure that they can go out there and fight a battle where you ultimately win a project, right? Like you get it done. For us, victory is well, the victory is a couple for victory is what we call NP or notice proceed. That is when you've agreed with the local town that you've got all the permits and you've agreed with your contractor, but we sometimes refer to it as EPC, which is engineering, procurement and construction. so the contractor who you've signed a contract, they're ready to go out, build, they've got all the permits they need. And then you say, okay, you go, you have I will give you a notice to proceed with construction, and they'll go out into the field. And so that's victory number one. I think in some ways that is the key victory for a developer. But victory number two is when you go to the utility and say, I have built a project and now I will start exporting electricity. And they take a look at all the electrical. It's like a teacher marking your homework. They're going to go and look and make sure you've done it the way that they want to see it done. And there's a whole bunch of rules and regulations around connecting your project to the grid. And then the utility comes back and says, yeah, you can start exporting electricity or importing, or you can start operating your project in conjunction with our grid. And at that point, that's when you can start making money right away. So if you're working from a spreadsheet, you're trying to figure out how to make this into something that makes financial sense, right? Like, I would love to say we are greening the grid. We are making this coffee so cool. And but but at the end of the day, there is this financial consideration and it costs an awful lot to build this thing. And you want to be pretty certain that you're going to get that cash back. And so once this is operational and running, you've reached that point, you're going to start to see some of the cash flow back because you're like, you're really in the hole here, right? You've given somebody given a lot of people a lot of cash. And you're like, I'm kind of flat broke right now. I got to start making money from this. We should probably touch on where did all that cash come from. And let's talk about project finance showing. Let's talk a little bit. Oh can we I. Love to talk about project finance. I just want to touch on one thing that Charles said that's like kind of important around the skill set of a developer. And I think to some extent you're the general, to some extent you're a project manager. You hopefully have a pretty robust financial model that you're stressing about in the background. but in my experience, like the number one critical skill of a project developer is like relationship and people management. you have a ton of these circumstances where, yes, you have a contract or you're working on getting a contract, but you are working with people from across the political aisle. You're working from with people who have explicitly different, motives and incentives around the project. And like, the most valuable thing you can be doing with your time most of the time is helping make sure those relationships run smoothly. so I just, I think it's easy to get buried in the contracts and easy to get buried in whether this project to get a pencil or not. But, you know, if you go to, if you go to some, if you don't know until you go up for approval that, you know, there have been entrenched entities that were like against the project and weren't, weren't listened to. you've put a lot of effort into this, without, pulling it back. I want to get the pants question. Yeah, yeah, but to that point, one of the words of wisdom I, I live by here is a contract is only as good as the lawyer who's paid to unpick it. Like at the end of the day, it's a paper document that governs the relationship. But the underlying relationship is what matters. It's there to protect you. If you get into a dispute or if you fight somebody. But you can't just say and you can just say it's in the contract. But at the end of the day, that contract is it's a commercial negotiation that you said that says, I'm going to give you something, a VP and microgrid, whatever, and you're going to give me something, the permission to build it, for example, or, you know, the the construction labor. but it is the relationship that underpins that contract. First, the contract is only meant to describe how the relationship is supposed to work. In an ideal circumstance. That's a really good clarification. and figuring out like, it's like a pie with a bunch of different flavored slices and you want to give the pumpkin to, you know, The person who really likes pumpkin pie. Yeah. My brother. Yeah. And I want this slice of apple. and there's going to be like, the mincemeat slice at the end that nobody wants. and hopefully it's pretty small. But you're going to pay someone a lot of money to eat the mincemeat pie. Yeah. You're going to pay an insurance company, probably. Or or, you know, the equity is going to take on that risk. And, they get the second pie. So this is, I've got, this actually is a funny segue into a real life development story. It's not buy it. But it's a good friend of mine was, developing, I want to say it was it was either solar or wind, but developing it for a big utility scale project in Wisconsin. And the locals were not having it. They're like, no, you're a big city coming into our little town, and you're going to force wind down our throat. We don't want it. And and she's like, no, no, no. I'm like, you know, I just I work for I think it's, I think it's next year. It's like I work for a big company. Sure. But, like, I'm just a Chicago girl. I drove up here like, you know, I came by and I wanted to say hi and and literally to the to Jack's point about relationships. She went to a town hall where nobody wanted this project and said, nobody's consulted us and just talk to people. It was like, yeah, this is the plan. You know, these are all the community benefits. Usually there's like, there's tax revenue for the local community. You pay taxes that school taxes like this is helpful for your community. And this is not a takeover. There's no sort of deep state worries behind here. And everyone started to warm up to her and thinking, okay, like this isn't so bad. And they said, well, you know, we're going to go post-meeting. We're going to go to the, you know, community hall, and we're going to have a little get together. And, and she walks in there and they've, they've laid on a spread and it is white hamburger buns, uncooked onions and uncooked mincemeat. And they're just throwing these things on together into a hamburger, like an uncooked hamburger. It's a bun. It's raw onions and raw minced meat, and everyone's just eating and they're like, well, aren't you going to join us? And she's like, oh, I guess I'm the one eating the minced meat slice. I like. And you're just like, yeah, you do, because this is what everyone else is doing. You're part of the community now. You're representing your company, but you're also trying to show them that you are your relationship building. And that relationship building can come in so many different ways. And that's just one example. Yeah. You eat a raw, you eat a raw hamburger, because sometimes that's what you've got to do in order to get this project done. Yeah. And I wouldn't under emphasize like being there and listening to concerns is like especially at community scale and larger like that's so important because your project will have a big impact on the community. And like you need to become, have at least to some extent become part of it. So, and yeah, we've seen this in the distributed side as well. especially when, working with low income communities, it is absolutely paramount that you work with folks who have existing relationships there. Like there's, there's been a lot of mistrust built up over the years with, for like really good reason around things like upside down solar, people's, where, like, the pricing is set up to escalate, yeah. And, you know, there's not really a substitute for working with with folks who know that community and have trust there. yeah. Anyways. Very good point. Very good point. okay. So the point that we, just bounced off of and we should probably come back to is where does the money come from to, to deploy these, you know, these pairs of, batteries and solar panels to coffee shops across, across the western seaboard? Oh, it all comes from generate capital. Oh, perfect. Easy answer. That's good. Jack is Chuckling. Yeah yeah I mean sure. Also you know I think thinking about as basically. Fundamentally capital has different expectations for risk in return. And the more risk it's taking on the higher it expects the return to be. and so as a project moves through the pipeline, different types of capital will become available to it. So, you know, high level early stages, you're looking at something that looks like development equity typically, you know, there's a few folks out there. This is perhaps one of the most underserved, areas of the capital market. I know. seg sustainable infrastructure, is doing a lot of really great work in that space. not to namedrop too many non generate names. and then as you move towards, completion, you're, might have the long term project owner start to take a stake as early as, you know, it might be pre NTPC or it might, it's depending on the asset class. It's often starts at NP and then you'll often get varying types of debt coming in with that. typically the earliest step will come in is during construction. And that'll be like a short term construction loan. and then you'll have long term debt once the project is quite, you know, verbal air quotes, de-risked, and operating, and then sometimes you'll get really low cost capital from, sort of the biggest investors think your, sovereign wealth and, pension funds, after a couple of years of operating history, especially with new, asset classes or new new portfolios, which is $0.02, yeah. Charles, I think you have. Yeah. I just wanted to jump in here with a quick explainer, which is when we think about a project, it's just it's moving things from left to right along a timeline, and we find ways of segmenting that. So I think there's probably is actually a relatively recent concept that I'm still playing with. But maybe for segments we want to talk about we talk about development. And that's like that's just paperwork. That's that's moving paper. It's getting all your planning and permits and your leases and a lot of the sort of call it the white collar work of building the project. and that ends at entropy. To give you a bright line, just a little bit fuzzy area around that. But development leads, leads up to notice, to proceed. And then you notice to proceed. And that's when the blue collar work starts. That's when you get your contractors on on site turning wrenches and building the infrastructure. and that will go from NP to code completion development. We also have a couple of other things in power. We refer to permission to operate. We call it placed in service. there's completion of code, completion of development, a couple of different, names there. But let's you code, you go forward and then after code, you really kind of have you have operations. But I said for I'd split operations into this kind of wrap operations where typically for the first two years you have some teething issues, things break down. they take a little bit of time. Each of these projects can be their own special beast. and you sort of figure out, where things are breaking and you fix them. And that's the sort of wrap period. And then after about roughly two years, give or take, depending on the complexity of the project and how well it was built in the first place, you'll get to a sort of steady state operations, and that will kind of go for on a go forward basis. And that's, that's sort of where the pension funds are interested, particularly at the bigger pork belly of utility scale projects. But we're talking distributed here. So let's put them to one side for now. Each of these call it we'll call it three for now. development construction operation stages is going to match quite well with a different pool of capital. And we talk about risk. It's this really nebulous concept which is basically, almost like, percentage likelihood of the project to die for one reason or other, maybe your grid constraint. And the utility says, look, you built it, but I can't take the electricity anymore. I can't, like you just can't connect it. And I'm. Putting the electricity that I'm putting into the ground because I can't like there like the utility can export it from my site and I'm not getting paid for it. Maybe it's the townspeople saying, we don't want this here. Thank you. But no, like this isn't good. Or maybe it's, you put some, equipment into a coffee shop that went bankrupt, and the guy is like, look, it doesn't make sense for me anymore. I'm walking away or I'm retiring. And then, you know, you've got electrical equipment on a coffee shop, and nobody's paying for it, right? So there's like, that's those are examples of risk where things could happen and you want to understand whether or not they will or won't happen. It's a lot harder when you sort of rocked up and you said, I'm going to build a solar project here. and then somebody turns around, says, over, my dead body is going to be, you know, that's that's quite high risk, right? But once you've once you've got all your paperwork and said that you're allowed to do this, you know, there's definitely construction risk. And I also want to say that development doesn't cost a huge amount of money. We're not talking crazy big sums, but it is very high risk. So this you'll have, investors who play in this space. You mentioned Segway. We can just go it, let's be fair about this nexus as a development capital solution. You've got lacuna. You've got, ley line that's doing this green backer. I think those are probably the 4 or 5 when you're talking about, like, distributed energy. but then also a lot of developers who've recently got private equity money are doing this with their own balance sheet. So there's a whole universe of different funding providers at development stage. And then you get into construction, and that's when you have to start, like buying equipment and equipment's expensive, so there's less risk, but there's a much bigger need for a lot more money. So all of a sudden that's a whole new, group of investors who feel like, hey, this I'm I'm ready to dip my toe in the water here, and I'm willing to take less. Less, risk on than than the, development funders. But I'm also willing to deploy a lot more capital. And so they come in, they help you buy your solar panels or EV charging equipment or your, your thermostats and meters and things to help you manage load or maybe your refrigeration units, and then they'll take it through to operations, and then you've got a whole new universe of investors who are going to think of this more like, an investment product. They the way that solar really got to scale was that they discovered that a lot of pension funds who had a lot of underfunded liabilities, could see solar in a similar way to, say, Treasury bills. So when interest rates on treasuries plunged, they were like, well, a solar project, kind of, if you squint a little bit, looks a little bit like a a Treasury bond, but with a higher rate of return. So we're just going to put our money in that and it matches the pension funds liabilities. And, and they don't really need a huge return on their capital. So that's a whole new universe of people who could potentially invest in your project at that point. But each of these investors is going to have a whole list of concerns that they want met. And that's when we talk about de-risking it. You want to make sure that those concerns that you're getting out of those concerns as a developer, and you're able to answer them before you even go out to talk to those people, because they will come back and they'll say, but what about this? But what about that? But what about the other? And you say, don't worry about it. We've thought about it. We've taken care of it. That's not a problem anymore. And then they give you their money. It's just that simple. This is something that said, oh yeah, this is this isn't like that. that Jack is all too familiar with. I, I can hear a chuckling away in the background. It's like the time and the time to make sure you. Can answer all the investor's questions is before you talk to the investors. That is 100%. So like when you're when you're at the negotiating table, when you're going out to find someone to fund your project, it's really not the time to be improving the quality of your project. You should have you want to do that ahead of time. other just like notes on, risks that are helpful is a lot of your risks. They're they're greater and they're often binary. Meaning, is this project going to go forward or is this project not going to go forward until you reach NP once notice to proceed, right when you've got, when you can actually start construction? once construction starts, it's actually quite rare for the project to stop. and so your, your, you know, your return might change, you might have some cost overruns, but. Yeah, I see, like, that grimace. Yeah. The, that there are such thing as stop work orders. so sometimes going back to the policy question, sometimes policies change, sometimes communities issue moratoriums and they're like, we don't want any solar in our town anymore. that has been known to happen. Or you become non-compliant with the permit that has been previously issued. So it can, but it is much less likely at the construction stage that that is binary. And to Jack's point, it'll be cost overruns, which could be a problem. Right? Like you don't want to be spending more on your project than you'd initially budgeted for, because now you've got to make more money somehow, and people don't want to pay more, because once you start building it, they're like, so you're going to do it for the price you said you're going to do it for. And so it's very hard to make more money. So you want to make sure that you're not spending more money. So worth worth noting here. If you find yourself on the don't build side of the develop don't develop divide, slowing a project down, for a significant period of time is like actually a reasonable way to make sure that that project doesn't happen. Amazing. So we have, we structural projects. We have a solid pipeline of projects of, of all of these coffee shops. We have, we've done some de-risking on these projects. We have signed agreements with, with EPCs. We have signed agreements with capital providers. We have, signed agreements with, with our off takers. So like the coffee shops that, that want these, that want to participate in this virtual power plant and, but let's talk very quickly about, about how do we actually make money off of this. And this comes back to, one of Pam's questions from the from the very beginning, what is a PPA or more broadly, how do you monetize these assets and make sure that everybody that has taken a gamble on you and developing this pipeline of projects is able to get payback yourself included? Who wants to take that? I want to start with that, but but let's start. Could you you. Rephrase the question for me? what is, yeah. What is what is what is contracted revenues. Sure. yeah. And I don't let's start with contracted. But there are two ways you can get paid contracted revenues and contracted revenues. Yeah. And, investors, project finance investors love contracted revenues and VCs. BP's live on contract is. Oh. Well, is. That why is VP. Is broadly. Right like. BP's would love. Contracted. Revenues. If they were typically enough to cover the cost of the capital and they were in the business model of owning the assets. if you're building a VP with other folks assets, then it makes a ton of sense. You can have a more aggressive risk profile. So, yeah, talking about, contracted and, contracted revenues. You know, one of the biggest. and honestly, one of the early stage things you will do when you're developing a project is securing what's called an offtake contract. And, it, it can look a few different ways. The kind of, the, the, the standard, in kind of the solar space is, PPA or power purchase agreement. And it's basically, an agreement between the asset owner and someone who needs power. So that could be a utility or a commercial entity or even a homeowner to pay a certain price per unit of energy produced and delivered to that, so, well, unit of electricity specifically, these tend to be long term documents or long term contracts. So, they should cover a good chunk of the useful life of the equipment. Typically they will cover at least the, period of time over which you are financing the equipment. lenders in particular. Right. Lower risk capital really like to see a solid revenue contract set up. but you could also have an agreement that is, structured differently. So you could have, contracted revenues through a lease where, you are giving the use of equipment regardless of the specific, kilowatt hour production to a particular off taker. yeah. And there's other things as well, like tolling agreements, and things like that for energy storage. more capacity payments would be another, although those tend to be relatively short term contracts, at least in the, the, areas where I've worked. but yeah, so that's, that's on the contracted revenue side. part of the logic of the, of those contracted revenues is, the, the off taker right to the customer, so to speak. is getting a what is projected to be a better deal on the energy that they're purchasing, by locking it in for a long period of time. And that allows you to finance the, the equipment, with. Well, specifically with that on the other side, you have, uncontacted revenues. So this could be, you know, basically based off of retail electricity rates, or, and like, you know, something that is, that is unfixed or floating, and that can give you much higher upside. but it's harder to get, debt to support that. So that's something that's, as, Charles was just saying that's, that's really helpful for, or is really interesting to folks that have a greater risk tolerance, in the equity and venture space. And also know where at time. We are. Meeting apart this. But I am loving it's, it's, looking forward to part two. I think we're pretty close. I don't know if there's a whole lot more we need to cover here. I think one. Thing I would love to highlight is just thinking about, like, we've talked a lot of it'd be good to clarify the difference between, like, one off project development and project development, where you have a portfolio of assets and pre rent financing. because like specifically for Dars, like. It's usually portfolio. Yeah. Well it yeah, it should be for portfolio leases. That's my position. Which I can take two more minutes if you want to, if you want to dive into that. Let's I think that would be good. yeah. And it shouldn't take ten minutes. So, So what's the Segway from where we were to here? So we're talking about people's contracted, contracted revenue and different kinds of contracted. I think. So things are on the spectrum. These revenue contracts can go all the way from, I think when you think about a very to kind of clean basic PPA would be, the sort of agreement you might have signed if you'd, put solar on your rooftop, right on a residential solar PPA. So pretty, pretty standard. but then the bigger the system is that the bigger the counterparty, the more they might want to negotiate it. So. So you can get into quite negotiated elements here for contracted revenue, though there aren't too many different types of contracting structures, PPA leases are the typical pathway to structuring a power uptake. To be clear, leases you can actually probably use in different cases, even for batteries and for, EV charging. I've done a lot of distributed battery leases. for example, which is something that generate was very happy to finance and is very happy to finance. and I think we can do you can do leases for, for busses. So we have a portfolio of electric busses where we get paid X number of dollars, flat rate every single month by our counterparty to use those busses. And then, you know, they get the benefit of the busses. There's no utilization risk. There's no like, pay by the mile or anything like that. But that's a good example of where, like UN contracted revenues are, right, where we could in fact, some of our early battery projects, we split the we did a shared savings model where whatever dollar we saved you, we would get, you know, 80% of that and you get 20% of that. Now we'd get 80% because we cleared. We were clearing the, the costs that we paid. So we need to finance those batteries. But you're getting that 20% savings free and clear. And so that's reducing your overhead bill. But, you know, I don't know how much I'm going to save you in any given month. I can make an educated guess. I can use some really fancy venture capital backed software to determine what that number might be, but I can't hang my hat that I'm going to get that every single month. And then what happens if you, you have an outage or you close your shop and go on holiday for a month and you're like, I'm not. You know, I'm turning everything off for a month, then I'm the one who has to ride with that. I don't get anything from that because I know you're not using power. so generally, project finance doesn't like that because there's a lot of uncertainty. Right? The whole goal from the project financiers perspective or the lender that the bank lender's perspective is, I want as much certainty as possible. If I'm going to give you a home mortgage, I want to know that you're going to pay that mortgage, which is why I do credit checks. And, a lender would do credit checks on you and, and want to understand your, your financial position and your income. It's a pretty similar process obviously with a lot of differences, but it's a pretty similar process for investing in a, in a renewable project. You know, it's a big outlay of cash upfront. I'm giving you a lot of money. I want to make sure that you're going to be responsible with the money that I give you, and I'm going to give you a score and determine how likely it is that you are to repay that. So if you're going to go and say, well, I'm going to take that money and I'm going to go to the casino and start spinning, spinning balls and like, don't worry, it's very likely that I'm going to get red every single time. Like the balls are pretty weighted to in that favor. You're like, I don't know how you know you're going to hit red every single time, but maybe you found a way to beat the house, right? Like maybe you have an angle on this. Maybe you have a a technology that is just more sophisticated and, and actually you've seen something in the market that says, if I go and invest in, AVP, there's going to be ways that I can operate it to really capture something, some pricing that that isn't otherwise there that I or I can. I think about those as bilateral contracts, for example, where. Like it could be it could be market access. So like getting or taking a portfolio of smaller assets and then bidding them into transmission, double ancillary services, contracts. Right. That wasn't like maybe that's just a more lucrative, lucrative market to, to, offer my energy services to right at the core, I am offering handheld. we'll get to bilateral contacts in a second. But at its core, I am providing, a unit of power or a savings on that power on the on the power you would have otherwise use. and then also, I'm kind of moving it around, so you might pay one, one price at one time of the day. You might pay a different price at a different time of the day, or I'm reducing your total demand, or I'm providing electricity to, to reduce your demand or to reduce the amount that you're taking from the grid. And, and it's some triangulation of these. But in each I may I'm probably over complicating things now. But basically whatever I use the hardware to do, I'm looking for a way to be compensated. I can either get compensated through a contract or I can get compensated by bidding into a market, or bidding it into a certain time of day, or splitting the revenues with you. And there may be there may be savings. There may not be. So it's a really a question of certainty. And the savings could be huge, right? yeah. And especially the newer the technology, the newer the market, the less track record you have around that. the higher the bar for like getting financing on the back of a variable, variable outputs. Right? Yeah. For sure. Kind of across the, across the spectrum from like market risk to, you know, performance risk. and yeah. Okay. So quickly bilateral contract is two people getting together and saying, coming up with paperwork in an agreement to say I give you this in return for that and really in energy, it will I will give you a kilowatt in return for a price. A pay is a bilateral contract. It's not negotiated through a market. It's not wholesale. it's not kind of a public document. It is you and me getting into a room and negotiating paperwork that says you can. I will give you this service for that price. Yeah. And I think of these a lot in terms of, providing like capacity or other services to like relatively tight geographic areas or tight markets, where, you know, for like to put a bit of a point on it where a utility has a problem, they've got transmission lines that are no longer, that are no longer serving load well enough, like, non-EU, whereas alternatives contracts are kind of my favorite there. But it's basically a contract between those two parties where one is the service provider and the other is the utility. And in the cases that then I spent time thinking about at least. yeah, absolutely. And so just to zoom back out, like where we're really in that revenue spot, like if you're going to go back to the four things that are valid for really cares about revenue side control, permitting and interconnection revenue, revenue, revenue, we are sort of touched on, incentives. And so tax equity is global. A lot of, subsidies or rebates or incentive payments will be quite local, often at the state level, and will vary by technology, of course. and then you've got your customer revenue. And so when you talk about the customer revenue component of that, you're stacking all these different revenue types. You've got the customer revenue. And that could be where it's either contracted or about, it'll be a bilateral contract or a wholesale contract. So you're kind of stacking all these different revenue streams on top of one another. And here we are talking about one subset. So I just wanted to situate ourselves in the context of this, this monster of a project that where all these different work streams that you've got going on. Amazing. Jack, did you get to to cover what you were hoping to. No, no, but. There's always more. yeah, I think the the highlight is just that, the, the framework for project development is, is mostly focused on moving one asset through a pipeline. and it looks a little bit different if you're at asset costs like $30,000, then ten, $10 million. specifically like, the financiers tend to have, minimum thresholds where they're interested in giving you time. And so, like, you know, five seconds on, well, give me 15 seconds on the process. So, like, in order to set up, like, you know, a bunch of, residential batteries, for example, you're going to prove that you can access the homeowners and make those sales, you're going to set up contracts, you're going to work with financiers to basically set up a fund like entity that has sort of, prearranged thresholds for financing. So you might have, you know, $10 million that's going to get