Unknown

All right. Hello. Greetings, everyone. This is Volts for October 21, 2026. Can distributed energy work around American utilities? I'm your host, David Roberts. Distributed energy, rooftop solar, home batteries, EVs, smart thermostats, is accumulating in American homes. In theory, all of it could be coordinated to help the grid, shaving peaks and delaying expensive new infrastructure investments. In practice, very little of it is. Why is that? One useful way into that question is to look at a company that's very good at that kind of coordination. In Britain, Octopus Energy is the single largest household electricity supplier. It has turned hundreds of thousands of its customers' EVs, home batteries, and other devices into a giant virtual power plant. It came to the U.S. in 2020 intending to do something similar. Six years later, it still sells electricity only in Texas. So it has adapted. It sells flexibility services to utilities, supplies residential capacity, and more. It's also the largest state-of-the-art utility in the world. It's the largest state-of-the-art utility in the world. for consumers and for Octopus? Is it the forced choice thing? Is it the. I'd say it's the meter data access more so than forced choice. And I say that because. That's interesting. There are going to be markets in the US that are not ready for retail competition or for a variety of reasons. That's not the thing that is going to unlock the benefits to the consumer fastest. And so under the Octopus Uplight partnership, fundamentally, we want to be able to work either direct to consumer through an Octopus retail business that we have in Texas or through the utility. But inability to access customer data becomes a hindrance to acceleration of customer signups and flexibility programs. So if you have robust access to data, Octopus can then operate as essentially a customer-facing channel to identify which customers are most likely to benefit from flexibility and then move those customers into programs that Uplight manages for that utility quickly and seamlessly. Without meter data access, settlement becomes more challenging. Targeting becomes more challenging. Yeah, yeah. Okay, let's talk Texas then because Texas, I guess, is, as you've said a number of times now, the closest approximation to the UK. It's the closest kind of open competitive model. How is it going in Texas? That's kind of your foothold. What are the kind of numbers in Texas? What's the level of participation? How fast are you growing? What's the Texas situation? So from Octopus business perspective, growing very quickly, we've doubled our customer base in the last 12 months, starting from a fairly low starting point, just given some previous prioritization. And then we've doubled our customer base in the last 12 months, starting from a fairly low starting point, just given some previous prioritization. What we're seeing, though, in Texas today is. Sorry to interject, but do they have forced choice in Texas? Forced choice in Texas. They do. Okay. All right. Yep, exactly right. So the underlying business is going well. We're not seeing as much active participation in flexibility programs as we have in other markets. Interestingly, because Texas energy market has been so deliberalized, and there's been so much utility scale, so much flexibility in other markets, we're not seeing as much active participation in flexibility programs as we have in other markets. Solar and storage deployed. Texas volatility has essentially been destroyed. Yes. This is such a fascinating story. This is such a. Really over the last 12 to 18 months. And so flexibility, especially in an energy-only market and one like in Texas where transmission and distribution rates for residential customers are essentially charged on a flat volumetric rate, the whole value prop of flexibility is inner-day price arbitrage, right? Yeah. Cheap prices in the middle of the day, expensive prices in the evening. I want to flex my load from the expensive into the cheap. That's essentially what all the batteries have done. Yes. The utility scale batteries. And so it's actually great for consumers because prices have been depressed, but it's not great for the flexibility component of our business. It's actually been great for the standard part of our business. So we're growing. We're growing. We're growing. We're growing very quickly in just the, hey, we're signing customers up for 6, 12, 18-month contracts. And from a flexibility management standpoint, that's fine because at some point in time when we start to see volatility on the horizon, we've built this relationship with the customer and then we will start engaging with them around flexibility management because it's Texas. So everybody has air conditioning. We are now starting to sell batteries to consumers on a relatively small scale. We're going to get to that too. Mostly because of the economic dynamics for residential. So I think the big policy in Texas that we would like to see changed is greater ability for at least the retailer, if not the individual residential customer, to manage their TDSP or transmission and distribution costs through flexibility. So if you're a medium commercial customer, say a 50-kilometer, kilowatt customer or greater in Texas, you are subjected to your four-coincident peak-based demand charge. And so then batteries start to pencil again because you have some price volatility, but you have these four demand charges that you're trying to manage against. And so suddenly batteries are able to monetize both energy and essentially avoided distribution costs. Right, right. So allowing residential customers