deployed into a bunch of, residential, assets. And then, basically, you will start placing those, bringing those assets through. Each subset will go through these known set of, milestones in order to get, a certain amount of allocation of funding. And then it goes in and then you get to play with what are the good assets, what are the bad assets? How do we well, what are the less good assets and how do we mix those up so that, the overall requirements of the financing we secured previously, are met and it's just, for each asset, the process tends to be much simpler. But the overall financial operations and development operations around that are often much more complex. because the level of effort does not scale with the dollar or megawatt value, it turns out. To wrap this up, I think that we've, today we've learned that, this is a big multi-variable problem, to solve. And while there are some overarching commonalities, you're going to find, a huge amount of differences depending on where developing these projects, what kind of size of projects are developing, what kind of financing your, you're using for this or what kind of customers you have? and so, you know, part of the reason that we pulled this episode together, with Charles and, and Jack is because both of you guys actually work on, on this complex problem in, in a couple different ways. And so just as we close on this episode, I think one of the, one of the best things we can do for, for people is help them understand who is out there in the industry that knows this stuff. And is actually there to help. In case somebody who's listen to this episode is honestly seriously thinking about going and developing projects like this, Charles and Jack, why don't you guys each give kind of a quick breakdown around, just for, I guess, a recap of what you do and how you help developers. Oh, good Lord, that's a big question. so, look, there's a universe of developers out there, and they come in sizes great and small and left and right that some just do pure development and do a little development. Epic like this is a skill set that for all the developers we have out there, we need more. We need better, always more. I think the development is the bottleneck. People who can get projects across the line are worth their weight in gold in this industry, and that is very what keeps the ball moving forward. So now my plea is anybody who's listening to this who's considering a career in development, absolutely do it. And come talk to me. I want to give people resources. I want to empower them. I want to encourage them. so me first. But, if there are, you know, if there's any subset, if you're interested in project finance, I'm happy to put you in the right direction. There is an absolute universe galaxy of different investors who are willing to take different slices of the pie, as it were. and they like their different flavors. So again, if you want to dive in, if there are certain areas that you think you have a good skill set in and you're kind of like, ooh, that development sounds really cool, or you know what? I just I'm just going to sit back until, you know, generate traditionally. And typically we'll look at Npx do the construction where the big capital that comes in and then and then hold for the lifetime or, or one of the first people to really see these is evergreen projects where we could hold for the life, and we're structured as a balance sheet entity. So we don't have a, a fund that we have to sell out. And, and like send money back to the investors. At some point. We can hold on to these to a long term. so that was a bit of a novel concept when we started. So, you know, that's a different flavor on the same thing. So I know that's a roundabout way of saying it really depends. So align your interests. Come talk to me. I will point you in a subset of the people who I was talking to. And maybe we can put something in the show notes. Oh quick shout out to KVK to kind of take VC folks. They are doing a really good job in trying to corral all the different, you know, what they call the climate capital stack. So the venture capitalists, the developers or the development finance entities are really thinking about it from a finance perspective. But if you want to know who an investor is, who takes on different types of risk, then, they're doing a lot of good work. And maybe we can put that the show notes. Amazing. Yeah, we'll do that and check. Yeah. I mean, I've been in I work at Pearl Street. and if we were talking about always needing more and better developers, we help developers focus on adding value to their projects. Right. So, Pearl Street is a financial operations platform. we help manage all of the chaos, financial models across, you know, tens, hundreds of projects as they move through the development pipeline, help keep an eye on cash flows and help make a developer's job a lot easier with regards to finance and financial operations. So they can, you know, as we said earlier, focus on the things that really matter. You know, coordinating those contracts, helping, make sure that people feel heard and that, you know, that their projects are moving forward. Amazing. Well, I think, I think with that, we've kind of come to the, comes the end of our developing a, virtual power plant series of episodes. Thanks again to Jack and Charles. If you have any questions or comments, please make sure to check us out at www.indermediate.com This is a public episode. 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#5.2: Virtual Power Plant (VPP) Hackathon

Summary Co-hosts Pam, Ben, Charles and James are joined by listener Pegah [https://www.linkedin.com/in/pegah-zarei/] and Isaac Maze-Rothstein [https://www.linkedin.com/in/isaacmazerothstein/] in part two of the InDERmediate Virtual Power Plant (VPP) hackathon. In this episode the team dives deeper on key VPP inputs like financing / business case then wrap up by grading the viability of our Coffee Inc. VPP and outlines key next steps and open questions. Episode chapters: * (1:07): Selecting a location * (8:59): Financing options * (16:44): Key business case inputs * (20:45): VPP revenue streams * (35:03): Key market selection criteria * (42:15): Changes to increase success * (43:33): Coffee VPP Inc. feasibility * (50:45): Battery API’s Help us out! * Subscribe, share and rate the show wherever you’re finding this podcast! * Apple podcasts [https://bit.ly/inDERmediateApple] * Spotify [https://bit.ly/inDERmediateSpotify] * Give us feedback: We’d love to hear from you via email, inDERmediate@gmail.com [inDERmediate@gmail.com] * Follow us on social media * inDERmediate on Twitter / X [https://twitter.com/indermediate] * James Gordey [https://twitter.com/james_gordey] * Ben Hillborn [https://twitter.com/BenjaminHilborn] * Wyatt Makedonski [https://twitter.com/wyatt_yy] * Charles Jurczynski [https://www.linkedin.com/in/cjurczynski/overlay/about-this-profile/] Relevant links we found helpful * VPP Data substack including spreadsheet of all US VPP’s [https://www.vppdata.com] * Department of Energy Virtual Power Plants Liftoff Report [https://liftoff.energy.gov/vpp/] * DER/VPP Reading List [https://miro.com/app/board/uXjVNd1IcnU=/] * VPP insiders group [https://lu.ma/vpps] and supporting #vpps slack channel within DERTF [https://www.dertaskforce.com/] * Challenges and Opportunities for VPPs (what I know so far...) by Clint Amadeus Chan [https://www.linkedin.com/pulse/challenges-opportunities-vpps-what-i-know-so-far-clint-amadeus-chan%3FtrackingId=U3vSVnaY8F0ucYx85Pj1hw%253D%253D/?trackingId=U3vSVnaY8F0ucYx85Pj1hw%3D%3D] * https://www.purepower.com/blog/why-energy-storage-is-more-difficult-to-scale-than-solar-pv [https://www.purepower.com/blog/why-energy-storage-is-more-difficult-to-scale-than-solar-pv] * https://developers.google.com/maps/documentation/solar/overview [https://developers.google.com/maps/documentation/solar/overview] * From Pam * ResStock: https://www.nrel.gov/buildings/resstock.html [https://www.nrel.gov/buildings/resstock.html] * ComStock: https://www.nrel.gov/buildings/comstock.html [https://www.nrel.gov/buildings/comstock.html] * FERC 2009 (not 2008!) report: https://www.ferc.gov/electric/industry-activities/demand-response/national-assessment-action-plan-demand-response-2009-national-assessment [https://www.ferc.gov/electric/industry-activities/demand-response/national-assessment-action-plan-demand-response-2009-national-assessment] * https://gridintegration.lbl.gov/der-cam [https://gridintegration.lbl.gov/der-cam] * https://zomasleep.com/blog/most-awake-city [https://zomasleep.com/blog/most-awake-city] * California Self-Generation Incentive Program [https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/demand-side-management/self-generation-incentive-program] (SGIP) * California Demand Side Grid Support Program [https://www.energy.ca.gov/programs-and-topics/programs/demand-side-grid-support-program] (DSGS) * Federal tax credits for batteries [https://www.energy.gov/eere/solar/federal-tax-credits-solar-manufacturers] * Get energy prices: * Directly at the wholesale market’s website (CAISO [https://www.caiso.com/TodaysOutlook/Pages/prices.html], ERCOT [https://www.ercot.com/mktinfo/prices]) * Through aggregators in different markets (Leap [https://www.leap.energy/], Energytoolbase [https://www.energytoolbase.com/], Stem [https://www.notion.so/b84d830ac18945a6b18ba245f49097de?pvs=21], Sunnova [https://www.sunnova.com/], Sunrun [https://www.sunrun.com/] etc) * New England ConnectedSolutions Program [https://www.nationalgridus.com/connectedsolutions] * AutoDR Rebates in California [https://www.sce.com/business/demand-response/ADR-customized-control-incentives#:~:text=Auto%2DDR%20Customized%20Control%20Incentives&text=We'll%20pay%20whichever%20is,verified%20(M%26V)%20load%20reduction.] Music Our incredible intro/outro music is the song Ticking, by artist TINYou can stream the whole song and the rest of their catalog here:  Episode transcript Welcome back to intermediate and to part two of our creating a VPP series if you missed part one I'd highly recommend you go back and listen to that first because we pick up right where we left off without any recap With that out of the way, enjoy the show What are those things that we have now available that are renewable? That can be worked in quite a different way into the economy of the United States Which are concerned primarily with the design of nuclear power plants and this type of thing We do not know what the magnitudes or the side effects will be. Hi, I'm Pamela Wildstein. I'm Wyatt McAdonski. I'm Ben Hilborn. I'm James Gordey. You're listening to Intermediate. Intermediate. Intermediate. To Intermediate. Intermediate. The place for people trying to get into or already working on distributed energy resources and clean energy. This is the podcast that makes it easy to learn how the grid actually works beyond the office. Okay, so sufficient lack of density. There is a time of use and or flexibility program that is conducive to us doing this. Coolness factor. So like, let me just, I think the density one is fair. Like New York City, San Francisco, probably too dense. But like, let me just test some things. Like I would probably say that in many cases, Seattle is probably a little too dense too. like it's a pretty pretty big densely populated place but like what about the place i used to live portland oregon like do we think portland might have like enough lack of density for that to make sense or is that also too big and we want to go some smaller place i'm i'm happy with that i think somewhere along the the western seaboard is um yeah we need like a market that's gonna have some like time of use or like yeah you know flexibility goodness Okay, so Portland has 368 coffee shops for a population of 656,000. This is Portland proper. So that's a good, decent density. That's timely. Hey, Ben. I just want to call out Isaac from Leap, who is kind enough to pop in and be our phone-a-friend quasi-expert in here and help us out a little bit. Hi, Isaac. Hey, Isaac. Hey. How's it going? Thanks for having me. Isaac. So just to catch you up, Ben, if I could. So what we have kind of gotten to is that we want to create a virtual power plant for coffee houses with the rationale being that coffee houses mostly operate during the day. And so we could either like shift them to a time of use rate so they'd save some money like because they're operating mostly not during peak hours and or solar plus storage on the coffee houses and they could kind of like use that excess kind of like energy during the times when they could get compensated for it. These can't be in like Manhattan because they don't really have rooftops probably for the coffee houses and so we're trying to figure out like sufficient balance between density and places where there's a good time of use tariff to tap into or a good flexibility program to tap into. So that's kind of where we're at, and you're pretty knowledgeable about this stuff, so Ben is raising his hand, Ben Hilborn, but also I thought maybe we could shortcut the answer a little bit and see if you have some ideas. Yeah, we should let Isaac give some ideas. Sorry to throw you in the fire, feel free to ask any qualifying questions. So yeah, the question is, where would I go if I were trying to do a VPP of coffee shops? Does it need to be, is there, with solar and storage, and you're thinking about generating revenue for, or not generating revenue, your primary focus for the customer is bill savings through changing time of use tariffs or generating revenue with this kind of like extra solar juice that we're getting. If anyone else, feel free to chime in. I feel like this makes sense or made sense five minutes ago when we were thinking about it. Yeah, the only thing I had I had my hand up for was, you know, maybe we can simplify this a little bit by just removing solar from the equation and just do batteries. right in that there's a kind of overlapping need of coffee shops need a you know a decent a decent electrical service much more so than say a you know a clothing retailer that might be in the same space the coffee shop needs to run commercial fridges they may have commercial ovens because they're doing baking in-house they have all of the you know high draw boilers in there you know 14 espresso machines, all this kind of stuff. So they need a decent amount of service and they're probably going to pay the utility a reasonable amount to have that service at the building. And so there's an internal need to have a lot of power available at certain kind of internally determined times. And at the same time, this business doesn't operate when the grid needs, when the grid demand is highest. So there's potentially an opportunity here to have simply battery buffered service to the cafe where we don't have to pay for an install of, call it whatever, 400 amp service for your cafe. Instead, when we build up, when the cafe gets built out or if somebody's upgrading or whatever it may be, instead our virtual power plant is going to provide a battery that helps this cafe operate all of its internal internal load peaks are absorbed by the battery and then in the evenings when the when the grid is going to pay for it most and the cafe is closed this battery then just discharges back into the back into the grid to make some extra money based on the business that we set up for virtual power plant. Okay, helpful context. So you're going to need some other type of incentive for a battery that isn't paired with solar. In general, batteries sold for small commercial would probably be justified on a resilience basis. They aren't going to have a short enough payback period for a business that isn't really deep in energy to want to do any type of financing for a seven, 10-year payback for a battery, which makes me think that you're probably gonna go to California with a self-generation incentive program. Pat loves SGIP. Isaac, if I could, I think we're open to what makes sense for coffee houses. We're just trying to figure it out and appreciate your guidance, given the different options and markets and constructions of hardware we might use. So, you're, yeah, I mean, you probably, I would probably start in California. There's also, with the challenges around building gas plants, there's increasing prices for both energy, well, capacity prices available, so you're likely going to be able to generate some meaningful revenue. There's also a recent program that came out last year, demand-side grid support, DSGS, that batteries are able to participate in where the battery is used as the source of truth for valid for measurement and verification. So that is probably where I would go for these coffee houses. I would probably pair it with solar because the primary solar will still provide the of savings and those solar and storage assets will be under net energy meeting 3.0 so that they'll be offsetting primarily really high peak usage. And I think to your point, coffeehouses do often have a pretty big drop-off and so they would have some flexibility to use that battery to to participate in demand response. So that would be, for this example, probably where I would go. What kind of batteries would you guys wanna use? Have you thought about? That's a great question. We haven't got there yet. Let's dive into it. What's, hit us with some options, Isaac. Well, so there's, so the battery landscape's really interesting in terms of how do you access these batteries? Do you work with a financier who might have access to the terms of how those batteries are being financed? Do you work with an individual OEM to integrate with their APIs and pay them an API fee? Do you try to work with both of them? Is there some general installer that you might work with for a small commercial batteries? And so those would be some of the people that you, or folks in the ecosystem that you could engage with for how to access that battery, for thinking about programs in California. Let's call up Charles again, bring him back to the front here, because this is his ballpark. So, I'm at Generate Capital. We love to finance batteries. That is a shameless plug for my day job. Long story short, I mean, there are numerous ways we can kind of create financial structures that allow for this. And just putting my infrastructure hat on, if you can get contracted relatively certain revenues into the future, so if somebody is willing to commit to having that battery and having a charge, we can finance against that. And what I've seen done in the past is to offer performance guarantees. So we can still guarantee that you will not be out of pocket having that battery. It'll still save you money, right? So as long as we can use the batteries in the right way, make you a saving or even revenue, if they can export back to the grid through some program and then obviously allied through the SG program and other, maybe GSGS, there are ways to make the numbers work. So I think from a commercial side, that is one perspective, we can dive into that more. The next question is technical as well. Just to make sure I understand it, our options are we could buy, like the customer could buy the devices out of pocket. We could help get some financing for it. Or like what are the general models that typically get used? Is that just for buying the battery or is that for how they participate in a VPP? Yeah, in the context of like people doing virtual power plans, there's having these assets in general, like how are they typically like purchased or financed or however you want to say that, just so people can understand the options. Yep. So in many instances, if you think about the folks generator doing, building this complex financial model that is taking in different revenue streams, there are some instances where a individual virtual power plant is included as a specific revenue stream, there's a clear line of sight on a particular portion of that revenue. There are other instances where the battery might have already gone through, it's installed, and then afterwards there might be an offering for a virtual power plant that comes along where they can make incremental revenue by participating in that battery. So it really depends on where in the point of sale a customer will consider or a financier will consider integrating into a given virtual power plant. If we're doing a new system to install on these various coffee shops, I would expect that it would probably be included in the initial financing package would be like, is the ideal solution for an end customer. Oftentimes that is complicated enough because as Charles was referring to, So you ideally want to be able to see what the prices would be for 5, 10, 25 years out. Many of these programs will, especially if you're participating in a wholesale market to start, you're relying on prices for the capacity market as well as energy prices, those are much more merchant, much less reliable. cycle. And then utility programs are often going to be updated on a recurring cycle anywhere from three to five years, depending on the public utility commission cycle that they're on. Charles, curious for your perspective on this on the financing side, but both of those make virtual power plant programs with long-term stable revenues a little more complicated for financiers to consider. Well, yeah, for sure. And I think what made it work for us is a lot of the upfront and center programs. So we are very invested in SGIP. Not to get too finance wonky on you all, but a big metric that investors use is IRR or internal rate of return. Now, that shows that I get a a return on my money, but there's like a discount component. So money that comes in sooner is worth more, right? I'd rather get $5 tomorrow than $5 in a year. That $5 in a year is worth less to me than if he gave it to me tomorrow. So an incentive program that gives me the money up front can be really positive to my IRR. So for that reason, something like SGIP that comes in early, there's a five-year performance-based component, or at least was when I was looking at it, is really valuable. So that's one element. Programs that run over five to seven years can be viable and can be a good component of the overall, what we call the revenue stack, so the different forms of revenue that we can earn. And we will look at volatility and certainty of those revenues, and then basically take a best guess at the likelihood of capturing those revenues, and then we'll do what we call discounting back. So if those revenues are going to earn me $10, I'll say, well, you know, that's going to be, I'll pay you $8 or $9, or I can build it for $8, right? I'll give you $8 up front to build your battery. So the amount that I can afford for the battery today is gonna be some combination of future revenues, but discounted back to a present value. Yeah, that's helpful. And so if I could repeat back what I think we've heard, and then I wanna like maybe dive deeper into some of these individual ones. So there's some component of how does the hardware get like purchased and be available? And so, you know, maybe the coffee houses already have solar plus storage and that's great. We can use that and help them with that. But if not, there's some like, you know, some calculus some process by which we kind of decide like how that's all going to get paid for and like if it makes sense on paper, the economics and so one portion is like the actual hardware costs. Another portion is the virtual power plant revenue from the different energy markets and compensation methods and maybe some things around that that can help with the financing include incentives and things like that. Absolutely. So I think we're getting into a really interesting part of the process where we've decided who our customer is, what we want the solution to look like, And now we're trying to figure out, okay, how do we make this work as a business? And we've talked about, so we're going to go to, so CoffeeVPP Inc. is going to go to Charles Capital LLC to finance our batteries. And Charles Capital is going to want to see some good numbers on IRR and, you know, make sure that he's actually going to get his money back out plus some. And we need to look at, you know, how we're going to stack some value streams here to make sure that we don't have kind of this single point of financial failure. And so that we can start to get a return on investment for everybody involved sooner rather than later. And so we're going to have some tax equity, some IRA incentives, some other pieces of the puzzle that we're going to layer on here to make this make financial sense. Charles, is there a quick question from James here before I ask the question to Charles? Yeah, and so I think in my mind what we're trying to do is like understand how we can like make some kind of economic equation, you know, TBD if that actually makes sense right in pencils, but I think what's helpful to people is to figure out like with enough detail into it like what are the different like inputs of that formula and like how do you like understand what those are to like even understand like what the economics are And so to the extent you can speak to like enough detail without like going way down the rabbit hole, that would be super helpful, I think. Yeah, what would you be, Charles, what would you be looking for when someone comes to you with a proposal like this? So I think the first thing, just from a very high level, no specifics, but universally applicable is what are my revenues and how high can they go? What are the different options? And then what are the costs that I need to incur to buy software as a service, buy new battery technologies or EV charges or whatever to power the microgrid? And how can I get that cost as low as possible? Because these are close run things. We're trying to make energy as cheap and accessible as possible to everybody. And the incumbents are, say what you like about your utilities, but that's your benchmark, right? you gotta beat that. So your revenues are naturally gonna be capped because then people are gonna say, eh, well, you know, you're more expensive, I'm gonna go with what I already have. So you have to provide a compelling value proposition and get those costs as low as possible, and that's really hard. So I'm gonna go and say, okay, what do we need to do? And then what is the infrastructure that I need in order to shift from what you do today to what you're gonna do in the future that will unlock all these new, different grid services programs and load control and SGF, of course. So as an investor, I take all that information, I plug it into a financial model in order to try and determine what the IRR is on that. Now, you know, that is the sort of the commercial prospect. What are your revenues? What are your costs? And then how much money can I make from it? Obviously, your cost, a big component of the cost is going to be the technical side. And I think I will hand it back because I don't want to monopolize people's time. But when I think about commercial side, there's going to be a technical input there. So what do we use to build this BPP? What what are the the underlying components? Yeah, and would it make sense to unpack those one by one, like what are the costs, like literally specifically, and then like what are the revenues? I think the revenues are the different markets that we can participate in and what we can do. So maybe, Isaac, I don't know which one makes more sense to go to. But like, if we could speak to like, what the potential revenue streams are, in like, reasonable amount of detail, but not too much, I think that would be helpful for people to really understand, like the stuff that's hard to figure out, without talking to people, you know? So yeah, in terms of revenue streams, when you're at your action, while you're talking about VPPs, really, you're asking about what are the revenue streams for a battery, in this instance with VPPs being one of those inputs. Oftentimes the biggest savings will be bill savings related to being able to basically get renewable energy from solar on the roof and the arbitrage between that versus the price of electricity that they would have gotten from the utility. And that is going to be the majority of those revenues. SCHIP is going to be another great example that's gonna offset those costs. Sorry, what was it? The self-generation incentive program. It's gonna, that's gonna be, I guess, I don't know, Charles, what you think of that as a revenue or we think of that as just a... So it's a revenue, yeah, and that's an interesting point to make is that revenue can come in different forms. Revenue could be like an incentive program, which utilities want to do to kind of subsidize the cost, the upfront cost of putting something they won't necessarily pay for the whole thing, except for maybe S-chip resiliency. But typically, utilities don't want to pay for all the hardware. But they can significantly reduce the cost. Now, if I can get reimbursed for all the hardware that I'm buying this much earlier, the hardware becomes cheaper, and it means that I don't have to find that revenue elsewhere. So, I can, the bill savings could be smaller, right? It directly leads into lower revenue needs from other value propositions and makes the business case easier. So incentives can help drive new revenue opportunities, say where the bill savings are not quite as high, where they couldn't justify paying for all the infrastructure and the BPP orchestration software on their own. So yeah, I think about them as revenue, but two different types of revenue, like one-off or incentive revenue, upfront incentive revenue, and then recurring revenue. Yep. Helpful. Helpful context framing. From there, you then get into revenues is what we think of as participating in a VPP. And that could be a utility program. That could be participating in a wholesale market. That could be participating in some adjacent program like DSGS, wholesale market adjacent, excuse me. And then those revenues are often come in the form of like a capacity type payment, a dollar per kilowatt month, and often an energy type payment. And that's often in a dollar per kilowatt hour, a dollar per megawatt hour depending on the specifics of the program and mechanisms involved. And so those are some of the common categories that we see partners at Leap considering for battery participation for a VPP. So Isaac, where would you go to get some of those numbers when you're trying to figure out the model for your VPP? Where would I go? So S-chip, I would go look at where we are in the different tiers in terms of pricing or the different saving tiers that are available for S-chip in terms of federal tax credits. Similarly, looking at guidance for the specifics around batteries and where we are today and the percent discount available. For pricing on the VPP component of these different programs, there are a bunch of different aggregators that you would probably want to shop around, Leap being one of them, to see the pricing that they could offer you based on different programs and the different capabilities you have available for these batteries. The other thing to consider is that sometimes the battery control software layer, someone like a STEM or energy tool base might already be able to participate these batteries into a bunch of different programs, and that's part of the stack that they're providing. Those are two of the partners that Leap is working with to enable wholesale market participation. So you might end up just going through one of these battery software providers. Yeah, Pam? Yeah, I was just going to ask in the wholesale market, how are you, how are, is the resource like as like the resource as an aggregation, how is that being valued in the market? So I guess if it's participating in the energy market, it would just be how much it's producing I guess if you were to go to ancillary services, it would be through, I guess, a demand response program, but then not applicable to California, but if you were in PJM, ISO, New England, MISO, or NISO, what would you do in the capacity market? Which I know they haven't complied with order 2222 yet necessarily, but. Yeah, okay, there's a few different layers there. So it's going to vary by ISO and RTO, but at a high level, there's oftentimes an annual bid or bilateral contracts of some sort for capacity. And so you're going to get a contract either through a open or closed process for a capacity price in a dollar per kilowatt or megawatt month. And then there are different ways of calculating how you've met that. Some of it is just, what is the nomination that you put into the market? What is the forecast of what you said you could do? Some people will be judging you based on your actual performance for very specific events. That is, I think, the highest level of how, the core question that I heard is, how are you evaluated for capacity payments? That's the core, or the fundamental construct, and it varies, some of the nuances vary by market. Does that speak, was there a second question there, Pam? No, I think that was it. Okay. I have a couple of follow-up questions too. We don't have to answer them all here, but I at least want to get all the links so that we could go deeper and give people the ability to go deeper if they want to. So self-generation incentive program, SGIP, I Googled it and I found something on the California Public Utility Commission website. Is that like the right place to start to learn about that? Yeah, that would be a good initial source. Okay. These federal tax credits, we didn't get specific, but like, where are people Googling or going specifically to learn about that kind of stuff? For batteries, and Charles, you'll probably be more expert than me, I believe it's ITC and PCC would be what you'd be Googling. And specifically for, I believe it's either now for batteries with some of the recent changes. And so that would be some related to tax credits. If you wanted to look for a specific market just to understand energy prices generally, you could get a quick summary going to a given, let's say the Kaisa website or the ERCOT website just to see prices for a given day or month. That's going to give you a really summary view, and some of these markets have a fair bit of nuance. And then reaching out to some of the different aggregators who provide VPP offerings, whether that's a LEAP, in the case of batteries, energy tool-based STEM, as some examples, on the residential side, someone like a, you might see someone like a Synova, another partner of ours or Sunrun, those types of partners. having specific offerings in different markets, different incentives for their customers to participate in a VPP. And just to make sure I understand that piece, so are you saying that you could either go directly to like one of the markets, be it the utility or the, you know, Kaiso, the wholesale market operator and like register to participate directly Or you could go to someone who's already participating and have them like assist you and they would give you a price to do so like per kilowatt per month or per kilowatt-hour Yeah, depending on the specifics of the program and whether there was an energy component or it was just a capacity Oh and or vice versa and similar if you want to go into ancillaries as well and With a battery you might want to consider ancillaries as well just because you can respond relatively quickly. I'm curious, like, do we want to do a quick, like Isaac, you're at Leap, Leap does this. What about a quick shameless plug for what Leap does and how that works, right? Because if I'm a customer and I have energy needs, I don't necessarily know utilities, I don't know grid interconnections, I don't know all like the different ways that I could potentially make revenue. I come to you and say, what can Leap do to help me recognize, I run a coffee shop, right? I'll get a battery, but it may or may not make sense. I talked to Charles over here, he says he can pay for it, like, but there's still sort of money on the table here. Like, how am I going to make money from it? What does that look like? Yeah. So just context on Leap, we are a platform that connects assets with markets and programs is like the fundamental interaction we're playing or connection point. So oftentimes we will not communicate with an end customer. We might work like if your company is a coffee shop as well as has bought some battery, the battery operator might be the one who ultimately is going through LEAP. And so those are some of the examples that I've been citing before around like an energy tool base, for example. So you're like, we want someone to provide software to our battery to make sure we're getting the most value out of it. Let's work with them. But to be clear, like if we're the coffee VPP Inc provider, we would work with Leap kind of like as in between Leap and the coffee companies, right? That's more your typical model. Yes, yes. Did that speak to both questions? Or was there a fall in there? Yeah, no, I think that's, that's good. So, like, I go to a coffee shop and I don't know anything about energy. And so I go to like a Stem or a Synova and say, operate this battery for me. And, you know, save me on, save me from my ludicrously high refrigeration and coffee machine, electricity coffee, of course. So yeah, I go to somebody who then, and I guess the way to think about this is like, they can run it, but they can't necessarily put it into utility programs, right? There's a universe of really wonky energy revenues that exist in kind of a nebulous form for me as a coffee shop owner, or even like my buddy over here who knows how to install batteries, and they put one in the back and I'm good to go. And they said, they'll run it for me. They're then going to leap and you're gonna make sense of all those different nebulous revenue streams that exist at a much more, both on a utility scale and the transmission scale. I don't know if now is a great time, but for 2222, if you wanna talk about those interplay, I know that may be going down a rabbit hole and I know James also has something to say, so. I can start with, for Corona 2022, our general perspective, and I'm not on a regulatory team, so just as the caveat there, is that it is going slowly. There is movement incrementally towards DERs being able to participate more in wholesale markets, and more and more stakeholders are seeing the need for this. The DOE liftoff report is a really good example, and definitely including a link to that report summarizing the fact that VPPs, there's a lot of flexible load that's about to come on the grid with energy storage, EVs, and other smart devices. VPPs are cheaper to operate than a traditional power plant as well as utility scale storage, often because people are buying these assets regardless. So the coffee shops sometimes might just be buying it because they've been through five power prodigies with a given utility, for example. I went on a little rant, but that was the initial context on 2222, and then more broadly on why VPPs are being considered, and there is movement in that direction, and it's slower than we want. Yeah, James. Yeah, and Isaac, you helped us take a shortcut, if I could call it that, in that we sort of figured out like loosely the type of EPP machine we wanted to build. And then you just said like, yeah, California, like that's the one to go. Could you help us understand like, or correct me, like my assumption is that you're like given your knowledge of this market and how this works working at Leap, you basically like know in your head, like, okay, like for these types of devices and this type of like small CNI type customer, I know that like California has really good compensation Mechanisms given like time of use rates and also like all these other like demand response programs energy services things like that And so you said that's the reason you chose, California. Am I correct? It has good compensation mechanisms. And if we wanted to look For other options We would be like Looking market by market given our type of devices and trying to figure out like what makes sense based off the compensation mechanisms, is that correct or Yeah, so for me, there were two things at play. Being able to, assuming that the batteries were being installed up front, being able to offset costs immediately with S-chip was part of what pushed me. If the batteries had already been installed, I might consider suggesting doing something in New England through Connected Solutions. That is a relatively lucrative program across many of the utilities in New England for batteries in particular to provide services during the summer, often participating in a daily basis. And because in many parts of New England, there isn't a lot of advanced metering infrastructure installed, the battery is the source of truth for measurement and verification there, making that in some ways simpler if you have access to that kind of data. So that was some of the background of why, given the battery wasn't installed yet, we're trying to figure out the cheapest place where you might be able to install it. The other thing to consider is that because you had a battery, while there might be more lucrative programs like in Con Ed in New York City, the fire codes are such that you wouldn't be able to install a battery. If you're doing something more with like thermal storage or trying to manage, like there are partners of ours that control thermal store, like the coolers, for example, or the refrigeration for this type of coffee shop. That would be an example where I might be looking at another market or considering something like an auto DR rebate in California to provide additional savings as you're installing these different types of assets. Now for- It's a lot, but that was like, that's the background of why I said simply California. For anybody listening who, maybe they have a novel idea for a type of VPP or they simply want to get into the market and want to figure out what these kind of opportunities of interest are. Is there some location or some aggregator of information that shows, you know, here are the kinds of, you know, pluses and minuses to VPPs in one jurisdiction over another? Is there some sort of resource like that that you know of? I would, so again, going back to the Department of Energy's VPP liftoff report, they do have a few like a summary of where VPPs are located across the country. And you'll see that there's, I think, five states that have more than 10 VPPs. Massachusetts, New York, California, Texas, and I believe North Carolina is the fifth. I would need to double check that last one. But that just gives you a sense of where VPPs have been concentrated to date. And often that's reflecting some of the underlying grid changes we're seeing around there being increasing EVs, more renewables, and more difficulty installing new gas assets. And so VPP stepping in to provide these services that Peeker plans used to provide or provided to some degree. And so DOE liftoff report is the long way short answer to that longer. Yeah, that's really cool. And Isaac, like, thanks for all this, like, it might be a lot for people to parse, like, listening through it once. Like, our typical audience is, like, reasonably familiar, but not quite an expert. But, like, I think we're giving people the tools and the threads to pull on themself to, like, try and figure these things out on their own and their details, and that's really what we're trying to do here. So, Ben, Pam, Pega, Charles, I'm looking at, like, our loose outline and also the fact that we have 19 minutes left. I see at least one more question or bullet point that we haven't, I don't think, touched on yet. Do we wanna do that? Which is kind of a deeper dive on specific requirements and things that we're kind of like pointing towards now, or is there another way we'd like to spend the time? What are you thinking when you say specific requirements? So, to summarize where I think we're at, We are a company that is going to help coffee houses, you know, through whatever term you want to say, flexibility, virtual power plants, primarily through, you know, helping them with solar and storage so that they can save money with time of use. They can, you know, tap into some incentives and credits to kind of like reduce the cost of installing these devices if they don't already have them. And then through some combination of utility demand response programs, wholesale energy markets, capacity markets, ancillary services markets, within California is where we're going to start. And so I think in order to flip from where we are now to putting how we would actually build this, I think the next step is to say, OK, okay, we know what the aspects are that we need to figure out, but it's more like looking into the actual incentives and the actual markets and the compensation mechanisms and trying to build out maybe a spreadsheet or maybe just a Google Doc with all the information to try and make an informed decision about how to piece together all those different building blocks we need. Yeah. I think it's going to be getting into the modeling. How do we make a business around this work when there are so many ins and outs of capital over a long period of time? So we maybe don't have enough time because that's a lot, but we can maybe create a next steps that we would do given what we've learned so far the rest of the time, or we could just stop recording and give people time back. Happy to do whatever. So I would just point out some nuances of how you're thinking about the business and ways that I would change it to increase the likelihood of success. A few things that stand out to me is batteries are gonna be a 20 to 25 year asset, maybe 15 to 25 years, let's say, depending on the battery. Most commercial leases are gonna be 10 years. So there's gonna be some added complexity if you're installing the battery already, what I would think would be much easier would be to market to coffee houses that already have installed solar in storage and enable them to get incremental revenue or incremental savings by participating in a demand response program. That if you were to change it to more of a software model where you're not you're not needing to go out and get financing but you're simply going to different batteries like small commercial battery customers and saying, hey, we can provide you incremental revenue to participate, that would allow you to probably start generating revenue sooner and have a wider base. So just some things that I would consider from the way we've seen commercial, residential and industrial VPPs participating. Yeah, well, I think we've kind of got to the point where if we wanted to take this any further, we would need to start doing some real number crunching around what's our density of customer within the locale that we want to launch this. What does our model look like in terms of where are we finding incentives? What does our revenue stream look like? What kind of revenue streams are we unlocking for our customers? To Isaac and Charles, I'd say the two people that probably see the most of these projects being developed, what would you score us on a very simple 1-10 of, hey, would this work? is there, you know, could you see somebody picking up this idea and starting, you know, the VPP for coffee shops? Feel free to be honest, that's okay. And do you want to jump in before or after? I have a completely separate question. I was just saying, like, after. I have a question after we're done. So, from my perspective, I think one of the big hurdles is always scale, and as we talk about this, yeah, I can help a friend out with one coffee shop, but where it starts to really make sense is how many can you do, and there are a bunch of different aggregation points here, right? Like, I could go to, like, a solar installer in whatever town, and they know all the people who want to get batteries and solar installations on their roofs and want to be part of the VPP. And I think, so somebody who can go out and get a bunch of different projects is a really good tip of the spear for an investor like Generate. Kind of, I'm sure Isaac will say something similar, but we partner with the same kind of people from different perspectives. Somebody who can get that critical mass, because for me, it's a lot easier to write a bigger check than a smaller check. and it's a lot easier to kind of procure at scale a number of batteries rather than just one here and there you know if you can do this yourself you can go talk to an installer you could even go talk to some some vendors out there you could probably buy a battery on Amazon really but then you wouldn't necessarily know how to wire it into your your electrical system so you know I'm looking for that kind of scale. Now, as we've discussed, there are a number of places in California that have some real density of coffee shops. So if somebody could go and convince everybody in that region to say yes, I think there's something here. But for me, it's that question of scale. How do you bring them together? I think Charles picked up a really good point around scale. You focused so far very much on how to interact with the customer, you haven't focused as much on how to continue to engage with the battery, and how you're going to be controlling that battery, and what are the costs associated with controlling that battery? Or do you want to create a layer of software that is controlling the battery, or do you want to be a financing primarily institution? Are you more of an infrastructure type organization that is building owning these assets and then farming out the controls, or do you want to be controlling these assets, if you want to be doing more of the control, then you want to be a much broader. If you want to just focus on infrastructure with VPPs being one of the revenue sources among many, then I think that there is probably a small business around installing batteries and solar in coffee shops and similar small CNI. Just before, Pega, you've got an additional question here. Could you just expand very quickly on a quick pros and cons of picking one path or the other, Isaac, from those two choices? Yeah, there are really great businesses that are focused on being installers, being asset owners. It's just a very different kind of business than a software company that has recurring SAS fees, or some other similar model to control batteries. And maybe a customer communications layer. And so the depending on the skill set of the specific team founding team would be the question of which of those paths you would want to go down is where my head goes. And yeah, I also want to just chime in, it's like, I'm absolutely a hammer sitting a nail here when it comes to financing and development. I can kind of put myself in the project installers' shoes and I can put myself in the financier's shoes. But one element, and I think it's probably relevant to our loyal listeners, is the, is the SaaS component, is the VPP, like the software, is like this all works together because some sort of intelligent brain sits behind and says, turn this on, turn this off at these particular times. So there is that angle to like, how does this operate and how do you monetize that? Is it a share of the, the revenues that transact is it a sort of, so you get based, based on your performance and the revenues you're able to generate using that asset portfolio, or is it like pay me a recurring fee and I will make you a lot of money. And there's a lot of question and marks in there as well, which we can unpack because there's a couple layers. There's like an energy layer. So can you actually control a Tesla battery versus like one of the other ones, sunburnt battery or a Panasonic battery. Those will have their different technical challenges. Whereas Leap will kind of sit on top and be the brain on top of the various different arms that controls the switches at that granular level. So there are, there are different types of SAS in here as well. Right. And Charles, this is an important nuance where actually we won't, we'll never control the battery directly. We'll be the integration with the market so that battery can commute, can like interact with a given market or program and consider multiple markets and programs there often is another entity that is truly controlling the battery and incorporating insights around the tariff considerations or other constraints that the customer has. I know there were a few other questions. We call that a battery management system and an energy management system, a BMS and an EMS. So just to throw out even more three-letter acronyms here. Gaga? Sorry. Yeah, there is an influx of information here. And as you were just adding and talking more, I now have 10 different questions. So my last question was, for Leap, is it safe to assume that if we are a software company and we want to connect with the batteries, if you're not controlling the batteries, does it mean that you are not paying for the API access? And so how does it work? How are you getting the information necessary to connect them to the markets? And if you do need to have an access to those batteries, because there are different manufacturers, is the cost of getting all these API access, is it feasible? Like it's gonna be very expensive because it's like $10,000 just to have access with a limitation on average $10,000 for only one model of a battery. How does it work at scale? Yeah. Now you're getting into the fun part of the business model, or one of the fun elements. So many original equipment manufacturers will have an API. Some of them charge, some of them don't. The rates that they charge vary significantly. Many of them are paying these rates on a dollar per system month or dollar per system year. And so what I would say is, oftentimes those individual fees are low enough to be able to enable a VPP. So long as they're participating appropriately in the most lucrative programs in those markets. But there is a lot of nuance that folks like Leap will parse to make sure that you're getting the most revenue so that you can pay off those API fees and still have a meaningful margin for your core business, if you were to go that software route. And so you have folks like Energy Hub, Resideo, others that are DERMs that do are connected with many of these asset types, paying those different fees with those different OEMs across batteries, but also other types of asset classes. Okay. I have one last question because it's been eating me up inside since we talked about the capacity markets. Why is it being valued as a kilowatt, yeah, kilowatt month, like what's the logic behind that? Because I'm trying to think of how to think through this. Because we care about capacity in the moments for a loss of load, probability is more than zero. And that would just tell me the month where there's a probability that will be more than zero, not the specific hours, right? So like, yeah, I know that it might be really useful in the month of July, but that doesn't mean it, because it's a variable resource, that it would be useful at 8 p.m. on a specific, you know, on an 8 p.m. There's two different layers there. So, again, capacity, the way that we'll explain it to partners is, it's the ability to show up, like you said, in the case of an emergency, or just be available. Just the ability, in the same way that it would cost a lot of money to to build a power plant to connect to the grid, and just that having that power plant around being useful, that is how we think about, or the way that we'll frame the value of capacity being available for a given month. What is the layer down that you're getting at in terms of the variability by day is when you are bidding into a given hour of the energy market, what is the connection between the energy markets and capacity markets? And that's going to vary a little bit by market before it is like the initial answer. One of the things that as a good steward in virtual power plants, you want to be putting in a nomination or a forecast of what you expect that load to be able to be decreased that is reflective of a given site's actual abilities to do that. And so that is how you're incorporating the very, so you're assuming that let's say in California, there's generally a duck curve at the end of each day where there's an immense amount of load towards that afternoon evening. That's often the most lucrative time where you should be bidding in or that's a requirement is getting a capacity payment. And you're putting in a nomination that is reflective or a forecast that is reflective of what you expect that load to be able to drop during a very specific time of day. Does that get at your question? Yeah, I think so Okay Well with that, I think that kind of brings us to the the end of our brainstorming session We now have a wireframe for coffee VPP Launching across California to a coffee store near you investors give us a call and we'll Put batteries and solar across all of your favorite all of your favorite coffee shops Isaac, thank you so much for being our Fona friend. And Pega, thank you so much for joining us for the brainstorming. This has been a lot of fun. And I think we really kind of turned over a lot of rocks that showed just where all the nuances in this space are. And hopefully we've left you the listeners and especially those of you who are interested in potentially starting a VPP company of your own, some of the places you need to go to look to answer some of these questions, to build out a business model that makes sense, and hopefully be one more brick in the wall that's going to build the resilient grid of the future. Pam, Charles, James, again, The Intermediate team is always game to try fun things like this. If you, the listeners, have any suggestions or questions or comments on the episode, feel free to write in at intermediate at gmail.com or reach us on Twitter at Intermediate. And we will be back next time with some more fascinating insight into the wild and wonderful world of DERs. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.indermediate.com [https://www.indermediate.com?utm_medium=podcast&utm_campaign=CTA_1]

#5.1: Virtual Power Plant (VPP) Hackathon

Summary Co-hosts Pam, Ben, Charles and James are joined by listener Pegah in part one of the InDERmediate Virtual Power Plant (VPP) hackathon. In this episode the team embarks on their journey to roll up their sleeves and build a VPP within two hours live on the podcast. After the obligatory attempt to define the nebulous term “Virtual Power Plant”, the team begins to answer the key questions required to build a Virtual Power Plant. These questions are: * What type of customers to serve - Residential or Commercial and Industrial? * What type of devices will the focus? ie. Solar and Batteries * What location to operate in? ie. California * What markets to operate in - Utility markets via time of use and demand response or wholesale markets Episode chapters: * (0:00): Introduction * (3:30): VPP outline in 2 hours * (4:38): What’s a VPP? * (8:20): Key questions * (9:39): Resi or C&I? * (16:40): What devices? * (36:56): Location criteria Help us out! * Subscribe, share and rate the show wherever you’re finding this podcast! * Apple podcasts [https://bit.ly/inDERmediateApple] * Spotify [https://bit.ly/inDERmediateSpotify] * Give us feedback: We’d love to hear from you via email, inDERmediate@gmail.com [inDERmediate@gmail.com] * Follow us on social media * inDERmediate on Twitter / X [https://twitter.com/indermediate] * James Gordey [https://twitter.com/james_gordey] * Ben Hillborn [https://twitter.com/BenjaminHilborn] * Wyatt Makedonski [https://twitter.com/wyatt_yy] * Charles Jurczynski [https://www.linkedin.com/in/cjurczynski/overlay/about-this-profile/] Relevant links we found helpful * VPP Data substack including spreadsheet of all US VPP’s [https://www.vppdata.com] * Department of Energy Virtual Power Plants Liftoff Report [https://liftoff.energy.gov/vpp/] * DER/VPP Reading List [https://miro.com/app/board/uXjVNd1IcnU=/] * VPP insiders group [https://lu.ma/vpps] and supporting #vpps slack channel within DERTF [https://www.dertaskforce.com/] * Challenges and Opportunities for VPPs (what I know so far...) by Clint Amadeus Chan [https://www.linkedin.com/pulse/challenges-opportunities-vpps-what-i-know-so-far-clint-amadeus-chan%3FtrackingId=U3vSVnaY8F0ucYx85Pj1hw%253D%253D/?trackingId=U3vSVnaY8F0ucYx85Pj1hw%3D%3D] * https://www.purepower.com/blog/why-energy-storage-is-more-difficult-to-scale-than-solar-pv [https://www.purepower.com/blog/why-energy-storage-is-more-difficult-to-scale-than-solar-pv] * https://developers.google.com/maps/documentation/solar/overview [https://developers.google.com/maps/documentation/solar/overview] * From Pam * ResStock: https://www.nrel.gov/buildings/resstock.html [https://www.nrel.gov/buildings/resstock.html] * ComStock: https://www.nrel.gov/buildings/comstock.html [https://www.nrel.gov/buildings/comstock.html] * FERC 2009 (not 2008!) report: https://www.ferc.gov/electric/industry-activities/demand-response/national-assessment-action-plan-demand-response-2009-national-assessment [https://www.ferc.gov/electric/industry-activities/demand-response/national-assessment-action-plan-demand-response-2009-national-assessment] * https://gridintegration.lbl.gov/der-cam [https://gridintegration.lbl.gov/der-cam] * https://zomasleep.com/blog/most-awake-city [https://zomasleep.com/blog/most-awake-city] Music Our incredible intro/outro music is the song Ticking, by artist TINYou can stream the whole song and the rest of their catalog here:  Episode transcript I think Pam's audio is unbelievably loud. Yes, Pam, you're too excited. The game thing? Yeah, yeah. You need less game. We fixed it, though. Pam's just really excited. She's just really excited. I think that's just her indoor voice. What are those things that we have now available that can be worked in quite a different way into the economy of the United States? which are concerned primarily with the design of nuclear power plants and this type of thing. We do not know what the magnitude of the side effects will be. Hi, I'm Pamela Wildstein. I'm Wyatt Makaronsky. I'm Ben Hilborn. I'm James Gordey. You're listening to Intermediate. Intermediate. Intermediate. To Intermediate. Intermediate. The place for people trying to get into or already working on distributed energy resources and clean energy. This is the podcast that makes it easy to learn how the grid actually works beyond the office. Okay. We are live. As live as we're going to get. Welcome to what will 100% be the messiest intermediate episode to date. Let's go around the table very quickly and just say who's on the mic, say a quick hello, and then we can dive into trying to build, trying to figure out what it takes to build a VPP in two hours or less. Who are you? I'm Ben, I work in energy finance as well as on Durham's systems and yeah, love hanging out with you guys every time we do this. James, who are you? Hey, it's James Gordey, your co-host. Excited for this. Excellent. Pam? I'm Pam Wildstein. I'm a PhD student at the University of Michigan. And also excited for this, particularly to have toasters in this VPP in some way, we have to get toasters in. Yes. I think toasters is like a thing here. I'm Charles, Charles Orchinski. I am currently working in energy finance at Generate Capital, and I'm also very interested in project development. So, I am keen to figure out if we can make a VPP make money. Amazing. And last but not least? My name is Pega. I have a few years of experience working in a lab at university that was about clean energy, and that's where I was exposed to VPP and DERs. But then my professional background is mostly ML and product development. I'm very excited to learn more about VPPs in this session and contribute in building one. Well, thanks, Pega, and welcome to the show. Yeah, and I just want to say