to benefit. From that is something that we think is an important market modification that we'd like to see. This is such an interesting story. I mean, I think maybe in the short term or medium term, data centers flooding into Texas might bring some of that volatility back, at least short term. But this is something I've asked every flexibility provider of every stripe on volts for years now and never really get a good answer, which is if you succeed, you're going to get a good answer. And you're going to put yourself out of business, are you not? Like, if enough flexibility is available, prices are going to flatten out and the grid is going to get sort of reliable and boring, and then you're not going to be able to monetize flexibility, right? I mean, that's kind of like, who knows the time horizon, but that's kind of what's going to happen, isn't it? You sort of see it happening in Texas. I think actually there's a great story of what's happened in Australia. Hmm. And you're actually now seeing rates go down because you have such mass adoption. I think there's two things, particularly when you think about batteries, but actually all residential flexibility. So the marginal cost of flexibility for the devices we already have in the home should over time go down to zero. Right. Because we should functionally eliminate sign up friction. We should compete away API fees. What are API fees briefly? So an API fee would be if Octopus is seeking to manage the thermostat in one of our customers' homes, or frankly, when Uplight is doing this on behalf of a utility, we have to pay a fee to the hardware company to be able to access the device. It's like a gating fee. Yeah, right. Right. In principle, those should be competed away. But today we don't have a single open source protocol to access all devices. And so you have to pay to access the device. So the marginal cost of that, at least some amount of that flexibility should go to zero because charging an EV overnight should be massively flexible. You just want the car fully charged when you get up in the morning. And when exactly that car charges between 6 p.m. and 6 a.m., you should be largely indifferent to. So we should compete down the marginal cost of that flexibility to essentially zero. We should compete down a big chunk of thermostat flexibility to zero. And really, it's only when you're asking someone to experience a perceptible temperature change in their home in response to an extreme grid event might you say we need to pay people. The day-to-day pre-cooling of the home while people are at work should be imperceptible. So that should cost zero. And then you're left with the battery asset class. And battery prices are going to come down. Installation costs must come down. And we look at the rest of the world. I'll actually take an example of our Spanish business where we have a robust solar and battery installation. A 5-kilowatt solar system paired with a 10-kilowatt-hour battery fully installed in the home, 9,000 euros. Contrast that with the U.S., right? That's going to be $2,000 after tax credits. Yeah. So then what does this do to flexibility businesses? What does this do to Octopus then if you've competed basically all the flexibility value down to almost zero? Well, Octopus fundamentally is a customer business, right? So we're going to compete down flexibility, lower bills, and still have a lot of actually value that we can create for transmission distribution deferral. We might compete down energy prices like we've seen in Texas increasingly across the country, but we still have a tremendous amount of transmission and distribution deferral to compete down. And so if our job is to continue to do that and we continue to drive down costs such that in 10 years we've put ourselves out of business, well, then we've done what we're supposed to do and we will move on to do something else. So moving beyond Texas, so there is retail competition in some Northeastern states, but you've not moved into those states in any kind of concerted way. So like what would have to change in a state like Pennsylvania or New York for Octopus to go in and set up a business there? What's holding that back? I'd say the single biggest thing that has held us back to date is consolidated billing. The bill is really so much of where the customer relationship with their supplier sits because it's the thing that the vast majority of people only care about, right? You don't think about your electricity unless it's too expensive. And so if you don't own the bill, you don't have the ability to communicate what's going on with the consumer around their consumption, help them think through ways to reduce their consumption fundamentally. And it's something that Octopus has spent a tremendous amount of time and effort refining, how we present the bill, how do we communicate with customers about their bill. And in Pennsylvania, the bill does not come from the supplier, it comes from the transmission, the wires company, and you're just a line items. And so you just don't have that same ability to build brand and build trust and build that customer relationship. It also means that when you don't own the bill, the first call when the customer has a problem tends to be to the billing utility. And again, we differentiate ourselves on customer service. And if their first call to someone else's customer operations team, we can't guarantee that they're going to get the level of service that we want them to get. So that has historically been why we have not wanted to operate in those markets. Interesting. It's not the forced choice thing or anything about. Yeah, I mean, that certainly makes customer acquisition more. And meter data. Yeah, I mean, those things are not non-trivial, but I think fundamentally, it's been we don't feel we can give customers the type of experience that we want them to have. Yeah, I think fundamentally, it's been we feel is a prerequisite of Octopus operating in some of those markets. Now, with Uplight, we're rethinking the level of engagement, not necessarily as a retailer, but like engagement with customers in those markets. And so you take New Jersey as an example. There is choice. Most customers in Jersey don't choose a supplier. Right. But PSEG, the biggest utility in New Jersey, is an Uplight customer for both home energy reports. So some customers are going to be using Uplight, and some are going to be using PSEG, and some are going to be using PSEG. And so we're going to be using Uplight and we're going to be using PSEG. And so we're now having a very active conversation with PSEG around how do we bring some of the special sauce know-how that Octopus has around customer engagement, particularly flexibility customer engagement, and integrate that know-how into the solutions that they already have with Uplight. Right. I want to get to Uplight in one second, but one more question about retail competition, which is, I think, outside of Texas, retail energy providers have, let's say, a mixed reputation. I think probably because they're all buying from the same wholesale pool. They're all sort of have access to the same energy. And so it tends to end up like the only differentiation they can offer consumers. And as you say, they can't really directly interact with consumers because they're just a line item on a line item on a line item on a line item on a line item on a line item on a line item on a line item. And so I think that's going to be an interesting question. And I think that's going to be an interesting question. I think that's going to be an interesting question. Which means there isn't a lot of like will or political energy to expand retail competition. Do you think residential retail competition has a future in the US? Do you think it's going to spread? So what we've seen in Europe and what we're seeing in Texas is competition for the customer does drive innovation around how you acquire resources. And so I think that's going to versus how you manage load flexibility that benefits the customers in terms of lower costs. And particularly when we're thinking about PGM and the capacity deficit, that seems pretty structural and they're just not going to be able to build their way out of that capacity deficit anytime soon because of limited access to turbines, unwillingness to allow grid batteries to be fully counted as capacity. You do need to start to engage on the demand side. And load flexibility is the way to get there. I think there's a strong argument that in states where they already have the regulatory frameworks in place for retail choice, there are some fairly no regrets changes that could be made that enhance customer protection. But also, make it easier for customers to choose their supplier that would undoubtedly attract companies like an octopus into those markets and start to unlock significant load flexibility. Actually, we're seeing it happen in C&I. C&I customers are starting to monetize their load flexibility in meaningful ways. This is commercial and industrial. Commercial and industrial. And if anything, the challenge right now is we're locking residential customers out of them. Those benefits. Right. Okay. Well, let's talk Uplight then. So Uplight's doing these customer-facing flexibility programs for 85 utilities now. But their utility programs, as I understand it, are getting in like these single-digit customer participation numbers. Whereas Octopus, where it is allowed to just rip, gets like 60, 70% customer engagement. On these flexibility programs. And I guess what I most wonder about is what explains that gap? Is it something that the flexibility provider is not doing right that you could do better? Or is it utility incentives? The old utility incentive problem in which those flexibility providers are embedded and it's thus structural and difficult to move. What's your take on that? I think it's multiple parts, right? So one of the reasons Octopus has had such great success in rolling our customers in flexibility management tariffs is we make it extremely easy to do so. We offer very clearly articulated benefits for flexibility. Save 25% on charging your electric vehicle if you sign up for a flexibility program. If you sign up for our overnight flex tariff. Okay, I want to save 25% on my vehicle. And, you know, one, two clicks in an app and the device is connected. And then I don't have to think about it anymore. That is what we view as best in class and what drives great levels of participation. It's done in our voice. We're constantly iterating how we're talking to customers. Compare that with a utility-driven program. Where there might be one or two mass emails sent out without lots and lots of iteration on like microchanges to messages. We're going to send out 50 versions of the same email to cohorts of customers. Some of that's happening, but I think oftentimes that is not, you know, the ultimate mindset of the utility. And I guess somewhat rationally, utilities tend to want to control lots of the direct marketing, right? So they're not allowing a company like Octopus or Uplight to just take total ownership of engagement with their customers. Is that going to change? That's my question. I think there will be some utilities that are going to be increasingly open to allowing Uplight, particularly