shout out to Pega. So we put this out in the DER Task Force Slack channel and just asked for help because we're literally just doing this and hit record and trying to do the best we can. And Pega just reached out and said, That sounds really cool. How do I join? And here they are. Easy. Amazing. So what are we trying to do? What does it mean to build a VPP in two hours? What, how are we gonna put a little, nice little box around this and what do we want to have at the end of this? Well, it won't be real because we have no money. Oh, yeah. Minor details. And since you want the electros from the Power Grid game, I have a lot of those. So to address Ben's question, I think we were going through in the lead up to the show trying to figure out what to do. Do we structure like a normal education episode? And I think one thing we highlighted was just, there's a lot of material and a lot of buzz for sure. A lot of buzz around VPPs, but we said, I think we could cut through the buzz and try and figure out what's real and help people learn how to engage more with actually building in this space if we just tried to build one, at least understand how to build one ourselves. And so I think what we're trying to do is either we're going to be successful or not in the next two hours, but we're going to try and build a VPP or know how to build one. And we're going to share the Google Doc, which outlines what we did. And we're going to share this recording and hopefully this helps to get more people building in this space. Absolutely. Absolutely. Do you guys want to start with the definition of a VPP? Oh, yeah. What's a VPP? Just keep using acronyms. Yeah. What's a VPP, Pam? Oh, I didn't say I was going to do it. I'm going to set a timer because I don't want this to take two hours. We could absolutely spend two hours. What's a VPP and what's a DERMS? NDE aggregation. Oh, my goodness. Charles. Charles or Pega, why don't one of you guys take it away? Okay. A VPP stands for virtual power plant. All right, children, I'm going to tell you that this is a bedtime story. A VPP is a virtual power plant. It is an aggregation of a number of distributed energy resources in intermediate DERs, and it is when you get them working all together from a technical and commercial perspective so that power can be produced in one place and sold in another place either physically or synthetically using market mechanisms that allow everybody to keep the lights on and socialize their power use with their neighbors, people in their community, or more broadly on the technical side it also has useful applications for utilities as grid support and regionalize energy support for utilities and grids. So it also facilitates much broader electrical stability, which is critical as we get more and more renewables on our power grids. So VPPs can do it all. Is that right, Pega? Do you want to take it on? Did I miss anything? That was a great description of VVPP and my understanding of VPPs or virtual power plants is working around DERs which are these flexible assets that either produce electricity energy or they can store electricity so they are flexible and that you can because the prices of electricity they're volatile, you can take advantage of those and buying cheap and selling high at a higher price. And a VPP's job is to orchestrate these flexible assets and get a revenue and then distribute it to the DER asset owners and everyone wins just an extra source of income for something that it's made like its main job isn't to produce revenue in that way but it's a nice extra cash that you can get. I think that's a really key component is you know what's going to incentivize people to join a VPP is the cash you get out of it. One of the things that I saw from this recent cold snap is you know too many utilities asking people nicely, hey, can you please curtail demand? A VPP is a way to just encode that and here is the business relationship we're going to have. If you curtail demand, here's what you get. And so that's a big part of what we're going to figure out today is based on the hardware that's gonna be the backbone of our VPP and the amount of load we can shift and when. How much how much can we offer to our consumers? To incentivize participation. I wanted to like zoom out a bit Get my game face on here so what we're trying to do is Identify what type of virtual power plant we want to build and when we ask people who know about this stuff They said there's several kind of key questions which will narrow down like the type of thing you could do and so one key question is residential or or what's called commercial and industrial. That's generally how electricity customers are bucketed in the electricity world, for better or worse. Geographic location is another kind of key question to answer for us. What types of devices, be it a toaster or something else, might you want to manage and bundle into our virtual power plant? And then once you have all those questions answered, Another kind of key question is, as I understand it, there's two broad types of programs and markets you can participate in. There's a utility program and a wholesale market program. And so what we're trying to do is think about what type of virtual power plant we want to build and kind of go through those questions and arrive at some answer so that we can actually roll up our sleeves and really see a couple options and start to put some meat on the bones. So, let's jump into some kind of really, really high-level splits, like where do we want to work? Do we want to be in Resi, which is, you know, there's a few different players in this space. Do we want to look at CNI? What do you guys think? Where is an opportunity that potentially hasn't been explored enough? Resi. Resi it is. I know you're all shocked. I want Resi. Because it involves toasters, right? I mean, how many C&I toasters are there? Very few. They're only in the commercial buildings. More importantly, I think in 2008, the federal, I think it was 2008, the Federal Energy Regulatory Commission released a report on untapped demand response potential, and the majority of it, or not the majority, I don't remember if it was the majority or not, but compared to commercial and industrial, there was significantly more untapped demand response potential in residential. Perfect. Yeah, I just wanna ask a question though on the solar, or on the, sorry, are we jumping into devices now, or? No, go ahead. Yeah, so what I've been told is resi is easier, and so I do think we're trying to get reasonably far in the process. And so in general, we're probably gonna make things that are easier to our decision. And we got some like input on that. My question on toasters, is that even reasonable to like make a toaster virtual power plant? Like, I guess we can get into this, but there's like, it's not a huge load, right? And so I don't even know if it's like big enough to matter. I have two. But I, sorry, go ahead, go for it. Yeah, I want to, I think for residentials, you know, the number of residentials is much higher. So that might, it's more complicated to work with a large number of DRs that are small in scale. It might become a more complicated one. But most VPPs nowadays, from what I know, are focused on C&I, so that might make sense because the residentials are kind of left out. My second comment is, what about small businesses? Because from talking to them, it sounds like the extra cash that they can get, it really makes a difference to their business. And so are they even an option that we can think about? Somewhere in between the two. So I just want to jump in here. There's technical and commercial issues. And I wouldn't worry too much about the size. It all contributes. I actually once heard of a company that was offering to install an app on cell phones. And because if they could get this into hundreds of thousands and cell phones that formed, and they could turn off the charging simultaneously and that on a large enough scale with enough phones signed up could meaningfully impact the grid. You can think about everybody- I believe Apple has that baked in at the OS level. They do have on an operating to optimize their charging, but that is more around battery life preservation than it is about I can turn on and off a load through an app in order to manage the grid. So that was, I don't know if that company ever went anywhere, I just heard that and it was quite a while ago now, so they clearly didn't break through. So toasters are not necessarily, I mean, they may not be the optimal unit of electricity, but they make for a fun one. But at a large enough scale, aggregated more broadly, in the same way as one home doesn't really make a big impact on the grid at large. But when you have thousands, and particularly like we're talking about concentration, right, so you can have thousands of homes across the country and that's not going to make an impact. Whereas if you have 1000 homes in Sacramento, right, like in a subdivision that's going to really impact that, that local grid and you're working with SMUD or maybe PG&E if you're further out. So, geographic density matters. And I think in some ways you can then tip that over to look at CNI, where one CNI provider can be a much larger demand consumer, especially if you're looking at bigger. And I also wanna be clear. It was bigger, you made a good point. There are different sectors within CNI. And this is really interesting. I did work on a fairly substantial portfolio deploying and financing. behind the meter batteries to be used as micro grids. So we orchestrated the whole portfolio and every different customer had a different load profile and some were pretty predictable. Something like a cinema, like you know when they're gonna turn on their projectors and you know when showtimes are gonna be. Maybe slightly more predictable versus like a hair salon or whatever, or like a grocery store may not be as predictable, but it's much more flexible. So for example, with grocery stores, they have freezer aisles, which are the big demand consumers, the big demand loads. So those freezers can be really deep cooled and then you can reduce the energy demand by moving that load around. So they're much more shiftable. And I think what's, well, so from a commercial side where that's really important, is just to this point, one more from a commercial side where that gets really important is you, you then have to sort of shape your, your hardware to fit that and to manage that. And, you know, they are sort of bigger loads. Generally, commercial will be more micro grid or tech heavy, like hardware heavy, because it's all about the physical, like the site, You're trying to manage their energy, whereas residential tech is important, but it's going to form a smaller component. It's much more about the software pay. It's about the orchestration. So if we want to go down commercially, you're thinking much more about how do we make all the hardware on site pay nicely together so that we can meet the demand or the load curve of the onsite resource. Residential is going to be much more about how can we use loads that already exist? Right? Like there are retrofits, but it's, they're smaller, they're harder. it's less about what hard work can I get into there, like obviously there are people who are doing home energy efficiency retrofits like electric water heaters, but it'll be much more about how can we use people who have already made the decision. I think based on what we've said so far there's a lot of opportunity in Resi and especially you know there's a ton of different options for devices and now if we think about the kind of devices as well I think we should put a on that. And as much as we love toasters, toasters themselves do not necessarily have the ability to shift. When you want toast, you move the plunger down and it draws power from the grid and then it's done. Unless we're going to go about retrofitting thousands of homes with smart toasters and battery backup. So this is one of the filters that maybe we think about. okay, within a home, what's an opportunity for a device that has a load that is theoretically shiftable without ruining the customer's experience and is something that people already have. So let's take the approach that we wanna build a lean VPP company. We don't wanna have to deal with hardware. We're just gonna use what you already have. How does that sound? Does that make sense to me, Pam? Yeah, I would just add with the geography component too, that's especially important when combined with the technology, because your load needs to be, your load and the way that you shift it needs to make sense for the location and any reliability issues they might be experiencing. So that's why, for example, your direct load control programs in California are mostly always being dispatched during the summer with air conditioning. You could run a direct load control program, which just turns off the technology that it's targeting for toasters in California instead of the air conditioning unit, but that doesn't really make sense because that's not where most of the load is coming from and really it's not probably being run in significant amounts during peak electricity usage hours. You know, people aren't running their toasters in some way for three hours at a time at seven or 8 or 9 p.m., which is when those programs tend to get dispatched. So for example, you could run a direct load control program up in the ISO New England area, for example, in the middle of the winter for air conditioning units, but that would be very silly. Okay. Pam, I think that's a good grounding input. We're trying to balance what actually makes sense and is feasible, what is cool and fun, and kind of based off of that. And so I don't know how we want to take this. So we could just say, like, batteries are the most common thing, and let's just do residential and pick a geography. And that's just very, like, I don't know. There's not a lot of whimsy and fun to that approach, but maybe it's the most broadly applicable to the audience. Or we could try and say, like, could we take some of those inputs, right? The load flexibility needs to make sense, and we want to use load that's already there to come up with something really cool. I'm not saying this is the answer, but one idea that popped in my head was I'm a big fan of local restaurants and grocery stores and businesses and things like that. I know that's light commercial, not quite residential, but I think it'd be really cool if you could come up with some VPP way to enable your favorite local coffee houses or your favorite restaurants or something to create a virtual power plant and come up with some side cash to help them stay more economically viable. That's something I literally made up and I don't know how feasible it is, but that's where my brain is going. Could you go to all the local brunch places and say, or maybe not brunch, maybe it's some other place, and say back to the toasters, I know normally you serve avocado toast, but if there's going to be a grid event, no avocado toast on the menu, change the menu up and then you will reduce your toaster load. Again, I made that up, but thrown it out there for inspiration. Amazing. And yeah, James, I think on top of that, you know, there are gyms, there are dentist clinics, and the prices that these businesses charge their customers can be varied based on a potential BPP that is really giving them significant cash, and it'll be fun. And I think the customers, most of them also care about a restaurant participating in this program. And then they also are taking part in this, and it would add something dynamic to it. I think it would be fun, at least at the beginning, you know, maybe a few years from now, everybody is doing it, and it's not fun anymore. But for now, that's another branding message that these small businesses can have to attract new customers even. I say let's try that. The idea of a VPP for coffee shops sounds super novel to me and fun. I really like the idea of doing coffee shops and I guess that moves us squarely from resi to commercial, because you cannot model a coffee shop in ResStock, which is NREL's modeling tool, but you can model a coffee shop to a certain extent in ComStock, which is the commercial building modeling tool. Yeah, Pam, question on this, right? So we would need to find a place where it makes sense for a coffeehouse to change their electricity usage with, and aligned with, a grid of reliability event, right? Is that feasible or practical? I'm asking. Well, it would be multiple coffee shops. Yeah, yeah, many. Because, yeah, so you would find. What I'm thinking about, I'm thinking about peak, like around, you know, like when it's cold, when it's kind of like peak hours, like four to nine or whatever it is, when coffee houses are like mostly closed. And so like maybe they're not traditionally using electricity during that time, but maybe there's some other reliability event that would make it make sense. Like we put a bunch of batteries in coffee houses and they charge it with cheap solar and then they dispatch it later. I don't know. Like you tell me. What if you targeted the belly of the duck instead of the bill? So as opposed to shedding, shedding load during high demand, we absorb available energy during the cheap periods. Yeah. Yeah. So they get, And then they could sell it back during the build of the docking. Okay, so okay. A quick distinction that I want to make is I think if you were to look at the kind of proper definition of a virtual power plant, this is where we're talking about something that is technology-enabled, remotely controllable, and And kind of gives the utility some control over the functionality of the power plant. And the reason that I bring this up is because, oh, you know, it'd be cool. We could make a coffee shop where, you know, we do a ton of baking in the middle of the day when, you know, when solar is at max potential and there's a ton of cheap energy on the grid. And then as you go on into the evening when power is getting more expensive, well, we We actually, we really kind of shut off most things and we just sell, we're not selling hot food in the bill of the duck, right in the evening. But that is, that's more business design than it is virtual PowerPoint design in my mind. What do you guys think? Ben, I don't know, like where my brain is like lighting up is like cool intersections of VPP design and like business design that already makes sense for these things. like, you know, could you have a bar that's normally, you know, has lights, do a disco or do a candlelight thing, like, during grid reliability events, or is there something with the coffee house where they charge during the day and they sell it at night, or you turn the coffee, like, in the office, right, they did cafe disco, where, like, people dance in the little room. Could you have, like, a coffee house that normally doesn't run at but turns into a bar at night or maybe that's the opposite of being grid reliable, so I don't know. This is me pointing my fingers in a very rave-like fashion, but what I think is key here is to understand the underlying consumer behavior, right? What does this coffee shop do, right? Is it typically running at four to six? Probably not, because that's not when people are ordering a whole bunch of espressos and steam milk. So you think about the underlying business case and then you create a hardware layer to best, well so okay, you create an optimal load profile or a grid profile and then you add the hardware to get you from the base case to the optimal load profile and it could be a combination actually of hardware and business model or like energy use So sometimes you can just say, hey, have a rule that people don't run the espresso machines from four to six to help with load curve or to shed load. And then you use hardware to make up the difference, right? So you kind of want a predictable use case where the same thing is happening, the same behavior is happening on a day-to-day basis, because that minimizes the cost of the hardware that you need to get to simulating an optimal load profile. And so typically, you think about this as being something you can either attach to hardware that automatically shuts it down. Things like HVAC are the low-hanging fruit where a lot of VPPs got started, a lot of the VPP software systems. You think about EVs, especially if you have some sort of leak component, which probably not in the case of coffee shops. Or you have energy source. So I'll try and keep my points tight. Take the low profile. Adjust it to what your optimal profile would be. And then identify what you can do to match the existing low profile to the optimal profile. That will be hardware. And then you will add a software layer on top of the hardware so that you can affect those low profile changes. Okay, so if I'm thinking of our cafe, right, we have, a cafe is highly, they're busy in the mornings. There's also a peak in demand in the mornings, not as high as in the evenings, but it is there in the morning. So if we think about, okay, a cafe has espresso machines, it has refrigerators, it has ovens. Um, I'm drawn to refrigerators because they are, I'll be it inefficient. They are a thermal battery. And let's say that in across our, you know, our cafe VPP, uh, we have, you know, a thousand commercial refrigerators potentially under management. And we could say, all right, we are going to lower your set point in the hours preceding your morning open. And as grid demand rises in the morning, as people are getting up, going, you know, getting ready, but nobody has really made it to out the door and going to the cafe yet. In that hour, two-hour window, that's when we're going to raise the set point of these refrigerators, let them just kind of idle, let the temperature slowly rise while still being food-safe. James, what do you think? So, I just have a quick question, I just want to sanity check the coffee house idea. I like, I love coffee houses, I'm drinking a nice latte as we do this. Are coffee houses viable even though most of their operations happen during the day and when most of the grid reliability issues happen later in the day, like, are they still viable? I'm just asking, like, maybe Charles and Pam are more familiar with this. It could be a coffee house in the morning and a bar in the afternoon. But it doesn't even need to be it doesn't even need to be open at night It just needs if anything a coffee house is really great because they're using all their power In the beginning in the middle of the day, which is what we want and then at night they're just sitting there dormant So if they can discharge anything from their solar plush storage system back into the grid Then they're perfect This comes to geography though because it depends on what the policies and regulations are around discharge. So are we talking about a a building that can go both directions, like absorb and export power, or are we just talking about a load control facility? Because that will depend on the utility and what utility programs you can bid into. Yeah, but my comment is related to this. My question was, are we considering a distinction between a demand response program and a VPP? Because what I'm hearing from your guys' those opinions and ideas mostly reminds me of a demand response, you know, shifting low rather than having actual DR assets like storage or a PV system. And also, are the utilities charging their invoice structure? Is it considering the time of use? because when I look at my bill from PG&E, sometimes it gives me some additional cash or some sort of a reduction in my bill because I usually start, I usually use my dishwashing machine or you know most of my electronic devices during the day and I think that's how I get those rewards. And because most of residential, they have smart meters and every 15 minutes my power consumption is, the data is going to the utility. So if I own a cafe, I am already incentivized to turn on my ovens and bake all the muffins at noon and how does a VPP help have a like an additional offer me an additional value or additional cash on top of what utility is giving me? I think I think that again is a geography question because you said you're PG&E in California right? PG&E I I think around, it was either 2020 or 2021, they started moving and then eventually moved their whole residential stock at least over, or sorry, all of their residential customer base onto a time of use rate. But that's not the majority of the case for most of the country. They're just a very specific situation of that happening. So that's why you're seeing those reductions, especially relative to the past. So if our coffee shops are all in San Francisco, then yeah, they're already seeing that incentive. But if our VPP is in, you know, Ann Arbor, then they might not be on a time of use rate and they might need some company to step, they might need some other entity to step in or some way. How about the demand response question? Are we now designing a demand response program or are we still focused on VPP, or is it not even a difference between the two? That's a question we've come back to many, many times. And I want to avoid getting into the minutiae of the differences between demand response and VPP, if we can. But I think for the sake of this episode, let's just say any controllable And I will add one thing about that and then I'll hand it over to James, but I will just say, I would say we should operate under the Federal Energy Regulatory Commission's definition of a distributed energy resource aggregation, which does include demand response. And also I'm biased because I studied demand response. So I want to talk about demand response, specifically residential demand response, because it may makes me happy. So good to have you here, Pam. You do such a good, eloquent, and official way of describing all the stuff that we're trying to say. Yeah, and so what I just wanted to try and do to stitch all this together, and I do think we probably need to decide and then cut into actually trying to spec out what we're going to build here. But I do think it's an important discussion. So to repeat back what I think I've heard, So, a coffee house normally is not using electricity during a peak time, but if we were to add solar and storage to it, that's one way where we could basically have them suck in a bunch of electricity when it's cheap and bid it out during peak hours and they don't need that electricity. So it's like basically completely free to use as Charles analogy. Or two, if the coffeehouse is in a place where time of use rates are not pervasive across coffeehouses, you could have coffeehouses switch to a time of use, and they'd probably save a lot of money, like both of those ways would help coffeehouses save monies. Yes or no, I guess to the to the team, it feels appropriate to answer. I second. Yep. That feels, that feels good. Okay. So then, given that, I think we can decide, right, like going back to our key questions, which of those do we want to pursue? Like the solar plus storage is like a cool, like, you know, you know, juice up your coffee house or however you want to say that. Like there's a lot of good stuff to do there. And that's like a very like mainstream relevant example to lots of people who probably want to include solar and storage in their virtual power plants. And so given that, what like, do we like the solar plus storage? It's like, that's what we're gonna do. We're gonna like help coffee houses install solar plus storage and then make money from this flexibility. Yes or no. And then if we do that, where geographically does that make sense, basically? Well, I think that I think you guys have laid out some fantastic reasons why solar storage make a ton of sense for a coffee shop, especially because they can self, they can consume their own generation throughout the middle of the day. And then feedback to the grid, any excess they have stored up, or any kind of shoulder amounts that they're still producing, as you know, they're winding down, you know, three, four o'clock. And that's as demand is starting to rise, but you know, the sun probably isn't setting until 7pm, so it innately works. And, James, for location, I'm going to suggest your corner of the world, you know, the birthplace of Starbucks, Seattle. I would love that. I also know that we have, so when we polled some people before, they said, yeah, Ben, your voice sounds spectacular with your potential strep throat today, so I just want to applaud you for that. Thank you so much. Applauded. So people said do Pacific Gas and Electric and the utility program, because that's the easiest to implement in two hours, I guess. Do we want to, like, do that, or do we want to try something else, like, Seattle, right, and see, like, if there's a program out there that makes sense. I know with Seattle City Light, we maybe don't have, like, the most, like, that many, like, complicated tariffs, but maybe that's better in C9, we could unpack it. I'm open. Well, a quick Google says that San Francisco is America's most awake city, with the highest ratio of coffee shops to people, with 528 dedicated coffee outlets serving a population of 866,000. I disagree. Find a college town. If you want many people consuming aggressive amounts of coffee, you want a college town. Okay, so let's try and come up with some criteria here, then. I have one argument against doing California, when I think of California utilities and California programs and also CAISO on top of it, the California independent system operator, if we look at wholesale, we can look at wholesale, they are, they're not necessarily representative, they're just a little bit further ahead in some ways, like the, everyone in the residential, all the residential class for being defaulted into time abuse rates, for example. So if we wanna look at maybe what the future is for everywhere, then maybe California, and then they clearly have very extreme reliability issues, so maybe that's a reason to go there too. And they have the duck curve, they're very distinct. But if we wanna look at more what the status quo is for the rest of the country, then maybe Seattle might be a better case or somewhere that's just not California. I also think that if you want to consider solar for coffee shops, it doesn't make sense in San Francisco. It's always cloudy here. And also, there are tall buildings, so. Density. Density is definitely very relevant. OK. The density point is very fair. I just want to, on the cloudiness, there's something, feel free to correct me, Charles or whoever's pretty familiar with solar, but there's um Something called like sun hours. I forget the term but like even in seattle solar is just viable and it's certainly much more cloudy than uh san francisco um So I just wanted to kind of like say that out loud, I think Yeah, likewise with with victoria. It is so much cloudier than um, you know much of uh, Much of north america, but it's solar still viable. It's just like a slightly longer payback period Okay, and so I think we're trying to tease apart like criteria here to select one So density Pega, I think that was a really good input. Like if we're in Manhattan, that's not really a viable like coffee Coffee house approach, you know And so we need a place that The coffee probably has like a roof, you know, or it's at least like in most cases. It's gonna have a roof Maybe where solar plus storage makes sense question mark and Yeah, I don't know, wherever else we think is fun, I think that's like my three criteria right now. And on that note, we're going to take a break here. Join us next time on Intermediate to hear us dive deep into the details of building the Coffee Shop VPP. I'm your co-host Ben Hillborn, and I can't wait for you to hear part two. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.indermediate.com [https://www.indermediate.com?utm_medium=podcast&utm_campaign=CTA_1]