with the credibility that Octopus brings, to have more say in how and where to engage with customers. And there are going to be some that are not as comfortable with that. I also think there's some of the enrollment journey, an experience is one that can be significantly improved. So today, if I'm a customer in most utilities and I have an EV, a thermostat, a battery, heat pump, you know, multiple devices, I'm going to experience four different enrollment journeys for each respective device. And while you might see significant participation of one asset class, you see significant reductions in follow-on assets because the enrollment journey is not optimized. And so at Octopus, we are bringing multi-device enrollment journey to bear into the Uplight channel through the Octopus app that is a version of the app that millions of Octopus customers, direct customers use. We're building a version of it that can be productized and used by a utility to engage with their customers as well. So that's another part of it. Do you have a target? Or a number in mind for how high you can drive participation in one of these markets where you are a tool the utility is using? I think let's think about by different asset classes, right? I think there's no reason why any battery that's out there today should not be enrolled in some sort of a flexibility management program unless, of course, the customer definitively says, I prefer to have my two Powerwalls sitting in reserve constantly. And there's going to be a subset of customers who that is a definitive choice that they make. And, you know, that's fine. But let's say that 70, 80%, similar with EVs, in principle, every EV should be enrolled in some sort of flexibility management initiative because there's no utility loss associated with it. Like, I don't lose functionality of my EV by managing when it charges within a certain set of parameters. When you start getting into heating and cooling, there is a comfort dynamic. So it may not necessarily be just as many. But I think what we see actually with our heat pump products in Europe is is, it's a selling point. Saving money on your bill by buying an octopus heat pump is a selling point for the heat pump. So again, I think 50, 60% participation rates are totally reasonable. Well, I think this is all sort of in a perfect world, but like you are an app within a utility, you don't necessarily own the whole customer experience. Like there are some, it's not a perfect world, right? That you're operating in practically speaking. Do you think you can get to those numbers within this context? Hey there, everybody. Don't worry. I'm not going to tell you about a new mattress or push a credit card on you. This isn't an ad. There are no ads on Volts. It is supported entirely by listeners like you. If you'll indulge me for a second, I'd like to ask for your support. I started Volts because we're all surrounded by depressing news about climate change and misinformation about clean energy. 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If you're already a paid subscriber, thank you. And now, back to the show. I think what we need to endeavor to do is focus on working with a couple utilities that are highly motivated to enroll significantly more capacity. Just to show it can be done. That's right. This is one of the things that's so exciting about this investment we've made in Uplight is that we now have active relationships with a whole load of utilities, and there are definitively a couple that are coming to us saying, we need to do this for our customers. We need to do this because of the stressors that we're facing related to data center build-out or rate pressures, or just we feel like this is now possible and we want to do this because our customers will benefit from it. If all Octopus did was tell you this is all the amazing stuff that it can do, I think no one would have believed us. The reason why the Octopus story is so unique, frankly, in this space is Octopus has always heavily oriented on the do side of the say-do ratio. And that's sort of our approach now in the U.S. is working with all of our utilities, but really going really deep with a couple of them to demonstrate that if you apply a different approach to customer engagement, the sign-up journey, the digital experiences. You can massively increase participation and then everything becomes more cost effective. That DERMS platform that they're licensing is a suddenly a really good investment because I have so many more devices connected to it. Right, right, right. Uplight commissioned a Brattle, a study from Brattle to sort of figure out a fully coordinated residential demand stack, what it could do for the utilities' peak shaving. It found that it could take peak shaving from about 3% now to about 5%, which like I guess just on his face doesn't sound like that big of a deal. Do you think that's a peak of what is can happen through the demand side or do you think you can beat that? So I think there's a couple things to think about, right? There is how do we drive more peak reduction with the asset base that we have today? So most of the assets out there today, you know, are, you know, you're going to have, you know, you're going to have a lot of risk, you know, you're going to have a lot of risk, you know, you're going to have a lot of today, in most service areas, put, say, a California aside where you do have a lot of batteries, are going to be thermostats, right? And so, yes, there's some incremental peak reduction we can get, largely driven by more participation. If you think about 20% of thermostats today, we're going to go to 50%. All right, that's your 3% to 5% peak reduction. I think the thing that is most exciting to me about the demand stack theory is not just the peak reduction potential, it is the fact that that peak reduction also comes with the potential for everyday cost reductions for consumers. And that's really the premise of the demand stack, right? It's, you start with daily shifting from the peak or from the high cost period to the low cost period. You know, that's a pre-cooling strategy or a managed EV charging strategy, and that's the thing that's going to lower people's bills every day. And then the next step is on an event day, the 10, 20 days a year when there's some sort of a stressor, you can then call on those devices, shift them from what might have been a simple pre-cooling strategy to a more dynamic strategy around, we're going to pre-cool the house and then really focus on reducing that air conditioning units, draw from the grid for an hour of highest price or most constraint. Or for an EV, it's the distribution feeder, is constrained at 10 p.m. So we're not going to charge any EVs in this particular area from 10 to 11 p.m. We're going to shift it all to 12, 1, 2, 3 o'clock. So that's the second order, more event-based, but because you're saving people money every single day doing the more simplistic demand stack management, we've now acquired all these devices at essentially no marginal cost for event-based demand response. And this gets back to the scaling effect and the cost effectiveness, right? Is if we treat these assets as things that can do the thing that people care most about, which is lower their bill without impacting comfort or utility, suddenly I can acquire loads of devices to then solve peak reduction challenges at a very low cost. And that's the power of the demand stack. That's the power of flexibility that we really need to go out and harness. Well, let me ask you how the utilities view that. So it says it manages about 8.5 gigawatts of flexible load. I'm just curious how much of that would a utility planner actually count on the way they count on, say, a gas peaker? I did a pod with Energy Hub about these sort of maturity levels of VPPs, you know, like how much like power plants are they in the view of utility planners? And they said the most advanced VPPs are like a two out of four or something like that. And I'm like, well, I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't like that. So like their version of the Turing test for VPPs, I think it's a really cool idea. I love that pod, but they're not there yet. So like how much of that 8.5 gigawatts is really is a utility planner really viewing as available to them? Not enough. And some of that is because the way we manage those assets today is very formulaic and tied to the program that they were acquired into. That is not necessarily a program tied to market operations or distribution operations, right? So many of the assets that we manage that Energy Hub manages have been acquired to fulfill a regulatory obligation associated with a specific program. And that program has specific parameters. Yeah, right. And those parameters are not necessarily parameters that the distribution planning team or the trading teams. So what I would say is, a fair amount of the legacy asset base was not acquired or designed to fulfill the sort of new needs that these operators have. But a significant portion of the go-forward asset base that we are acquiring on behalf of our utility customers is very much oriented towards meeting the operational requirements of our customers. You will, Uplight or Octopus, can guarantee, to a distribution utility operator that it will be available in the same way a power plant would be available. You're confident in your ability to sort of. So on Uplight, you know, what we find is 97% accuracy between the forecast and the actuals. So in some sense, that might be better than a power plant because the thermostat doesn't have the same kind of unplanned outage. A subset of thermostats, if you have 10,000 or 100,000 thermostats on any given dispatch, some thermostats are not going to be the same kind of outage. If you have 10,000 or 100,000 thermostats on any given dispatch, some thermostats are not going to be the same kind of outage. If you have 10,000 or 100,000 thermostats on any given dispatch, some thermostats are not going to respond because there's a Wi-Fi issue in the house or what have you. And so there, you just have to apply sort of a statistical normalization. So to say, all right, for every 100,000 devices, I need to assume 2,000 devices or 5,000 devices at any given point may have an issue. The challenge with a gas plant is when you have an unplanned outage, it's the entire thing. It's all out. Yeah, yeah. So that is, I think, a fundamental difference. But what I will say is for thermostats in particular, we are still, I would say, improving how we think about measurement and verification. I think this is where batteries become such a massive unlock. You don't meter the thermostat reduction. It's still kind of a statistical analysis of what didn't happen. When you start deploying batteries at scale, it's metered. The willingness of, say, an Uplight or an Octopus that may be deploying batteries to stand behind a service level agreement for a distributed battery fleet is going to be fundamentally greater than you might be willing to do with a thermostat, where at Uplight, we don't own the thermostats. It might be it's our vendors. There's always a little bit of tension there, whereas with a battery, it either worked or it didn't. You can't argue about it. There's a meter. Let me ask you about