#4: Interconnection and FERC 2023 explained simply

Summary In this episode of InDERmediate co-hosts James Gordey, Pamela Wildstein and Ben Hillborn are joined by special guest CeCe Coffey [https://www.linkedin.com/in/ceceliacoffey/] to unpack the Wild West of interconnection, FERC, Order 2023 and its potential impact on distributed energy resources (DERs). They talk through the role of FERC in energy regulation, how orders get named, then explain how interconnection works simply and highlight the problems with interconnection today. Finally we summarize order 2023, its impact on DER’s and brainstorm what might come next. Note: This episode was recorded before FERC granted an extended compliance deadline. Episode chapters: * (1:33): Ice breakers * (3:38): FERC intro * (4:53): Interconnection stakeholders * (8:35): How does interconnection work? * (12:51): Interconnection studies * (16:11): Interconnection x FERC * (19:05): Naming FERC Orders * (23:54): Prioritization * (27:12): Interconnection problems * (35:05): What's in FERC 2023? * (38:07): Transmission provider penalties * (42:44): Commercial readiness * (44:46): Interconnection hipsters * (51:51): FERC 2023 x DER’s * (54:42): FERC order lifecycle * (1:00:41): What’s next? Help us out! * Subscribe, share and rate the show wherever you’re finding this podcast! * Apple podcasts [https://bit.ly/inDERmediateApple] * Spotify [https://bit.ly/inDERmediateSpotify] * Give us feedback: We’d love to hear from you via email, inDERmediate@gmail.com [inDERmediate@gmail.com] * Follow us on social media * inDERmediate on Twitter / X [https://twitter.com/indermediate] * James Gordey [https://twitter.com/james_gordey] * Ben Hillborn [https://twitter.com/BenjaminHilborn] * Wyatt Makedonski [https://twitter.com/wyatt_yy] * Charles Jurczynski [https://www.linkedin.com/in/cjurczynski/overlay/about-this-profile/] Relevant links we found helpful * THE ACTUAL ORDER: https://www.ferc.gov/media/e-1-order-2023-rm22-14-000 [https://www.ferc.gov/media/e-1-order-2023-rm22-14-000] * https://www.eenews.net/articles/ferc-approves-historic-rule-to-address-renewables-backlog/ [https://www.eenews.net/articles/ferc-approves-historic-rule-to-address-renewables-backlog/] * https://www.power-grid.com/policy-regulation/ferc-issues-final-ruling-to-tackle-clogged-interconnection-queues/ [https://www.power-grid.com/policy-regulation/ferc-issues-final-ruling-to-tackle-clogged-interconnection-queues/]  * https://www.utilitydive.com/news/ferc-interconnection-queue-reform-spp-miso-pjm-rto/689965/ [https://www.utilitydive.com/news/ferc-interconnection-queue-reform-spp-miso-pjm-rto/689965/] * Dr. Volts podcast on interconnection in August 2023 [https://overcast.fm/+oT_ng0KjU] * https://www.troutman.com/insights/troutman-pepper-summary-of-ferc-order-no-2023-on-generator-interconnection-reform.html [https://www.troutman.com/insights/troutman-pepper-summary-of-ferc-order-no-2023-on-generator-interconnection-reform.html] * Background: https://www.utilitydive.com/news/energy-transition-interconnection-reform-ferc-qcells/628822/ [https://www.utilitydive.com/news/energy-transition-interconnection-reform-ferc-qcells/628822/] * https://emp.lbl.gov/sites/default/files/queued_up_2022_04-06-2023.pdf [https://emp.lbl.gov/sites/default/files/queued_up_2022_04-06-2023.pdf] * Site to track interconnection queues across all the ISOs and a few utilities as well [https://www.interconnection.fyi] by Steven Zhang [https://www.linkedin.com/in/stevenqzhang/] Music Our incredible intro/outro music is the song Ticking, by artist TINYou can stream the whole song and the rest of their catalog here:  Episode transcript What are those things that we have now available that are renewable That can be worked in quite a different way into the economy of the United States Which are concerned primarily with the design of nuclear power plants and this type of thing We do not know what the magnitude of the side effects will be Hi, I'm Pamela Wildstein. I'm Wyatt McAdamski. I'm Ben Hilborn. I'm James Gordey You're listening to InDERmediate to Intermedia, the place for people trying to get into or already working on distributed energy resources and clean energy. This is the podcast that makes it easy to learn how the grid actually works beyond the office. Hey everyone, welcome to the show. I'm your co-host, James Gordey. Today we have Pam. Hi Pam. Hi. And today this is gonna be a bit of a two-part episode. So in part one, we're gonna cover FERC and interconnection kind of generically. And then in part two, we're gonna cover the hot off the press in energy terms for quarter 2023. And then kind of after that, we're gonna spend some time and look forward to where things are going from here. And joining us on the show today to help us level up our game, we have Cece Coffey. Cece, thanks for joining us and welcome to the show. Thanks, James. Happy to be here with you and Pam and to talk about interconnection. Okay. Okay, so just jumping into it, we always like to start with some icebreaker CC, so play along with us a little bit here. You personally, this is a show about learning about clean energy and DERs in general. How do you learn about clean energy? Well, thanks for asking. Honestly, it's something I've thought a lot about. When I got out of undergrad, I moved down to DC, which is a great place in the country to be working in energy, but I was really trying to learn as much as I could as quickly as I could. So I was reading Utility Dive and other trade press, I was attending conferences and panel talks, and I also joined the Clean Energy Leadership Institute in 2016 and have stayed involved with them since. So I think for me, learning about energy isn't just reading, it's also talking with people. And that's why I'm excited to be on the podcast and also to have been involved in DER Task Force, because I think when everybody gets together, we have some pretty cool ideas about the future of clean energy. Yeah, no doubt. Always the obligatory So moving on to the second one then, there's a lot going on in energy. What portion or topic are you most interested in right now and learning about? Yeah, there are a few, you know, on a large scale, I've always been interested in how high voltage transmission gets planned and built. You wouldn't think of that being clean energy necessarily. But, you know, there are a lot of examples going back to CREZ and Texas and others about how building transmission really gets new generation online. And on a smaller scale, I've been really excited to see how clean tech companies have been able to unlock distributed energy resources, not only to provide demand response, but also dispatchable power, following Octopus and others who've been doing virtual power plants. And then one thing that I don't know that much about, but I'm curious to follow is just this kind of rebirth of nuclear, whether it's large scale commercial or the small modular and micro reactors. I think those are so interesting and kind of the way that they can do community energy maybe in the future. And then I know we had asked you ahead of time, Cece, for some deeper dive resources if people are curious. So for anyone following along with the podcast and online on the show notes, we'll put all of those links there and links we found helpful. So kicking things off, at a high level, can you explain what FERC is and why they have authority? We touched a little bit in a FERC overview that Pam gave on our great overview episode, but good to unpack it more here. Okay. That's great to know. And for everybody who's listening who I haven't met yet, I'm in law school right now, so please forgive the brief detour into legal history. But I think it's important to understand what FERC is and how it came to regulate the transmission system. So going back more than 100 years, actually, Congress in 1920 authorized what was then the Federal Power Commission to oversee the nation's hydropower resources. And the Federal Power Commission was formally established in 1930. But it was five years after that, in 1935, when Congress passed the Federal Power Act, which transformed the Federal Power Commission into an independent regulatory agency, and it granted that agency the authority to regulate, among other things, the interstate transmission system. And that's really generally the same jurisdictional authority that FERC, the Federal Energy Regulatory Commission, has today. Its interpretation of that authority has changed and evolved as the system has changed and evolved. But, you know, on the transmission side, at least, BERC regulates all transmission between states and as kind of by virtue of that, the transmission that happens at high voltage with both power systems. So who are the stakeholders in the interconnection process that Order 2023 is gonna be regulating? Sure, so there are actually a number of players here. It's who you'd guess, right? The project developers. Those are the people who are building, owning, and financing new power plants, new generation resources. And it's the transmission providers who are receiving the request of those project developers to hook up to their system. But there are also other indirect stakeholders. Transmission customers should care because they're the ones who ultimately pay the costs that the transmission providers pass along. And we're transmission customers ourselves. Those rates that we pay to our local utility cover what the utility pays to the transmission provider to get energy off of their system. And states should also care. States have policy priorities. they're trying to get a lot of different types of resources built and if those resources are you know proposed but can't actually get interconnected and can't reach commercial operations that's really going to slow down states who are trying to maybe meet their 100% renewable energy goals. And in this case just you know because when I was first reading through the order I got a little confused on this. Transmission providers in this case are both in restructured and non restructured areas right so it's both the independent system operators, such regional transmission organizations, and then also monopoly utilities. Yeah, that's exactly right. And I should say, you know, you all are pretty familiar with this. I know it's a bit of an alphabet soup, but Pam, when you're saying restructured areas of the country, you're talking about those parts of the country where generation is separate from who owns the transmission and distribution systems. And as you pointed out, those are operated in many cases by entities called independent system operators or regional transmission organizations, who not only dispatch the systems but also operate the markets for buying and selling energy in those regions. But there are parts of the country, as you mentioned, that are not restructured. They still have, for the most part, vertically integrated utilities that own generation, transmission, and distribution. And there are also transmission providers and need to comply with these rules. Because one thing that I could have mentioned earlier is that for jurisdictional authority over transmission, I said with the interstate system, but really any transmission provider over a certain megawatt threshold is jurisdictional and needs to comply with some of the transmission related rules like order number 2023. James, you can say it. What is restructured and non-restructured translate to for you? Yeah. In my mind, what is it? No. Deregulated and regulated. Pam and I had a whole conversation where we were trying to simplify this in people's mind and at the end, Pam was actually using my words, but then we mind tricked her into And that was my question too, just to like unpack transmission providers. So Pam, we're on the same page today. Totally. I think the way I think about it, honestly, Pam, we can come back to this, is just that whoever physically owns the grid and that grid is a patchwork of different systems that are owned and operated by different entities. And I think sometimes it can get confusing to think about, well, who's in a region and who's operating independently, because all of these systems need to be operating at same frequency and overseen by the same reliability regulators in the end, that being FERC and also NERC, the North American Electric Reliability Corporation. But I think it's worth noting that even though they all operate together as one seamless machine, they're owned by different entities, and those different entities are the ones who are responsible for processing requests to put new generators onto their systems. So those are the transmission providers that I'm talking about. Those are also – this will come into play later – the entities that maintain open access transmission terrace. Those are the sets of rules for not only interconnecting onto the transmission provider systems, but also for taking transmission service as a transmission customer. So at a high level, Cece, this is covered in other places, but I think it's helpful to give people the foundation. How does interconnection work today? We hear about it. We hear about the fact that there's so much new projects in the interconnection queues that it's more than is actually on the grid today, but like, can you speak to what it is at a high level for us? Yeah, absolutely. And I totally agree. I think it's easy to get bogged down in all of the details about interconnection, but historically interconnection is just a three-step process. It has a number of sub-steps, but I think for me, it helps to keep track of these as stages. So the first step is that a prospective interconnection customer submits an interconnection request. And what that means is you have a new facility, you want to interconnect connect it to the grid, and you need to submit a request to the transmission provider who owns and operates that grid to start the whole process. And then the second step is that that transmission provider assigns a queue position and conducts technical reviews. And this is something that we'll talk a lot more about later in this episode, and especially the next episode, is what is a queue? And honestly, you can think about it like waiting in line at the grocery store. The first person in line lines up, and the next person in line gets in line behind them. And so, that queue is something that we talk about when we talk about power plants interconnecting to the grid. It's the same sort of wait-your-turn system. And then, the third step is that both parties, both the prospective interconnection customer and the transmission provider, once the transmission provider has conducted all of those technical reviews and determined what's necessary physically from an engineering sense to interconnect that power plant into the grid, then they execute an interconnection agreement, which is a bilateral contract where they both make certain commitments, and that interconnection agreement is what green lights the interconnection of the new resource onto the grid. And at this point, there's no guarantee that you'll generate power, right? That comes later through whatever, I'll stay with restructure, because that's what I know the best, that would come to the market. Yes, definitely. I mean, your dispatch instructions, again, will come through the market. There may even be a different provider. It may not be that transmission provider who tells you turn on or turn off, but really the interconnection agreement, again, I think of it as the green light. You're cleared for takeoff. Everything's in place that needs to be in place for you to start injecting electrons onto the grid. And there are a number of different factors that will determine later how often you do or whether you do or for how long. So roughly how long does this interconnection process take from beginning to end? It's honestly pretty astounding. The average right now is about five years, although that number can vary a lot. It depends not only on the size of the facility and the region of the country, but also on the unique topology of the transmission system. And I didn't get this number. Researchers at the Lawrence Berkeley National Lab put together a really comprehensive guide to interconnection queues that they published in April of this year. I'm sure you all can link it for the listeners, but LBNL has done a great job outlining not only how long it takes from interconnection request commercial operation overall, but how that varies in different regions of the country and even for different types of resources. That's crazy. I did not know it was that long. People would always complain about how long it was, but wow, five years. On average, five years. My world is startups and technology. When you have an employee join, you give them equity to vest because you want them to stay at the company for a long time. And the equity normally vests over a four-year period. So it's less than an interconnection queue average process. Less than an interconnection queue, right. So if someone complains about how long it takes for their equity to vest, You can just point them to this report. Actually, this is not making it into toasters because of this podcast, we like to try to translate numbers into the number of toasters, but it does take five years to do a PhD. So it takes a PhD for this interconnection process. Right now. But as we're going to talk about later in this episode, that's a long time and it's long enough that it's slowing down not only project development, but also safe policy goals and so one of the goals of broader interconnection reforms of which order number 2023 is a huge part is going to be shrinking that five years until a more manageable amount of time. Maybe we can make it into two years, which would be a master's. No guarantees, but we're well underway. That's, that's for sure. Chipping away at the problem. So one thing that I think is a little bit confusing to folks not as familiar with the interconnection process. These studies right we need to study it and we need to study it again. And if one little variable changes, we need to do some different studies. Maybe, could you kind of unpack these interconnection studies? Like why do we do them and what do we learn from them? Absolutely. So, uh, again, historically this was done project by project. And as you alluded to, uh, if that, if that line changed, if that queue changed, if someone ahead of you decided to go back, go back and get another item for their grocery cart, then all of a sudden everything changes. And I think it helps to just start from a really high level. we study the interconnection system to determine whether there's enough spare transmission capacity to accommodate a new generator, or whether the system will need to be upgraded before new resources can interconnect without compromising reliability. So what that means is essentially, is there enough headroom on the existing transmission system? Are the capacities of the existing transmission lines in the area where you're trying to put a new generator at capacity, or is there space? Is there additional megawatt capacity that would allow more electrons to be pushed across that line routinely. And if there is enough space, then it really speeds some of the interconnections. The interconnection generator will still have to go through studies, but they may not be assigned those costly network upgrades that you may have heard about that can really jeopardize a project's economic viability. And if there isn't enough space, then that's where network upgrades, as we're saying, are assigned. And a network upgrade is essentially when an interconnecting generator is told that the existing transmission system does not have enough spare capacity to facilitate their participation. And so if they do want to get built, they're not only going to have to build their own facility, they're also going to have to build or at least pay for the transmission provider to build upgrades to the transmission system to make sure those electrons can get from power plant to customer. Yeah. And then like one tricky thing I was listening on a Dr. Voltz podcast was talking about like, it's almost like musical chairs or on luck of the draw, where like, if you are the person that is going to require the transmission upgrades, then you get stuck with the cost. And so people are trying to not get stuck with the cost, in a sense, and that causes a lot of people to, going back to the grocery store analogy, maybe get out of line if they realize they're going to have to pay extra for their bread. Yeah, I may have pushed the grocery store analogy too far, but I think it's something to make it a little more concrete, right? And I totally agree. The musical chairs piece was one of the big reasons why FERC and Order Number 2023, and several regional transmission organizations on their own before they're required to decided that this one-by-one processing wasn't just inefficient, it was also creating incentives for people to, if not intentionally game the system, at least deal with delays and cascading restudies that led to some of these really, really long gaps between interconnection requests and commercial operation. And so I think one big change, which we'll talk about later, was doing the whole process by group by group instead of one by one, meant that there was a little less of that luck of the draw, that you would be assessed for how many network upgrades needed to be built as a group collectively, and then the cost of those upgrades would be shared. And so it was a little less that you would get really lucky and get away with having headroom on the system and not have to pay anything, and it was also less likely that you would get stuck with a bill for 10 people's interconnection. Going off that, what has FERC done in the past? What's the history of interconnection? And what are the FERC orders that it relates to? Sure, so it's really not as long a history. We talked about the history of the Federal Power Commission earlier, and that's a hundred year period of history. But the process of FERC managed interconnection procedures is actually pretty short. So before 2003, interconnection procedures were fairly inconsistent across the country. Each transmission provider generally had the authority to determine the procedures that it thought could work for its own system and to manage that set of procedures. But then in 2003, IEEE established technical standards for the first time, first for small generator interconnection. And the same year, FERC issued Order No. 2003, which established federal interconnection rules for large generators, and you can look at those online. But for the next 15 years, FERC largely approved incremental changes the transmission provider's interconnection procedures. And FERC also established rules guiding a provision of reactive power and frequency response from interconnecting generators, things that we can all think of as really needing to maintain the reliability of the system more so than managing this queue process. But in 2018, five years ago, FERC issued its next major reform of interconnection procedures. That was order number 845. And 845 was designed to enhance the interconnection process, both to account for changing technologies and also to facilitate additional generator interconnections. The energy transition was already well underway in 2018, and these queues were getting longer, wait times were getting longer, and so FERC took action to try to raise the floor and make sure that transmission providers across the country were complying with certain more rigorous minimum standards to make sure that they were trying to process generator interconnection requests. But 845 did leave several gaps. It retained the serial queue process that was contributing to queue backlogs, that one-by-one processing that we've been talking about. And 845 also maintained a standard that transmission providers only needed to make, quote, reasonable efforts, unquote, to comply with study deadlines, and that's important. That means that there's really no binding deadline by which the transmission providers need to finish their studies, and that really contributed to uncertainty for interconnecting power plants about exactly how long it was going to take to figure out both what their costs would be and when they'd eventually be able to start reaching commercial operation. And I guess one more thing I'd say about 845 is it included pretty anemic penalties to back up those flexible deadlines. If transmission providers didn't turn around a study in the 60 days that were required or 90 days that were required, it was kind of a shrug, you know, okay, well, try better next time. And that was something that also really contributed to some of the And as you can see, these are problems that FERC was realizing as, as we were heading into 2022, 2023, we're maybe going to need to be addressed again. Yeah, real quickly before jumping into the next question. Totally okay if we don't know or if it's random or whatever the answer is, but like, can we speak a little bit to how these like numbers and the names of these orders get generated like sometimes. Favorite question. Order 2003. Favorite question. Do you know the answer like is this Pam do you have a surprise like I mean forward right the tear does choose I know that actually former commissioner and chairman Chatterjee cleared this up with 2222 right the famous the er aggregation order because he explained that those numbers were actually a combination of the birthdays of members of his family and and told everyone publicly that the order number is up to chairman's discretion 2003 I think you guys can see it was issued in 2003. I think that one's pretty straightforward. Another pretty common one is order number 888, which ensured open access to the transmission system, was named after the new building that FERC moved to in D.C. It used to be on North Capitol Street, but it moved one block over to First Street Northeast at 888 First Street. So that was one that commemorated the move. So sometimes they're fun, sometimes they're random, sometimes they're tied to the year, but yeah, no serial order for those. Wait. 2023? Is there anywhere? Yeah, 2023. 2023 came from because this was such a big deal came from 2023. Yeah. Yeah. That's yeah. Wait, is there anywhere online that lists all the orders and how they got their name? No, I don't have a document though, where I keep track of it though. Oh my gosh, Pam, we need to publish that. No, it's just like a random like Google docs somewhere that I started as a joke. That's what InDERmediate is all about. What would Indy want you to do, Pam? Do we want to get this out here? Is it just your own Google Doc? It's my Google Doc. Actually, it's not my own Google Doc. It's at the bottom of my typed up law notes from when I took energy law. But I will say that when I learned to order 888, the exact like line when my professor opened, you know, opened the discussion on it was, you know, it was an important order, because they named it after their address. Yeah. It seems when you look at the history of the interconnection processes and for the amount that FERC's regulating it, that they're almost moving towards more standardized processes. And I'm thinking in the context of RTOs, like the RTO taking more of a planner role. And I think Clements brought this into her discussion too. Who's Clements? Sorry, Commissioner Clements. I'm thinking of how back in 2000, there was this goal of the ISOs transitioning into RTOs, which is where the name difference comes from. And the RTO was gonna be this large centralized system operator, system planner, And the switch to, you know, the R in it was that they were going to plan the transmission system and they were going to take a much stronger role in having the centralized system that they were going to operate. And when you start to, when you go from, I didn't realize that it was in 2003 when they started to do these interconnection procedures and I guess maybe an attempt and maybe it was just because of IEEE but like an attempt to make them more consistent. and that just feels like that push to have more centralized planning entities for a more complicated system. I think that's definitely part of it. And I can't say that these are connected. This is just totally, you know, out of left field here. But what else was happening in 2003 was the great Northeast blackout. I mean, there might be other things that were happening that led FERC or others. I think 2003, the process for that rule was already well underway at that point, but may have added some urgency to figuring out if there were additional resources that were needed on the system, as there may have been, right, in 2003, as loads are continuing to increase and more people are looking to interconnect. It might have just been more necessity. And I think one other thing that's important to keep in mind is that the ISOs and RTOs themselves are pretty new. I mean, the New England Power Pool, I think, was the first one in the mid-1990s, and then NISO organized and others over the course of the late 90s and early 2000s. And so I think one of the reasons that may have prompted 2003, and again, this is just my opinion, is that you have all of these organized markets that are still pretty new. And I think FERC was still trying to figure out what its role would be and how it could help ensure efficiency in the interconnection process and also provide some certainty to interconnecting generators. And to your point about standardization, I think in theory, one reason why you might want to have standardized processes is to remove an incentive for power plants to want to build only in one part of the country, to make sure that any resource that was built across the country would generally have the same expectations and would generally be put through the same paces in a way that might kind of democratize access to the grid. I think that's what I would guess it would be, but I have no idea. Yeah. A question I had, if I could ask. So FERC orders come out, it seems, like I've been in clean energy maybe three years now, So, you know, we've had 22-22 and 20-23 since I've been here, you know, kind of following it since COVID. Is it, like, it's probably transparent, but is it worth talking about, like, how they decide which issues to tackle and orders to do and what order? Because obviously there's a lot to work on, and I'm sure there's some big process by which, like, orders get issued. But curious, like, how that prioritization and, like, order creation process happens. It's at the discretion of the chair, right? Yeah, it is. That's what I was going to say. Oh, sorry. And you've heard some recent chairs talk about this, right? Chairman Chatterjee, I mentioned. Chairman Glick has been pretty outspoken about his priorities, and now Acting Chair Phillips has also been clear that getting Order Number 2023 out was a priority of his. And so while the entire commission works together to study what updates to existing procedures may be needed, the ultimate final rule process is really guided by the chairman and their priorities. That's fair. And my understanding and research leading up to the show is that there's four or five commissioners and then one chairman within that group? Yes. Five commissioners is a fully seated commission. Although, as you may have noticed in recent years, depending on term ending dates and reconfirmations and even nominations from the president that have lagged behind some of those vacancies, the commission's often sat at three or four commissioners, but a number of the commissioners, the current and former have said publicly that the commission functions best when it has all five. And so I think that's something that those of us who work in energy law and energy regulation like to see is the ability to have five commissioners because not only does it lead to stronger, unanimous orders on rulemakings and general adjudications, but