last year, you told me that Octopus was spinning off Kraken, and Kraken is sort of like the software layer that utilities can use to run their operations. You told me you're spinning off Kraken so that utilities didn't view Octopus as sort of a conflicted vendor. or a competitor. Now, Octopus owns Uplight, and it seems like there's some overlap here, like Kraken Flex and Uplight AutoGrid software both orchestrate devices, basically. So if like National Grid, for instance, wants device orchestration, does it buy it from Kraken or buy it from Uplight? And like, which one would you prefer? And are they now competing? How do you see the relationship? Gosh, great question. This is something that people ask me about internally all the time. What is the relationship? I'll be careful with how I answer it. No, I'm going to be, as usual, pretty blunt about it. So I think my view fundamentally is that Kraken is most differentiated when you think about it as an end-to-end stack, billing all the way to flexibility management, right? And that is where it really is an unbeatable solution. Because of its integration into that core billing system. This is what's been such an unlock for Octopus. Being able to seamlessly and quickly spin up new customer tariffs, and then make sure that that connects very quickly down to the device. So the time in which it takes Octopus to think about, we want to introduce some new variable rate. So we want to introduce some new variable rate. So we want to introduce some new variable based on a market dynamic we're seeing in a specific area is fast right if we see a distribution constraint that we think pointed electric vehicle managed charging can go and solve we can move on that extremely quickly because our billing system is cracking and reflects management is cracking right when you don't have that core billing modern billing system the ability to sort of move on the creation of that new dynamic rate is going to fundamentally be slower less reliable so if you're trying to do that in SAP or Oracle I might say well I might take me 18 months or you know I've heard a story of a utility here in the West Coast that is not able to implement any new rates without deprecating an old one because their system can't handle any new rates I don't understand how that works but okay fair enough so the way I think about it is cracking flex is built to fundamentally unlock flexibility at scale when you're using the crack and customer solution and so you take national grid as an example I think as a general matter I would say national goods should absolutely be thinking about replacing its grid derms which is not applied by a different vendor it should absolutely be taking a very hard look at crack and flex because they are implementing the crack and customer solution and we at octopus know that when those two things are together it's magic the reality is there are very few utilities in North America you know only one announced hopefully more soon that operate on Kraken and so we're talking about the vast majority of customers that are operating on a legacy system that is not designed for nimbleness and not designed to enhance flexibility at its core and I think that's where we feel like the up light solution is really built to suit that particular set of use cases and then the exploration is around how do we blend aspects of the crack and flex product where appropriate into kind of the up light platform to try to bring the best of both worlds is it fair to say that a utility that's not using Kraken it's gonna be faster to adopt up light than it would be to adopt the full Kraken suite like you can do up light as let's say a lower bar to clear a faster an easier decision maybe I mean a flexibility management platform is definitely any lower bar to clear than ripping out your billing system so absolutely right it is a lower bar to clear I would also say that the crack and flex solution has a lot of powerful components to it but for the most part it's a solution that is deployed at massive scale outside of the North American market too so I do think there's something we said for being able to go to these customers as a starting point and say this is a product that 20 other 30 other 50 80 other utilities in North America are already using and then really think through how and where Kraken fits in the end we would love at octopus putting my octopus hat back on we would absolutely love it if every North American utility operated their core systems on Kraken because we think it would deliver tremendous outcomes to the customer unlock flexibility in a way but that would to be clear if that happened it would put up light out of business right like if that happened there would be no market for up light I think before we even got close to that we would be very much sort of evolving the business model I think it's a problem that I'm not worried about because of the sort of realistic time scale on which utilities make big software decisions yeah it would be a nice problem to have if you were selling too much Kraken and then had to modify up late but to be clear of Kraken now is a separate company from octopus and so I say that less from a financial interest perspective because yes octopus does have a small minority position in Kraken but more from a fundamental perspective that I see these Legacy billing systems as the single greatest hindrance to the energy transition lowering costs for consumers giving them better experiences yeah and so more utilities operating on modern billing platforms will unlock lots of opportunities for flexibility and it may be in that world the uplight solution shifts away