it also gives a little bit more room for compromise and for really working out some of the nuances of these issues. As you saw with order 2023, all four commissioners voted in favor of that order. But through their concurrences, you can see that they may have had different policy priorities or different conclusions and different parts of what they were approving. Yeah, and I'll emphasize this again in part two. I thought it was very impressive that this ended up being a 4-0 vote but you should definitely go read the concurrences, because that's where you see the commissioners start to have their own opinions and really where they get to shine. And you get to see all the interesting nuances and what might happen in the future. Definitely. And for anyone who doesn't know, what is a concurrence? Concurrence is a yes vote. A concurrence is saying that I conclude in the ultimate outcome of this order or this rule, but I have either slightly different reasoning or I have other facts or considerations that I want to introduce into the record. Or I might, as Pam said, want to highlight areas for future work. But a concurrence, it's important to remember, is a full yes vote. It's nothing short of a normal agreement. Yes, and. Yes, and. That's a good way to put it. Okay. It's the stand-up comedy of orders. Yes, and here's 15 pages of my opinion. I mean, hey, if the mic's turned on. So kind of wrapping up part one here. So you see, could you help us understand, like, I think a lot of people trying to get in, maybe trying to help with this problem, you know, from many angles are curious, like, what are the biggest problems kind of understood or explained in a simple way with the current interconnection process? Definitely. So I think one of the largest challenges for all of the stakeholders that we talked about earlier, that's not just project developers and transmission providers, but also transmission customers and states, it's uncertainty. So the marginal cost of energy is falling. And, you know, that's something that we've talked about, there are more clean energy resources on the system, solar and wind and other types of renewables tend to have a zero marginal cost or near zero marginal cost of operating. And with that marginal cost of energy falling, more projects are operating on thin margins. When they're looking to interconnect, let's say you have a new solar facility that's looking to interconnect, they're going to make some money from selling energy, and they have some fixed costs that need to be recovered through other means, whether it's by contracts or participation in a centralized capacity market. But if they're assigned really hefty transmission upgrades, network upgrades, that's going to cut into their profitability and may even mean that it doesn't make financial sense for them to interconnect. And so dealing with this uncertainty and especially dealing with uncertainty around network upgrade costs is a really important part of making sure that new resources can be hooked up to the system. And for transmission providers, this cascade of generators withdrawing from the queue, not only generated just an unmanageable number of restudies, but also led to cost allocation problems. I think we teed this up or hinted at this at least a few minutes ago. But if you, for some reason, were in a queue and you hadn't been assigned many network upgrades because someone right in front of you was going to build an addition to the system, but they withdrew from the queue and they essentially took their money with them, you might be hit with that upgrade cost, which you weren't anticipating. And you may have now been further into the process of requesting your interconnection, and it may not make sense for you to go forward. And so when I say cascading restudies, it's because when one person pulls out, But if you're dealing with each generator in turn, one by one, then when their costs are pushed down to the next person in line, it can cause many different people behind them to pull out as well. And that leads to uncertainty, of course, for those folks who are interconnecting, but also for the transmission providers, who are honestly doing a lot of work, doing the lion's share of the work here, to continually re-study the topology of their system to determine where there's existing headroom and to find out network upgrade costs. And if that's changing every time someone pulls out, then it creates almost an impossibly long process for them. Yeah. Thank you for walking us through that. Would you say then, just to restate, right, that uncertainty and then kind of the unanticipated like network or project costs that come from it are definitely like two areas. And then the third is just given how that process plays out with uncertainty and then people like pulling out, not pulling out, things like that, it just creates a lot of work for the transmission providers and operators. Yeah, definitely. I think that's a good way to summarize it, right? Uncertainty in cost, uncertainty in timing, but then you're right. It comes all down to this idea of the length of time it takes to get from submitting that request to actually reaching commercial operations. So all of the delays kind of become their own problem at a certain time. Yeah, for sure. I'm trying to think. There's like obvious, you know, like cascade effect, maybe ripple effect, like whatever you want to say. Okay, so just like so we know that's the conclusion of part one where we talked about FERC and InConnection at a high level. Now we're gonna move on to part two, which is where we're going to focus on FERC Order 2023 and kind of some forward-looking ideas and brainstorms the group might have. Wait, can I actually make one last point or comment. That's also a question, so tell me if I'm wrong. When you think about the amount of uncertainty associated with Generators withdrawing and the amount of time you might spend in the queue and where you'll end up in the queue and all the uncertainty that that would cause you as a company and a business or as a project developer, that probably really limits the type of projects that can get built too, because the only people then that can submit projects are those that have the capital on hand to deal with that uncertainty. Yeah, that's a really great point. I think that's changing a little bit, and I'm definitely not a finance expert. I'm sure there are folks you could bring on the show who can talk a little bit more about this. But there are essentially some of these delays that become barriers to project development, and it means that you have to have a lot of working capital in order to both build these projects and to withstand the expected delays that come up at this point, as well as to maybe put up more money or at least more collateral to cover unexpected upgrade costs that you may need to pay. So yeah, I think your point is right, that typically if you're a larger product developer with deeper pockets, you're going to have a better chance of withstanding some of the uncertainties that was present in the one-by-one process than you would if you're a small kind of mom and pop developer. Yeah, and you made some comments before about standardizing things and driving more certainty in the process to try and raise the floor, I think is a good way to talk about it and let more people access the grid from an interconnection standpoint. Because it's not ideal, I think, at minimum to say, okay, if you have deep pockets, then you can interconnect. But otherwise, it's kind of a hit or miss process. Great if we can make it more certain. Definitely. And I guess one other point that's important to note is that it's not just certainty having these standardized procedures, it's also essentially removing the ability for transmission providers to discriminate. And we want to believe the best in everyone, right, but if you're a transmission provider and you have your own resources, maybe, that are interconnecting onto your system, especially in the parts of the country that aren't restructured, where there are more vertically integrated utilities, part of the reason that 2003 and then after it, 845, and now 2023 were put forward is to make sure that everyone's playing by the same rules and that if you own a transmission systems that you have publicly available transparent procedures that any generator can follow to get connected onto your grid. And then the flip side of that is as a transmission provider that you follow those procedures in a non-discriminatory way. And what that means is that you process the interconnection request, you conduct studies, and you execute or sign interconnection agreements with third-party power plants in the same way and on the same timeline that you would do for your very own affiliates. And so I think that's something to always keep in mind in the back of your head when you're thinking about energy is that there are those competition and maybe sometimes anti-competitive urges. And so a lot of the things that FERC says to regulate and state public utility commissions do to regulate is to remove both the opportunities and the incentives for any preferential treatment. Yeah, I mean, it's the real world. I'm almost thinking about like, you know, every market is different, of course, but like to the extent that you can make the across all market playbook the same. That's helpful in allowing more people to actually be able to get their arms around it. Definitely, but we won't say standard market design because I'm sure there are people who are still haunted by that from the early 2000s. Yeah, I've only been here since 2020, so forgive any ignorance or things I'm stepping on that are sensitive topics. We at a high level have talked about the challenges to interconnection. I'm sure lots of people have lots of opinions or you know that the document and their concurrences or otherwise to improve interconnection. So, I think. Can you provide a summary of like what actually is being improved in 2023. I can do my best. And I know Pam said that there would be some sources that are shared. I know there are a couple of law firms who've done a really good job of this. I think Rocky Mountain Institute has done a couple of good, has done a very good job of this. And as we've all talked about, the commissioner statements can highlight some of the main changes. But for me, I can organize these into a few categories. One is that the overarching theme is that order number 2023 requires certain new procedures to improve the efficiency of interconnection. efficiency is the main focus. And there are a few different ways that the order goes about that. One is by requiring the use of a first-ready, first-serve process. What that means is there's no holding your place in line indefinitely, and you can't sit in the queue if you're not ready to move forward with conducting some of the further studies and eventually moving to the stage of interconnection. And we call that commercial readiness, and that can be demonstrated a number different ways, not only by signing certain agreements but by putting up deposits as collateral. And commercial readiness is a real focus of order number 2023. And then the second part of that efficiency and using the first ready first serve process is that order number 2023 requires that all transmission providers use cluster studies. What that means is that groups of generators are studied together, not one by one, and the cost of upgrading the transmission system to accommodate their interconnection are shared among the different generators in the group and the cost allocation of those upgrades can vary. It's been a real subject of debate and Order 2023 offers really detailed guidance on that cost allocation. But I think at a high level what's important to know is that the costs are shared and it removes some of the uncertainty that we focused on about whether you're going to be lucky and get a low cost upgrade or be unlucky and get a high cost upgrade. And then I'd say the third major overarching part of improving efficiency is on the transition provider side. It's that order number 2023 establishes binding deadlines and pretty substantial financial penalties for transmission providers who may not, if they don't meet the deadlines that are in the order. And that's for a few different reasons. One is just simply to encourage their staffing up, right? A number of transmission providers, I will say they have a lot on their plates right now. They're trying to do a lot to manage their changing systems while operating the system on a second by second basis, right? They have a really heavy lift. But the lack of finding deadlines or substantial penalties may have led to transmission providers not prioritizing completing these Q studies on time and getting answers back to interconnecting generators. And so one focus of the order is to essentially raise the stakes and to make sure that transmission providers are allocating all of the resources that they need to, or hiring new people if they don't have enough currently to make sure that they can get through all of the studies that they're required to do by the deadlines that the order requires. No, that makes sense to me. If I could ask a quick question on that. Yeah. The penalties, not all transition providers are the same. If I understand it correctly, like ISOs and RTOs are one example of a transmission provider, but then there's also, I would say, utilities and restructured or regulated markets. Do you think the penalties are still, and it's okay if you don't have a fair answer for this, but are the penalties like interesting and enticing enough for like both cohorts of transmission providers there? Do you think like one being a nonprofit and one being, you know, like an IOU, they kind of have different pocketbooks and different senses of what's important for them financially? That's a really interesting question. The penalties are pretty substantial. And so, as you mentioned, there are some large transmission providers and some smaller transmission providers. And this is where I don't remember exactly right, whether they're the same or not, but I think they're uniform penalties. It's a certain number of dollar amount per day of delay. But essentially, they do have different pockets, and they also do have different cost structures. And so this is something that Commissioner Christie actually highlighted in his concurrence, that RTOs and ISOs, which are nonprofit organizations that are funded by their stakeholders, their customers, may not have the same incentive to feed their processes based on these financial penalties, in theory, they could pay pretty hefty financial penalties and just pass those costs on to their transmission customers. And that in and of itself is a cost shift, right, from the interconnecting generators who need the studies to transmission customers who may not be making any changes at all. And so that's something to keep in mind, too, and it's kind of a broader theme of what to consider moving forward. Are there ways that beyond order number 2023, the cost allocation between interconnecting generators and transmission providers and then those transmission providers customers can be modified so that the people who are benefiting from the studies are paying, or in the case of transmission providers who are behind the eight ball, the people who are causing the delays are actually penalized in a meaningful way. The transmission providers though, um, that are in non restructured areas. Could, could they still rate base? I don't know. I mean, the penalties wouldn't be rate-basable, just like a five-bar, the penalties can't be rate-basable because it's not an investment or an asset of the utility, if anything, it would be an O&M, so it would be in that O part of the rate case, and that's usually a fixed negotiated amount that's an estimate, right? And so if they're delayed a number of years, they could then assume that they'll continue to be delayed to the same extent in the future, and they can ask for an amount of that money in their next rate case as part of their overall revenue requirements. But I wouldn't be surprised if it came down to study delays if a state PUC would force them to allocate some of those costs to their shareholders instead, not give them the full amount in their revenue requirements. But I think all of that gets a lot more into state retail rate making, and I can't give you a solid answer on it. No, I was just going to say, that's a very interesting question, I think. The cost allocation issues are the ones that I'm most interested in, because I think it's really tricky to figure out how you can get a nonprofit or someone who passes through these costs, who actually have a meaningful reason to change their procedures. And I think that deadlines are part of it, that theoretically if a transmission provider was just consistently failing to meet deadlines, they would be noncompliant with a FERC order. That could be the subject of an enforcement action, and that could carry its own penalties. But I would be shocked if the commission really wanted to pursue that. Obviously, I have no personal insight into it, but I'm curious, beyond the financial penalties, which the transmission provider may or may not pay itself, I don't really know what else you do to try to encourage them to speed up these studies. And I do want to recognize, again, as I said earlier, they have a lot going on. Interconnection is a big piece of their work, but it's not everything. They're operating real-time energy markets. They're balancing on a second basis the frequency of the grid. I mean, they have a lot going on. And so, I think One, one challenge and one reason they've been cut a lot of slack in the past is that they are the experts on managing and operating their own system, but it did get to a certain point with the queue delays and a lot of the backlog, but I think the commission decided that needed to step up and that even though transmission providers. Maybe do a thing they were doing the best they could that the imposition of some more standardized procedures and deadlines could encourage them to move things along. One quick question on commercial readiness, and this is just me not having a very strong background in project development. So maybe this technically should have gone in the first part, but when we talk about whether a project is ready, is that on a scale of intent to make a project to a wind turbine exists and is on the ground or what are they expecting? Well, when I say commercial readiness, and I think this is a good thing to clarify, I'm really talking about financial readiness, right? I definitely will not get into the engineering of what it takes to build a wind turbine or 200 wind turbines. But I can say that what Order 2023 sets out in terms of commercial readiness is what type of financial deposit and other showings, whether it's site control or necessary permits or approvals from your state commission, what boxes do you need to check before you can move to the next stage of the interconnection process? And that's what FERC is setting out some standards for. And so that might not, that might be a certain percentage of site control, I think order 2023 has that you have to have 90% site control before you can move to the cluster study process. And then separately that you need to post certain financial collateral to show that you are not just invested but then you have some skin in the game, and some of those deposits are are forfeitable, if you pull out of the queue and as you get later into the interconnection process, a larger portion is forfeited. And so all of these checks are supposed to work together to make sure that the interconnecting generators are serious about planning to achieve commercial operations, that they're not taking speculative queue positions and beyond their intentions, that they actually have the money to back this up, that these are serious projects that are going to be added to the system and therefore are worth the transition providers taking the time to include them in the cluster studies and to allocate them costs. Yeah. for me, if people are really curious about the details, because no doubt there's a lot of details, both in the summaries, and then if you really get crazy, look at the order. They do have some very specific and tangible commercial readiness requirements, which people can kind of look at to get a better feel for it. Definitely. That's a great reminder. What we've heard is that some people have already implemented some of these actions, some people being some transmission providers, I guess is the right word to say. And so I guess, Cece, if you could just like speak to that, and then like, yeah, I guess just starting there, like, you know, some people have done this, but we're really raising the floor here. Right? Absolutely. So I can just give a brief overview. I know that I did some quick digging and found out that KISO, MISO, NISO, and PJM had already submitted proposals. And in some cases, we're already using a cluster study process. So, that represents California, the Midwestern part of the US, New York State, and the Mid-Atlantic out to Chicago for those people who are listening who may not be as familiar with those regions. And I think one thing that's worth pointing out is that BERC, as you said, tends to raise the floors, right? This is not an untested process. Cluster studies is something that has been done before, that other RTOs and ISOs have done successfully for a number of years in some cases, and ISO has had a classier process for a long time. And I think that's one reason that the commission may feel confident taking such definitive action is that they're not requiring something untested. This is a process that not only has been in place and used successfully by certain regions of the country, but has also been shown, at least in those regions, to contribute to relieving some of the interconnection queue backlog. So I think one way I like to think about it is that FERC is likely never going to be the first mover in an area. And that's for good reason. I mean, if FERC came out and required transmission providers to do something that was untested and maybe wasn't feasible in the end, then that might set back energy policy and, in this case, interconnection queue reforms a number of years. But I think by waiting to see what works in certain parts of the country, and then, as we've talked about, grazing the floor, making sure that once something's been shown to work, that every part of the country can implement that and can use it to more efficiently process their interconnection request, I think that's really one of the benefits of having a federal regulator is to be able to provide that consistency and whether the transmission providers want it or not to spread some of those best practices across the country. One question I had related to this to pull on this as a little bit more, would it be fair to say that this practice of kind of seeing what works in different pockets of the country, like maybe at the state level, maybe at the market level, and then using that given that it works like federally is something that has been done before or is done often? Yeah I don't want to get too far ahead of myself here but I think there are some recent examples that we can really look to. So I think order number 841 was a really good example. There had been regions of the country where energy storage was being deployed and deployed effectively but was running into certain barriers where energy storage resources weren't getting compensated for the full range of services that they were technically capable of providing. And there were some regions that were starting to experiment and were calling energy storage negative generation, or were trying to figure out how to solve some of these problems of getting these energy storage resources paid for the electrons that they're putting onto the grid. And I think FERC served kind of a dual role when thinking about energy storage. One was a convening authority that the commission organized a series of technical conferences that brought people together from different regions of the country to talk about what was working for them or areas for future improvement. And then the commission used its rulemaking authority to direct certain regions to comply. And I think one thing that we saw in the energy storage context at least was a little bit more flexibility than we see when we're thinking about interconnection. And part of that comes from having a new technology. I mean what 841 required was that energy storage resources be able to participate and And what that means for transmission providers, and in this case it was for independent system operators and regional transmission organizations only, was that they develop a participation model. But that participation model was really more guideline-based than prescriptive, and the commission left a lot of the details to the compliance process. And so I think that was one example, a little different than interconnection, kind of along the same lines. order number 2022 took a similar approach when it talks about requiring transmission – excuse me, independent system operators and regional transmission organizations, again, to develop a participation model for aggregations of distributed energy resources. It was the same sort of requiring a structure but leaving the implementation details to a case-by-case basis. And I think you can see shades of that in 2023 with interconnection. And interconnection we know a little bit more about, where the order is a little more prescriptive because there are these procedures like first ready, first ready for cert processes and cluster studies that have been broadly successful across the country. But there is still some room for flexibility. And this is something I wanted to mention earlier, which is that the ISOs and RTOs, in complying with order number 2023, still can take advantage of what's called an independent entity variation. What that means is that there is some level of deference given to the fact that these RTOs and ISOs are independent organizations that operate their grids and have some level of expertise and also facility with the interconnection process themselves. And if there are things that work in certain parts of the country for one reason or another that may not work everywhere, the ISOs and RTOs are free to propose and explain to folks why their alternative is actually comparable. This is something that can get a little confusing, so maybe it's worth touching on here. The ISOs and RTOs have one standard, independent entity variation, where as long as their proposed option is comparable or equal to what the order requires, it may get approved by FERC. If you are outside of an ISO or RTO region and you're a transmission provider or in that other non-restructured part of the country, you do have a higher standard. Maybe last thing I just wanna like say on this section, and then maybe we can move on. I just think this is very cool to see that things that work in kind of smaller geographies can get adopted as like good models. And so if anyone says like, why should I really like get active in my local community and like get a new legislation passed just for my city or just for my state or something like that, I think the point is, if you can prove that it works, then it's a model that kind of maybe the state can adopt or it could even get adopted at the wholesale market or the federal level. And so I think personally, one, help your community because it's good for your community and it's the right thing to do, but these things can be proof points that can eventually get adopted at broader scale, which I think is really cool to see. Yeah. I would just add that. I would just add that, you know, this is where urban planners, this is where we get our best practices from, like, from real things that real communities do. So this podcast is called InDERmediate, with the DER being distributed energy resources. So what are some ways that you think that this order will impact DERs? Yeah, that's a great question. When I looked back at order number 2023 before this podcast, I realized that most of the reforms, or at least many of the reforms, are focused on the interconnection of large generators. But order 2023 does direct transmission providers to modify their small generator interconnection procedures. So those are the procedures used by generators that are less than 20 megawatts in capacity. And that those modifications should allow for consideration of alternative transmission technologies and some other discrete changes. Order number 2023 also requires transmission providers to maintain a publicly available heat map of available transmission capacity. And this is something that I think system modelers at least are getting pretty excited about. I'm not a system modeler. I'm also somewhat excited about this because even though some people who've criticized the order have said that this is a pretty heavy lift for transmission providers, that they have enough to do. They shouldn't have to build and maintain these heat maps. This is really kind of a key for distributed energy resource developers, because these heat maps are essentially treasure maps to show which parts of the grid are underutilized. And if you're – if you have a low budget, especially because you've got a small resource or a number of small resources, if you have a heat map that's being updated, if not in real time, at least relatively recently, that can show you where there's headroom on the system, well, that's really a key to unlock some easy, low-cost interconnection. And small generators typically have their own interconnection procedures that are dependent on the distribution utility and their systems, but I think the heat map could be a really powerful tool if you're developing distributed energy resources in figuring out where you should locate those resources, not only to make sure they can get hooked up to the system, but also to give them a chance at making money, at relieving congestion, and at being in a location of the grid where they're really providing value to the system. Yeah, I'm also very excited about the heat maps. I didn't see that. I'm curious to see what that looks like. Go heat map. I'm so excited for the heat map too. I'm sure energy Twitter will be very excited as well to have more things to screenshot. Oh my gosh, I hope energy Twitter survives for the era of the heat map. Energy X. I'm assuming it'll be like the, the heat maps with prices. I hope it is. Lulumastodon Skythread. And then without saying like specific names, just to be neutral, I know there's some startups that are like kind of working on heat map type products as well for like project developers and people developing projects to use, which I also think is really cool and I love that. That's great. Folks can name names in the comments. I'd love to see those. So we love heat maps. I think we could talk about them for a while. Do you think that's like the main takeaway for DERs? or do you think there's other like key areas? You know, I'm not really sure. I think honestly, and this is something we'll start to talk about just in the last part of the episode. I think one thing that I wanna emphasize is this process is just beginning. We can talk specific dates and compliance, but one thing that I saw from following the compliance process for orders 841 for storage and 845, which was the last round of interconnection procedures, is that there are some questions that transmission providers haven't figured out yet, and even FERC may not have figured out yet. and only when those issues are raised by transmission providers to attempt to comply or by stakeholders whose projects that are under development are affected will we start to iron out some of the details. So I think maybe I'll put a pin in that for implementation details. I think we'll start to see pretty soon what parts of this final rule DER aggregators are interested in debating and whether some o

#3: Deck the Grid with Christmas String Inverters

Summary Ben and James are joined by Carl Lenox from Sunrun [https://www.linkedin.com/in/cjslenox/] and Spencer Fields from EnergySage [https://www.linkedin.com/in/spencerwfields/] to shed light on all things solar. They start by diving into solar’s history with a special nugget on Albert Einstein’s pioneering work on the photoelectric effect which netted him a Nobel prize back in 1921. Then Ben stokes the flames of a hardware jam session that covers the solar system, Christmas light string inverters and a three minute face melting solo on maximum powerpoint tracking 🤘. The episode wraps with a rundown on buying rooftop solar and solar ducking utility bills. Episode chapters: * (1:05): 👋 Carl and Spencer * (2:07): Ice breaker #1: How do you learn about clean energy? * (6:01): Ice breaker #2: What energy topic are you currently most interested by? * (16:06): Solar’s history * (19:15): Solar efficiency * (25:04): Cost down and manufacturing * (32:20): Types of solar * (39:27): Solar PV hardware * (43:59): Holiday season & micro-inverters * (50:36): Ben “MPPT is essential” * (53:31): Rooftop project steps * (1:00:53): Financing & utility bill savings Help us out! * Subscribe, share and rate the show wherever you’re finding this podcast! * Apple podcasts [https://bit.ly/inDERmediateApple] * Spotify [https://bit.ly/inDERmediateSpotify] * Give us feedback: We’d love to hear from you via email, inDERmediate@gmail.com [inDERmediate@gmail.com] * Follow us on social media * inDERmediate on Twitter / X [https://twitter.com/indermediate] * James Gordey [https://twitter.com/james_gordey] * Ben Hillborn [https://twitter.com/BenjaminHilborn] * Wyatt Makedonski [https://twitter.com/wyatt_yy] Relevant links we found helpful * General resources mentioned as helpful for learning * https://www.ctvc.co [https://www.ctvc.co] * https://www.canarymedia.com [https://www.canarymedia.com] * https://dertaskforce.com [https://dertaskforce.com] * F-150 Lightning: Ford Intelligent Backup Power | F-150 | Ford [https://www.youtube.com/watch?v=kSAxNZ5dI8E] * Solar basics * Solar history: Timeline & invention of solar panels [https://www.energysage.com/about-clean-energy/solar/the-history-and-invention-of-solar-panel-technology/#:~:text=In%20theory,%20solar%20energy%20was,light%20torches%20for%20religious%20ceremonies.] * A guide to the energy transition by Tsung Xu [https://www.tsungxu.com/p/clean-energy-transition-guide] does a good job on historical cost curves of solar and other technologies * How solar panel cost and efficiency have changed over time [https://news.energysage.com/solar-panel-efficiency-cost-over-time/] * https://www.nobelprize.org/prizes/physics/1921/einstein/biographical/ [https://www.nobelprize.org/prizes/physics/1921/einstein/biographical/] * Community solar overview [https://www.energysage.com/shop/community-solar/] * Community choice aggregation in California [https://www.cpuc.ca.gov/consumer-support/consumer-programs-and-services/electrical-energy-and-energy-efficiency/community-choice-aggregation-and-direct-access-/consumer-information-on-ccas---frequently-asked-questions#:~:text=Community%20Choice%20Aggregation%20(CCA)%20is,for%20their%20residents%20and%20businesses.] * Microinverter vs String inverter [https://8billiontrees.com/solar-panels/microinverter-vs-string-inverter/] * Maximum power point tracking [https://www.leonics.com/support/article2_14j/articles2_14j_en.php#:~:text=module%20and%20battery-,What%20is%20MPPT%3F,(or%20peak%20power%20voltage)] * Solar financing [https://www.energysage.com/solar/how-to-go-solar/how-to-pay-for-solar/] * Solar panel utility bill savings by state [https://news.energysage.com/much-solar-panels-save/] * Interesting state specific utility tariffs for solar * California’s net billing tariff [https://www.canarymedia.com/articles/solar/what-to-expect-from-californias-new-rooftop-solar-plan-more-batteries] * North Carolina's new net metering policy [https://www.energysage.com/blog/north-carolina-new-net-metering-policy/#:~:text=Previously,%20there%20was%20no%20minimum,Duke%20Energy%20Progress%20(DEP)%20customers] Music Our incredible intro/outro music is the song Ticking, by artist TINYou can stream the whole song and the rest of their catalog here:  Episode transcript What are those things that we have now available that are renewable that can be worked in quite a different way into the economy of the United States? Which are concerned primarily with the design of nuclear power plants and this type of thing. Hi, I'm Pamela Wildstein. I'm Wyatt Makaronski. I'm Ben Hilborn. I'm James Gordey. You're listening to Intermediate. Intermediate. Intermediate. To Intermediate. Intermediate. The place for people trying to get into or already working on distributed energy resources and clean energy. This is the podcast that makes it easy to learn how the grid actually works beyond the obvious. Hey everyone, this is James Gordey. This is episode three of the Intermediate Podcast. Today we're focused on solar. In addition to myself and Ben Hilborn, who's a regular on the show, we have two guests today. He's our first guest and we're really excited. I'll let them introduce themselves, maybe starting with Karl. Sure. Yeah. So I'm Karl Lennox, currently the VP of product at Sunrun, been in and around the solar industry for about 20 years, starting in a, you know, engineering product development role and then moving into product management and strategy. and I've seen a lot of stuff. So I'm hoping to chat about that today. I'm excited. Awesome. And I'm Spencer Fields. I'm the Director of Insights at EnergySage. I have not quite 20 years of experience in solar like Carl does, but I have 10 years in clean energy. I started out as a consultant at Synapse Energy Economics before moving to EnergySage five years ago. And even in the last five years alone or 10 years, uh, the pace of change for clean energy and solar in particular has been truly remarkable. So also very excited to be on the show and thanks for having us. Yeah, absolutely. Um, and so before we break into the core content here, I thought we could, um, get warmed up a bit. And so we have two kind of icebreaker questions here. Um, maybe we'll each let you answer, uh, kind of in the same order we did the intros. Um, the first is just, you know, for you, this show is all about learning about energy and DER is beyond the obvious. Um, what's your kind of go-to way about learning about this, this sort of information, Carl? Oh, wow. Interesting. So I think for me, it's like, it's like the sea I swim in. Like to be very honest, um, uh, I, I to kind of learn about what's new and what's coming. I actually, you know, spend a lot of reasonable amount of time connecting with startups and innovators in the space who were kind of thinking about problems in new ways. Sometimes they're thinking about problems the same way as somebody who's thought about that problem 10 years ago and maybe they've figured out a way to overcome a barrier that was insurmountable at that time. I also obviously keep up on the media sources that people tend to follow in this space. I think Canary Media is a great one, for example. But, yeah, just in general, you know, just keeping ears open, eyes open, talking to smart folks as much as I can, and always, you know, challenging myself to challenging my priors. That's one of the disadvantages of being in this space so long as you do come with a lot of priors, which is sometimes good and, you know, but it's always important to challenge those. So I do try to do that every day. So I don't know, that's my approach. You know, it's interesting, I'm absolutely with Carl in terms of paying attention to the main media sources, really Canary Media, obviously paid attention to GTM before Canary, but love what everybody's done when they built the new publication there. I think beyond that, there are a couple of newsletters I follow, obviously pay attention to what's happening in the DER task force and the Slack channel, I think that's a connected to get here. But my favorite newsletter in the space is the Climate Tech VC newsletter, which if you're not subscribed to is really, really wonderful. And they just raised some money to turn it into a sort of a bigger platform and begin to build their voice even more. So I'm excited to see what will happen with them. But that's the main way. And then I think beyond that, it's getting asked questions by friends, family members, coworkers, other folks in the space and thinking that I know a lot about solar clean energy. And then as soon as somebody asked me a question, realizing that in fact, there's still a whole heck of a lot more to learn. So like Carl said, keeping ears open and really trying to listen to what it is that people are asking. Yeah, and I'll add to that too, I think. So first of all, I should have also pitched in on the DR Task Force in general and the Slack community specifically. It's just a great way to connect and really ask all sorts of people who have tons and tons of experience on really any topic. I'd also say that to the point of talking to friends and family and things like that, neighbors, people in the street, you can tell you're interested in this stuff, is a really good way to learn about how people who are not in the space look at the space and the kind of questions they have, that continues to be eye-opening for me, frankly, because it shows you what people really care about, and that's ultimately what we need to care about, right? And so it's not exactly learning about solar, but it's learning about how other people think about solar and other DOs. Yeah, and I mean, I think all of us here, right, we're always learning. We think we know, and then people ask the question, like Spencer said. Carl, do you have a specific aspect of DER as an energy in general that you're still like exploring right now or curious about? Yeah, for sure. I think, you know, one area of keen interest, you know, to me is the vehicle to grid space. It's an emerging space. I think there's, it's one of those areas where actually there's probably more questions than answers for everybody, right? There's still a lot of things that need to be out. So it's one of those areas where, you know, there's just a lot of inquiry happening about how should it be, and what are the constraints that are real, what are the constraints that are regulatory or there for historical reasons, why are those constraints in place. So that would be like for me the top of mind, but you know there's many examples of that. I think like one of the interesting things about the DER space is that there is like layers upon layers of historical practice and rules and regulations that can sometimes actually be kind of hard to bottom out. If you really want to understand why do we have this rule in place, oftentimes you learn it's kind of a rule of thumb. And then it's like, well, why is this rule of thumb in place? Where did that come from? And actually, it can be, it can take like several levels of digging to kind of bottom that out. And then you sort of realize, like, maybe like, does that still make sense? And if not, like, what can we do about it, right? So I think I think that's another sort of class of open questions that's always intriguing to me. Yeah, super interesting. And, you know, you sort of pulled the words right out of my mouth, Carl, with vehicle to grid. And I think bidirectional charging in particular for electric vehicles certainly opens up a lot of opportunities. It also opens up a ton of questions. I think, you know, even today, a colleague of mine was asking, hey, why did you select the level two charger that you did? Why didn't you select a bidirectional EV charger? And I think there's this sort of already this misconception around what an EV can do. And obviously, Sunrun is working directly to try to change, take that misconception and turn it into a reality. But when Ford ran a Super Bowl commercial two years ago with the F-150 Lightning Electric and said, this will power your home in a blackout. At that time, that was not true, right? That didn't exist in the US. And so there's this sort of difference between the reality of the products and getting closer to what it is that consumers want. And that's always been the case in solar, right? At the beginning of solar, there was this notion that, oh, if you have solar panels on your roof, you'll still have power in the blackout. That is not how it works. Then it became solar plus storage. Oh, you'll be able to power your whole home in the event of a blackout. And for most folks, that's not the case, or it's not the case without a lot of batteries. That doesn't mean that you don't have resiliency in the event of an outage, but there's sort of this missing 10 to 15% of the consumer perception of how solar works. And now finally we're getting to the point where actually this technology is going to provide the benefits and the services that people want. And so I think that sort of gets to what I'm really interested in in this space, which is primarily virtual power plants. Because all of these distributed energy resources, when you start stacking them in an individual home or business, Now all of a sudden you have a fully operational power plant in your home and that can provide a ton of different value streams to a utility, to a grid operator, and understanding how to monetize that appropriately for the homeowner to make it worth their time to forgo comfort, to not forgo comfort, and to make it worth their while to actually participate in these programs, because I think there's a ton that they could do, but they haven't seen a ton of success yet, in part, in my mind, and Carl, you'll come from a different place than me on this, in part, in my mind, because the incentive structure just isn't there for a homeowner to say, okay, yeah, utility, you can come use my battery 20, 50 times a year in exchange for 150 bucks over the course of the year, when I'm getting battery to be as far removed from the utility as possible. So that's sort of the space that I'm interested in seeing how we move from taking what's a really cool idea and has potentially huge ramifications for the clean energy build out in this country in terms of deferred transmission and distribution costs, in terms of integrating more renewables, et cetera, et cetera, and turning that into something that consumers actually want and actually start to adopt. Yeah, Spencer, I 100% agree with you actually. And it is to our earlier discussion it actually is like one of my huge open questions about DER is like, why is it so difficult to make a scalable, viable, consumer-friendly virtual power plant offering? Now, of course, we're doing that in various places around the country. They're always a little bit bespoke. So why is that? Why is it that it's so difficult to work with utilities to create these programs in some cases? Why is there a set of misalignment here? What can we do about that? So these are sort of existential almost, or almost philosophical in some degree. But so it's not really about facts so much as it is about just political realities, economic realities, how to kind of cut through these, you know, what do you call them? I would say hairy problems. Anyway, you know, just cut through the Gordian knot of some of these like areas where I think, you know, the solar system has historically kind of been in opposition, you know, and utilities have found themselves in opposition. And I think, you know, how do you find yourself so that you're actually actually have that alignment to deliver like what's really the best experience for the customer? Because what you don't want And from a technology standpoint, I think over the next five years or so, we're going to see that it's going to be viable and economically feasible for some customers to leave the grid if they want to. Nobody wants that. That's not a good thing. The network effects that you get from interconnection with your neighbors and your community via the electrical grid is valuable. And so, like, but you need to be able to deliver that value to customers, and they need to be able to see the value, right? And you have to share that value appropriately among different parties. And so that is like, I think, a huge open question for our industry. And I really resonate with that as someone who's, you know, been in energy about maybe two or three years, spend so much time and energy and effort just trying to like learn things as they exist and how they are so I can orient myself that I don't have as much brain capacity to like synthesize and think about like what should it be how can I drive it in the right way because it's just such a steep learning curve right and like you're trying to figure all these things out much less drive them in the right place. So there's a lot of power in these detailed things that are they're pretty nuanced so like a number of years ago there was a or a kind of a received truth in the industry broadly speaking that you can only get distributed solar right like no more than 15% penetration like you're never gonna be able to get beyond 15% of your power on like a district on a distribution circuit from from solar and you know people are saying we're gonna reach that pretty soon you know so you know the next in the next few Here's like, where's this coming from? Is this really true, right? And so it started to dig into it and what you find out is this. So where does 15% come from? So 15% came from this idea that in a normal distribution circuit, typically right on average, your peak loads and your minimum loads. So your minimum loads are about one third of your peak loads, right? And so at the time in particular, they really only measured annual peak loads. So in every circuit they had a number and that number was the annual peak load. Say cool divide that by three all right and you're like an estimated minimum load and then to be safe we're going to cut that in half and then we're going to round down 15 percent. That's where this came from and moreover it actually wasn't a hard and fast rule it was actually intended originally to be a screen so if you were above that 50 percent threshold that kicked you into a situation where you needed to do studies and things like this But it was received as this sort of like, you know, wisdom from, you know, the gods, right? Well, it turns out that like that's, you know, it's a lot more nuance than that. And we worked through how to represent solar more appropriately. By the way, that made no sense for solar because your minimum load is usually in the middle of the night, right? So as you work through, you know, you kind of work through those things and you realize like, oh, actually, yeah, we can easily go to 100% of minimum load or we can go even higher than that. And that's actually been, you know, revised and interconnection codes all around the country to kind of take this new knowledge into account. But that all starts with like, just sort of questioning, like, where did this never come from? Yeah, and so to jump into it, what I thought we could do. Yeah, no, this is great. I'd say like, this is our first episode with guests and like, very clear to me, listening to you guys go back and forth, like, definitely we should have our guests because just like the level of like, expertise really flows through beyond like us in our current level. So what I thought we could do, Spencer, I found an article from EnergySage where you give a brief overview of, and shout out to you all for your content. You do a great job. It's definitely helped me a lot. The history of solar, just so good people have some historical context. And then if we could, bonus points, overlay on at the different key milestones in history, talk about the cost so people can understand how we've gotten to where we are today of solar being just like a fantastic and economic solution. Yeah, totally. Thanks for the energy sage shout out and for coming and reading our content. Yeah, so the history of solar is pretty interesting. I mean, I think there's a little bit of debate around who the inventor of solar cells or solar panels truly is. There are some folks who credit a French scientist named Edmond Becquerel who in sort of the 1800s found the photovoltaic effect. There's some folks who in the 1870s discovered that selenium had this photoconductive potential which basically means that when sunlight photons hit this material the electrons start to basically bounce around 1883 Somebody by the name of Charles Fritz produced the first solar cells from selenium wafers And so some people credit that man with the invention of solar cells But the way that we think about solar cells today, they're made with silicon, not selenium. And so some folks point to Bell Labs in 1954 as the inventors of the, the true inventors of PV technology, because that was the first instance of solar technology that could actually power an electric device for several hours of a day. And so, I don't have the exact cost of what that particular panel was, but in 1954, that first ever silicon solar cell could convert sunlight at 4% efficiency, whereas today, solar panels on the market, like the best-in-class residential solar panels, are over 22%, 23%, maybe even approaching 24%. So pretty significant change in the quality of solar cells in the technology over time. I'm actually curious. I haven't looked recently, but what is that curve looking like? I assume that there was some sort of kind of accelerating exponential of, okay, we're getting rid of the early bugs and having some big leaps and bounds and I feel like the past few years, it's really been half a percent, 0.1% increases in efficiency every year. What is that looking like and what do you think is it is gonna take to change that? Yeah, I'll go first then. I'm very curious to get your take on this as well, Carl. We see sort of in the residential space in particular, we see very incremental gains in terms of efficiency. for solar panels. A lot of the announcements that you see around larger and higher watt class solar panels, so you know a solar panel is rated in terms of the number of watts that it can put out. And then also we talk about costs in the solar industry in terms of dollars per watt, the same way that you talk about dollars per square foot when you're looking at an apartment our house. So watt is sort of our standard metric here. You know, even five, ten years ago we were looking at solar panels that were under 200 watts. I was actually at a solar install today that was using 405 watt solar panels that are the same form factor effectively as those older solar panels that were 200 watts. When you see these higher watt class, power class solar panels that are coming out that are 500 watts, 600 watts, they're huge, they're gigantic, like they take up more space than a typical residential solar panel does, which is, you know, a typical residential solar panel is about four by six, so it's about the size of a hockey net, for comparison's sake. Whereas these larger ones are going to be, you know, maybe even eight feet tall. So, in terms of where the efficiency is coming from, certain folks in labs have modeled efficiencies over 30 or 35% with perovskite. I'm probably butchering how to actually pronounce that, cells and that technology. But in my mind, you know, most homes today, sorry, let me step back. Solar panels are powerful enough that by covering the side of your roof that faces the most southward, you can power more than your electricity needs for an entire year for an individual home, right? So most homes have 500 square feet or more of usable roof space, and you're going to be able to fit 8, 9, 10 kilowatts of solar in that space, and that's going to produce more than an individual home is going to use over the course of the year. Certainly with net metering, that changes the way that you calculate the benefits and the credits and the value of solar. But, from my perspective, I think that there isn't as much of a need for efficiency gains in residential panels in particular because they're already powerful enough to accomplish what they set out to do, which is power an entire home. Now maybe that equation changes as folks electrify more and more of their homes, right? So if you move from an internal combustion engine car to an electric vehicle, now you're charging at home you know once every two weeks once every week once every day that's that all of the sudden is the largest appliance in your home by a mile you know if you're trying to fill a 70 80 100 kilowatt-hour battery every day compared to the average residential usage of 30 kilowatt hours a day right so that's that could change the the calculus pretty significantly once you install heat pumps if you move to induction stoves as you electrify more things in your home, you're gonna use more electricity, maybe now you become space constrained again, and there is this need to really push for higher efficiency solar panels. But again, Carl, I'm really curious to get your take on that too. Yeah, Spencer, that's exactly right. I mean, I think efficiency is actually a really interesting topic to dig into because again, kind of coming back to how consumers think about solar, For many people, the first thing they think of is efficiency as a proxy for technological sophistication as a proxy for quality, when in fact, it's almost like when you think about when you use it by a computer and you care about how much ram it had or the clock speed of the chip. Nobody cares about that anymore, because it reached a point where it didn't have a practical difference. And efficiency is kind of like that. In a lot of cases, all efficiency is impacting is basically the physical space, the amount of kilowatts that you need takes up on your roof. So if you can get the amount of kilowatts on your roof, doesn't matter what the efficiency is. As Spencer points out, if you start to run into space constraints, that efficiency becomes valuable to you. And that's where it matters. And electrification is certainly gonna drive that. In terms of the evolution of efficiency, it's actually interesting because it's actually been, I think, fairly linear over time. The real innovation and exponential impact on solar has actually been in cost down, right? So that's where you see kind of your experience curves, your 15, 20 percent per doubling of cost reduction. Efficiency comes with trade-offs. So I spent most of my career SunPower. SunPower is very well known for its high efficiency modules for its special cell technology and they were for a very long time and still today they have the highest commercially available efficiency modules. The cause of that is in order to achieve that level of efficiency you have a much more complex manufacturing process and every step in the manufacturing process of solar cells you have an issue of yield. So every time you move a cell with a robot from one station to another station, a certain percentage, a tiny percentage of those cells break. And the further along you get in that process, the lower your yield is, right? And so, and by the way, in order to create that process, you have to invest a lot of money in specialized tools. And you have to have literally a bigger factory because your lines are longer, right? And so, it becomes like this question of, yeah, you can get higher efficiency, but at what cost? And what's that cost efficiency trade-off? Because yeah, I can get an extra couple of points of absolute efficiency, but it may not be worth it if I can just add another couple of modules of lower efficiency to create the same power in the same space or in a little bit more space, right? So that's how this kind of ends up playing out. And I think you touched on something that, Karl, that James asked us to cover that I missed, which is, how have the costs of solar changed over time? And I think that's sort of a natural transition. Yeah, and so, exactly. So the cost of solar has really come down over time, especially the installed cost for residential systems. Like Carl said, there's so much efficiency from learning within the industry, not only for the installers and the manufacturers and the sales teams, but also for the authorities having jurisdiction, the AHJs that have to come out and inspect these systems and provide the permits for them and the utilities that have to provide permission to operate and interconnect to the system. So for those that aren't intimately familiar, what is an AHJ? An AHJ is basically a local permitting office, so an authority having jurisdiction. So, they're the ones, you know, for instance, they're the local building code or electrical inspector or fire inspector, depending upon the municipality, that come out to your site and do either a spot check or a sort of a more in-depth check on the quality of install the system and make sure that everything is electrically set up and installed to code, whatever that code is at that individual municipality. And that's basically what an AHJ is and the role that they play in this space. What's really, I think, unique about solar is that each municipality is different and has their own processes. And so one of the largest sort of remaining sources of costs for, in particular, residential solar are these soft costs, which are permitting, inspections, interconnection, also sales and marketing. But I think permitting, interconnection, and inspection, PII, are things that are spoken about pretty regularly in an area that's really ripe for innovation and bringing down costs like what NREL is doing with the solar app. Yeah, I want to talk about cost and a little slightly different framework too. Like I 100% agree with what you're saying, but kind of going back a little bit of the history of solar and actually why is solar where we are today? So for the fundamental thing about solar technology, which it shares with some other technologies that I'll talk about in a second, is that it's extremely modular. So you think about it, at the beginning of the industry, first launched. Let me put space applications aside for a second, like terrestrial applications. Where was Bell Labs selling a PV module? Well, they were selling a $50 a watt PV module in a place where the only thing that could provide power to that thing was a PV module. It's like a buoy fully out in the ocean or whatever, or some remote tiny little light. And then you get into applications where like, oh, I need five modules to power my off-grid yurt or whatever in Humboldt where I don't want to connect to the utility because you know for reasons right well that's like actually like one of the places where the solar industry started was people who were like had a lot of cash we're not really cost-constrained needed power and you know we're kind of the middle of nowhere and didn't want to connect to the utility so that was like that was like the original original market and so but you could do that because you could buy five of these things and you could set up a one kilowatt system, that was possible. Like as opposed to any other kind of power generation where just the increment of it is larger, right? So the way that manufacturing learning curves work is the fundamental thing for solar is that just in general, when you manufacture a widget, that widget comes down in cost by some percentage for every doubling of manufacturing volume. In solar, we've had, I don't know how many doublings, right? But the basic principle is that PV module, whether it's 100 watts like it was forever ago or 500 watts now, you're still producing it in increments of a couple hundred watts. And so that mass production cost down is a huge lever, huge lever. That's why we've been able to create this kind of these curves. And the same thing exists for batteries, right? That's why lithium-ion batteries, it's this little thing that goes into your cell phone, go into your laptop, now all of a sudden it's in your car, now all of a sudden it's in your house, now there's containers, 40 foot containers full of them, 50 of those containers on a site. Well guess what's inside of those things? A pouch cell, or a cylindrical cell, just like it's in your laptop 10 years ago. It's scale. Also, going back to history, Albert Einstein got the Nobel Prize for the photoelectric effect. That was what he got his Nobel Prize in. So there you go. That's a good, that is a good DER trivia. No kidding. Nobel Prize for physics in 1921. It was, you know, obviously theoretical, theoretical physics. So I don't know if it was directly, who knows, that's an extra good question. Hard to believe we haven't covered this yet. but I think now it would be helpful to just kind of describe like the world of solar and the different types. You know, maybe people have heard, we've talked about rooftop or commercial, or maybe people have heard about community solar. Like, Karl, I know you had some thoughts on this. Like, how would you describe the categories or characteristics or categorizations of solar so people can kind of understand what like all the buckets or types are? Yeah, sure, I could take a crack at it. So, you know, I think really The one fundamental distinction is what we would refer to as behind the meter versus in front of the meter solar. So behind the meter solar is your residential, your commercial, maybe even industrial scale. The main point being that you have a photovoltaic system that's installed by a customer for their own use to offset their utility use. So, you're offsetting retail rate electricity. There are some exceptions. I won't go into that, but that's basically the rubric. Front of the meter is where you're installing basically as a wholesale power generator in some form or another. And again, it gets very complicated in terms of how off-take contracts are structured and whether you're actually getting wholesale value or some other value. But at the end of the day, you're delivering that energy directly to the utility grid. you're not offsetting retail electricity. You're operating like a power plant, like any other power plants connected to the grid. So that's sort of one distinction. The other distinction I think people tend to think of is the turf in terms of scale, right? So residential, typically, you're gonna be similar between, I don't know, four and 10 kilowatts. Commercial can be kind of in the low end, like a small SMB, small medium business, could be 10 kilowatts up to, but it could be all the way up to a megawatt, right? You see, in fact, going back to history, when I first joined the industry, we were very excited when I was at PowerLite, which is a pioneer in the CNI solar space, because we sold the first one megawatt rooftop system that had ever been seen in the world. It was like an amazing moment. Now that's like bread and butter for hundreds of companies, right? Anyway, I think at one point we did some massive roof somewhere. It was like a 10 megawatt rooftop system or something. That sort of thing exists, but it's unusual. And then you could have also ground mount, in some cases. You can have carports in commercial. It makes more sense to put it in a car. So you actually have a pretty broad range of scale behind the meter. Front of the meter, you have everything from what we call kind of like a wholesale distribution interconnected. So you're interacting at what we call medium voltage, you know, directly to the distribution system at say like 20 kV, and that could be anywhere from like a 1 megawatt to have a 10 megawatt up to like maybe 20 megawatt. But still wholesale system connected to the distribution side, all the way up to, you know, a truly, you know, multi 100 megawatt utility scale system that's going to interconnect directly into the transmission system. that's going to look a lot like, you know, a large-scale conventional power plant. So, again, that modularity, right? You can literally go down to, like, you know, something that's sitting on your RV to, you know, hundreds of megawatts, and the basic unit of it is the same. I think that's helpful. Yeah, one open question I had, I guess, is community solar. Spencer, I know you guys are pretty knowledgeable about that. Like, where does that fall in here? I, you know, it's kind of like a funky, it's maybe in front of the meter, but the compensation method, you know, is on your bill. So it's behind the meter. So just like curious how that fits in here as well. Yeah, totally. You know, community solar is designed for folks who either can't or don't want to put solar on their property is basically the idea. That's a big piece of it. And then the second piece of it is to try to aggregate buying power of people who live in various communities or in certain utility territories in order to drive better pricing and to support the investment in solar. Those are sort of the, in my mind, the two main reasons behind community solar sort of existing. And so community solar is very much one of those generating assets that's front of meter. The on-bill credits that you receive for that are due to an agreement that the sort of your utility has come to with that developer or with that sort of owner of the facility or subscription aggregator. And so it's not that you've signed necessarily a power purchase agreement to get a certain amount of kilowatt hours per month or per year from that solar per se, it's saying, I wanna support solar and I'll get a, call it a 10% discount on a certain amount of electricity on my bill by supporting clean energy and participating in this community solar program. So it's a little bit more complex and there are some sort of accounting cartwheels that you kind of go through to explain how it works. But that's basically where it sits. Anything to add to that, Carl? No, I mean, yeah, I agree. It's a sort of a type of an offtake agreement in a way. I think the other kind of similar concept is what we have very commonly here in California around community choice irrigation where you have an electricity provider that's effectively like a retailer, right, except they're nonprofit and community owned or community managed, I should say, that is basically procuring in many cases actually building and installing solar, for example, that then is basically offsetting their purchases from the wholesale market. It's almost like net metering for a for a quasi utility, interestingly. But, but that's another sort of similar kind of structure where you can go and subscribe, I can get like, you know, the the green plus, you know, plan from marine clean energy, which is what I happen to be. And they're they're saying great, like, we've allocated, you know, that's gonna that's, that's gonna create additionality, because by subscribing to that plan, that's going to require us to build more solar to make sure that we can deliver against a plan that your your electricity is 100% green, right? Yeah, very cool. And for people not as familiar with the hardware side, I think everyone is pretty familiar with the concept of like a solar panel. We've talked about that a lot. But like, what is like a solar system? You know, what are the aspects of it just so people can actually understand it without having to install one themselves? And is there a better word than solar system? So you don't get people thinking you're talking about planets? I usually say PV system, but not many people actually, a lot of people get confused by the term PV, which stands for photovoltaic, by the way. First of all, we talk about panels, we talk about modules, we talk about PV. It's all kind of the same thing. It's that, you know, that flat-looking box that goes on your roof that does the magic. It collects photons, it turns them into electrons. That's a photoelectric effect, wave-particle duality. It's frickin' amazing. We'll talk about that another day. All right, that's the panel so that so first of all like what is for what actually let's talk about Like can we talk about that? Like what it what the hell is that? So a PV module is made up of a bunch of cells. All right, each cell is a diode It's a photoelectric diode It's kind of like a light emitting diode, but like in but backwards in fact Actually, if you forward bias interesting little known fact if you forward bias a PV cell Where you apply voltage across it and it's dark It actually is a light-emitting diode. It actually emits infrared light, and that's used to do quality control checks on solar modules. You can do a non-destructive inspection of cell cracking by looking at the patterns, by looking at that image. It's pretty cool. That's incredible. I knew the theory that, yeah, okay, it's a diode. I had no idea that there was a utility to just driving it essentially in reverse. That is fantastic. Yeah, it's an end-of-the-line test in every modco. If you go visit a modco, you'll see it. Anyway, but the bottom line is like, where I was going with that, is that the module creates DC electricity, right? Because you pump in photons, outcomes, essentially a voltage, you connect a circuit, they flow through the circuit, Okay, it's direct current. So fortunately or unfortunately, depending how you want to look at it, like we don't use direct current for the most part. We use alternating current. Why do we use alternating current? Well, because like our whole system was built up around like driving motors and driving generators and generators span at 3600 RPM, which creates 60 hertz or 10, conveniently drives a motor 3600 RPM, which is or 1800 RPM, which is very convenient if you're, you know, running a factory, right? So, plus for other reasons. So, anyway, so we got, we have to match that 60 Hertz, we have to match that 60 Hertz waveform the utility provides us. So that's what an inverter does. An inverter is a very cool piece of power electronics that takes DC and synthesizes an AC waveform. People don't talk enough about inverters and it's a key, key, key piece of technology. Actually, think about like PV systems in general and the evolution of technology and where is this all going? Two key pieces of technology were invented in the early 1990s that have enabled us to be where we are today. One is the inverter. One specifically, the insulated gate bipolar transistor, IGBT, which is the heart of an inverter, is the piece of power electronics that you actually is able to switch on and off. It's a transistor, right? So you switch it on and off very quickly. Solid state. And you put these things in a certain arrangement and by switching them on and off in the right sequence, you get a waveform, right? It's, by the way, also in every virial speed drive, in every EV, like it's a fundamental piece of technology for solar and really across electrification in general. So that's what an inverter is and how an inverter works. Also invented at the same time frame was a lithium-ion battery, by the way. So there you go. What a fantastic time in history. So very important that all these things happened to get us where we are today. So, those are like, I'd say those are kind of the two sort of major, you know, components. You think about what makes a PV system. You can make a PV system in your backyard a day. You buy a cheapo PV module. You buy, you know, an inverter from the hardware store and you plug those two things together. You probably want a battery too, but, you know, you can make that work. Modern grid-tied inverters are very, very sophisticated though, like because they have to synchronize with the utility grid and perform all sorts of grid protection functions. So we'll get into all that. I do have a question. Some terminology that I struggle with, the difference, and others might as well. What's the major difference between and benefits between a string or microinverter and an array single inverter? So as I've been talking a lot, I'm going to let Spencer take that one. Thanks, so micro inverters and string inverters perform the same function of producing that waveform that AC, you know, taking that DC electricity and turning it into alternating current, but they do it in different places, I think is the main way to think about it. So, a string inverter, you could also call a central inverter, and for a typical residential solar install, you only need one of them. And it's going to go on the side of your house, in your garage, next to... to your utility meter, and it's going to aggregate all of the DC direct current output from the solar panels on your roof and convert that to that alternating current in a single location. And so that's why you could call it a central inverter because it's all happening centrally. It's typically referred to as a string inverter because the panels are all on input, individual strings and like literally like a string of Christmas lights yeah it's exactly that's the that is the most common analogy is a string of Christmas lights so if you it is it isn't a perfect analogy but and so the idea is that you're connecting all of these solar panels and the output from all these solar panels or call it up to ten solar panels onto an individual string and then bringing that string of electricity back down to the inverter where it's it's converted to alternating current. And most, you know, most typical string inverters today have can accept four different strings so you can have multiple different roof planes and not have to worry about the output from one of those impacting the output from the other. Can you go into that very for the audience why the output of, you know, one like a west-facing array would impact the output from a south-facing array if they were connected together? Totally. I'm gonna get into it and then have Carl correct me where I go wrong. So the reason that Christmas lights or a string of Christmas lights are used as an analogy, an imperfect analogy for a string inverter or solar panels that are connected to a string inverter is that, you know, historically if you had Christmas lights and one of them went out, all the rest of the lights beyond it on that string of Christmas lights would go out. And when string inverters first came on the market, something similar would happen with the production from the panels behind a malfunctioning or even a shaded solar panel on that string. It's not necessarily that their production would be reduced, but I believe it's their voltage would be reduced, I think. Is that right? To get the whole string to be the same level of... So yeah, so the current through a string, you can only have a certain current, right? And so, yeah. It's a little nuanced though, because I think the reason why this analogy imperfect is that unlike a Christmas light, if you have a module and a string that is under-producing, whether it be that shade or any other reason, there's actually a protection in the module called a bypass diode that knocks that module out, which will actually recover the string's current. Interestingly, these module-level power electronics, be they micro-inverters, which is just a PV module, an individual inverter for every PV module or something called an optimizer, which basically conditions the voltage coming out, it adjusts the voltage coming out of every module, so it balances the voltages basically. Ostensibly solves that problem because it's like, okay, you can actually produce some energy out of this module that was shaded and would have otherwise knocked itself out of the string. In reality, it actually doesn't create a huge benefit. It's been over-marketed, I would say. There's other reasons to have this architecture, unrelated to shading and all that, but as an analogy, you have rabbit shutdown, different roof planes, short strings. And so that's where the roof planes come into play, is that one reason that a solar panel could be underperforming compared to the other panels in a string is if you have panels all in a string on different roof planes. And so maybe in the morning, the sun is hitting some of those solar panels. But then as it progresses to the afternoon, the other solar panels are now being hit by the sun and are beginning to produce. And so because of that mismatch in production, that can change the output of the entire string of modules. So allowing for multiple strings on multiple different roof planes You can get around that like Carl was talking about the sort of the most popular Central inverter string inverter that's installed in the residential setting in the US is a solar edge inverter and they're almost always Installed with optimizers, which are these right they condition as Carl said condition voltage at the individual panel They're module level power electronics MLPE is an acronym that you'll hear thrown around. On the other hand, microinverters, instead of converting DC to AC electricity in one central location, do it at each individual panel. So they sit in the same spot that a power optimizer would, right underneath the solar panel. But instead of conditioning the voltage, they actually convert it at that individual site to AC electricity. So that's the main difference between micro inverters and string inverters or optimize string inverters And just before we leave like we're a little in the in the technical weeds and just before we leave this I think it'd be really good to have a brief primer on maximum PowerPoint tracking since that's Since that's pretty important You want to take that one Carl? Yes, that's a PowerPoint tracking I waiting for that? No, I mean, do I? Yeah. So, um, so we talked about how a solar cell is a diode, right? So all diodes, if you have any, if you're familiar with electronics, there's probably not that many people do, but hey, what the heck. Um, the, uh, a diode has a, every diode has what's called a current voltage characteristic, and so solar cells, when you, when you hit them with photons, they have a response characteristic of voltage and current, and voltage times current is power in watts, right? Amps times volts equals watts. And so what you see is that as your voltage goes up, all right, your current goes up kind of linearly, and then you sort of hit a point where you hit kind of like a knee of the curve, as you go over the knee of that curve, what happens is basically your voltage will drop, as your current increases, your voltage drops very precipitously. So your power drops precipitously. And so if you were to plot that as a voltage versus power curve, there's a maximum point where for any actually given any cell in a PV module, each individual cell has its own individual maximum power point. And when you string them together, the module has a maximum power point. And when you string modules together, the string has a maximum power point, which depends on irradiance, its temperature, and a bunch of other stuff. So in order to extract the most power out of a photovoltaic module or a string of modules, you have to keep the voltage and the current at exactly the right spot, which is matching kind of the the impedance of the system. So if you think about what that means, it means now remember this is shifting around and changing all the time, right, as irradiance changes, temperature changes, the wind blows over the thing, cools it off, right? A shadow transits across the module. So one of the things that an inverter does is it has very sophisticated control algorithms that dynamically adjust where the voltage and current are on that string to extract the maximum possible power. And that's called maximum power point tracking. It's actually really cool. And that's what I get excited about. Okay, we should get out of the weeds now. We've had our brief foray into electrical engineering for the day. One thing I did want to talk through here is what like a typical project looks like kind of end-to-end. Kind of starting with the you know sales marketing and then like going into install and then how customers actually like get compensated or the system is compensated. Happy for either of you to take that and I can appreciate that there's differences either behind the meter or in front of the meter? Totally, I'll take the first stab at it, just given that sort of where energy stage sits in the market. So most, right, so people generally learn about solar, they're researching solar, they're researching their clean energy options. A lot of people will have somebody in their neighborhood come to their door probably and ask if they're interested in going solar. A number of people come to EnergySage to request quotes from our installer network and receive quotes. The process of actually gathering a solar quote is pretty straightforward, and you want to make sure that you go out and get three to five to compare. But the solar installer will come out to your site, or they can do a lot of this remotely these days. they'll take a look at the roof planes, the orientation of your house, the angle of your roof, and they'll ask you potentially to send a couple of pictures of your main electrical panel, things like that. They'll get a sense of how much electricity you're using. That's a really big aspect of this, is understanding how much electricity you need to be able to offset or avoid pulling from the electric utility with solar. You'll get a proposal that has a layout of the solar panels on your roof that has an estimate of how much those solar panels are going to produce in the first year. It'll have obviously the name of the installer and any sort of reviews, recommendations, things like that, as well as usually also the equipment that's included, so the brands of equipment that are included, whether or not you're getting what wattage solar panels you're getting, whether or you're getting micro inverters or string inverters, things like that. And you can compare and contrast across a number of different metrics, whether it's the installer reputation, the brand of the equipment that you're receiving, the cost of the equipment, and that's, you know, the installed cost of solar in the U.S. right now has gone up over the last couple of years just with supply chain shortages, labor shortages, cost of capital getting more expensive. But I think is, you know, around $3 per watt, maybe $3.50 per watt, maybe $4 per watt, depending upon where you live in the country. The portion of that, I know you had a question earlier about sort of what the portion of that cost that comes from the equipment. Solar panels themselves are probably around 60 to 70 cents a watt, maybe at this point for top-tier solar panels. Inverters might be 20 to 25 cents per watt, so that gives you a sense of sort of the percentage of the overall cost that comes from that sort of hardware. Once you get the quotes and you sort of are working with an installer to move further along in the process, you'll want to have a site visit so that they can come out, take a look at your roof, make sure it's in appropriate condition to actually install solar, they'll get into any crawl space or your attic, take a look at the rafters, rafter spacing, things like that, finalize the proposal, see if there are any other upgrades that you need, whether to a main electrical panel, or if you want an EV charger, a battery, things like that, and then once you sign a contract, the, and we haven't talked about financing yet, but there are a couple of different ways that you can finance a system, cash purchase, a solar loan, or a lease or power purchase agreement, sort of where you aren't the owner of the system, there are a lot of benefits to that as well, as Carl can speak to much better than I can. But once you sign the system agreement, the installer will begin the process of pulling permits, the actual and making sure that they have all the equipment, scheduling an install day. Most solar installs can happen in a single day at this point. They run typically one crew of four people, two people who get started up on top of the roof, putting all the flashing, mounting, and racking in place to hold the solar panels in place on your roof. Those things are super strong. You can stand on them and they won't budge. And then the two other folks who are electricians who are getting started with main electrical panel and the inverter and making sure that everything's wired all together at the side of the house or next year electrical meter or main electrical panel. And then once everything's sort of laid out and set up it's just the process of getting solar panels, carrying solar panels up onto the roof on a ladder, putting them in the right place, connecting them to either the optimizers or the micro inverters, and then screwing them into place and making sure that everything is sort of laid out the way that you want it to be. And, you know, each individual solar panel, once everything is laid out, might take, depending upon how steep the roof is, connecting a single solar panel probably takes less than five minutes from ground to actually screwed into the racking. So that's sort of, you know, once that's all done, then you have final inspections from your local utility and your municipality, once you get the go-ahead to actually interconnect in the permission to operate your system, you either go out and flip the switch on the side of your house, or your installer can do it remotely, depending upon the inverter that you're using. What I missed there, Carl? No, you got it. I think there's a couple of things I would just add onto that. One, I would say like, you know, in most places the- it is fair to say that the timeline to get residential solar from like the time you sign to the time it's up and operating can be rather extended, a matter of, you know, many months. In most places that is because- not because of the time it takes to actually install this or actually do anything, but because we're waiting for somebody to do something. So you're waiting to get permits or you're waiting for the utility to take an action or you're waiting for permission to interconnect, permission to operate. And so that's actually, I would say, one of the lesser understood soft costs that we talk about. One of the things that happens is like when people have to wait, they get frustrated. When they get frustrated, they cancel. When they get canceled, companies like ours have to spend a bunch of money on a customer that we didn't actually acquire in the end. And that's actually turns into a soft cost. So we like to avoid those things. We like to try to pull in upcycle times And, but some of that is inevitable. The other thing I think I would just touch on briefly is on the financing side of it. You know, there is basically three major options. There's cash, so you basically take, you know, $15,000, $20,000, whatever it is, you put it on your roof instead of in the bank, and you make money off that. The other option is to take out a loan. You still own it. you pay that loan off after a certain period of time. It's just like a home improvement loan. And the third is kind of unique actually to solar, which is a lease model where basically it's owned by a third party if you don't own it. So a third party entity owns it and you're paying for the service. So the service you're paying for, you're paying for electricity that this other entity from this asset is generating that happens to be on your roof. And the interesting thing about that is that you don't have to, there's no money down. So you literally start saving money on your bills the moment it turns up. which is pretty attractive for some people. Now you're not saving as much as if you had, you know, made the investment yourself. But, you know, for a lot of people it's like, hey, you know, I saved a little bit compared to the utility and I'm using green energy and I feel good about that. I have more independence from the grid goes down, for example, if you have a battery with it, et cetera. And I think one thing that you just touched on there, Carl, that's really important that we haven't talked about yet is how you actually save with solar, Which is sort of a crucial piece of the whole puzzle here. And you save with solar because when your solar panels produce electricity, they offset consumption from your utility. And so you're really just avoiding electric bills. And each of the ways that Carl just laid out to finance your system allows you to avoid paying electric bills or to reduce the amount that you spend on your electric bill any given month. And so with a, you know, so for instance, if you're paying $100 in electricity costs per month today, if you put enough solar on your roof, you should be able to avoid all of that or all of that outside of non-bipassable charges or customer interconnection charges, which might be only $10 or $15 a month. So you're saving money straight away. Now the question is how did you actually pay for, and sorry, the reason that happens is because when you are producing more electricity than you are using on site, you send that electricity to the grid, run your meter in reverse. When you are using more electricity than you're producing on your roof, you pull from the grid and run your meter forward, you're billed on net. That's how net metering works. And so, and then also if you're using exactly the amount of electricity that your solar panels are producing, you're just, you're not pulling from the grid. So it's just avoided cost offset, right? And so, if you have, if you pay for your system in cash, that's a sunk cost, it's all upfront. and then month one, now whatever your savings are on your utility bill are your savings, but you've put a lot of money down in order to achieve those savings. Over 20, 25 years, you're going to see, like Carl mentioned, higher net savings over the cost of the system, but you have to have access to that capital and be willing to invest it in a solar panel system to actually get those highest level of savings over 20, 25 years. With a solar loan, Until very, very recently, it was very easy to design a solar loan where your solar loan payments were less than what you would have otherwise paid your utility and electric bills. So in other words, if you had $100 a month electricity bill and you're offsetting 90, 95% of that, so you still have a $10 a month bill, you should be able to get a monthly loan payment at $75 or $70 or $80. So you're saving, again, more or less from day one without having to put down any money to install the system. And then at the end of the loan term, you own the system. Because you own the system, you can take advantage of the tax credit, the federal investment tax credit, which is a 30% tax credit for solar, and you get the benefit of owning the system at the end of its life. lease PPA is the same thing but you don't own the system and you're not taking out a loan and like Carl said you're reducing your electricity spending from day one which is is pretty enticing yeah no doubt like what I've learned talking to people is like there's a lot of details here and it depends like market by market and the like compensation models no doubt are changing and then to your point and I would guess this is probably Related like in the loan model the like interest rates have had like a pretty decently sized impact on like the economics for customers, too So it starts to get pretty Pretty difficult to figure out or at least much more complicated than just a simple. Yeah, you're definitely gonna save and you know, here it is Yeah, well in the interest of time. I think we're gonna wrap it up here This has been really really great Carl Spencer. Thank you so much for joining I think as a follow-up to the guests, we're going to try and collect a few more resources to kind of go deeper if people are interested, teach the audience how to fish of it for themselves. In general, though, thank you so much for joining and really, really appreciate the time. Thanks for having us. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.indermediate.com [https://www.indermediate.com?utm_medium=podcast&utm_campaign=CTA_1]