from selling derms to be more consumer facing and working with octopus around how do we develop the customer propositions and engage with the consumer so I'm fundamentally not worried about that being a existential risk to the uplight business okay several questions left and we're running out of time this is story of my life so we'll have to hurry a little bit but I do want to ask and I have been trying to make it a point to ask every sort of VPP provider everybody who's in this flexibility business which is well like there's a commentary that came out in nature energy the journal the other day basically raising the flag warning about the and shitification risks of this kind of software and I think everybody at this point kind of is familiar with this concept where you the platform lures you in with benefits locks you in then starts exploiting you et cetera et cetera traps you you know so a lot of people I think are worried that like if I buy a device from one of these companies and then they go out of business is it going to get bricked am I going to have a useless device or if these people have access to my home devices my HVAC system the EV in my garage are they gonna be responsible with my data are they gonna start serving me custom ads on my EV screen because they've locked me into a platform where my EV is stuck with them Etc Etc I'm sure you've heard versions of this worries how do you think about this subject generally what protections do consumers have once they're letting these companies into really very intimate household home and hearth type stuff what protections do they have now and how do you think about that going forward so one I don't think they have adequate protection and I think this is one of the reasons why I am not generally a huge fan of aggregator-led models say as compared to retail or utility-led models right so when I'm the retailer I have a fundamental obligation to serve right and so much of the value regulatory structure you're embedded in that has that built in already well when I'm the retailer like I'm servicing that customer I have an obligation to serve per the terms of the contract that we've signed and then when they leave I have to let them leave and I have to like let them disconnect their devices and take those devices to the next supplier they may sign up with right similarly in a utility context there's a fundamental obligation to serve like they must serve these customers they can't not serve them and in that relationship there are far more opportunities to insert regulations and safeguards, and there's a more clear alignment of incentives. What we're finding ourselves actually in a lot of places in the U.S. is because the utilities have not had the tooling, the regulatory constructs, in some cases really the capabilities to do that customer engagement, we're heavily relying on third-party aggregators who are trying to figure out a way to capture as much of the value of that flexibility themselves as they possibly can. That's the basic business incentive, is they want to capture. It is the basic business, and the value stacks often are just going to be too thin, right? So the question then becomes, if you have a dollar that needs to be split, when it's the retailer or the utility and the consumer, you're splitting it, say, two ways, and when it's the utility, that split is usually going to be set in regulations, and when it's the retailer, it is subject to sort of fundamental competition. Right. So. Both should derive some more sort of optimal setup around what that split is. When you have an aggregator that's able to intermediate, doing something that consumers don't really fundamentally understand, there's a lot more potential for rent-seeking, let's say. I don't know. I don't want to say that there is, but there's more potential for rent-seeking behavior. Yes. And it wouldn't take much to tar the reputation of the whole enterprise, right? Of the whole market. That's right. So again, getting to the core thesis of the investment, we made an uplight, is we feel like that relationship with the utility and the consumer is the right locus of engagement. And so we want to build tooling and capabilities and services to work with the utilities to help them do it better, as opposed to disintermediating them as an aggregator and kind of operating in this gray area of customers don't really understand what they're signing up for, but when they sign up, we have control. Do you think Occupus would support sort of new legal. regime governing this stuff, governing these aggregators or just governing flexibility in general? So I also think that it's hugely different in residential than commercial. I think when you're talking about commercial customers, there is a level of sophistication that those customers have, wherein they are better able to mediate between multiple potential aggregators. And I think that's why commercial aggregation market has actually worked fairly well. I think for residential, we just have to think about consumer protection, but also not use consumer protection as a way to fundamentally block innovation. And I think that's our tension, right? The flip side of that coin on the aggregator model is without aggregators sort of pushing the envelope, would we have made no progress? Right, right. Speaking of aggregators, data centers, you're seeing more and more of these, you know, data centers want to get online. They need capacity. They're starting to sort of gather the capacity themselves through these kind of partners and then sort of present it to the utilities saying, hey, I'm going to bring my own capacity. Is Octopus involved in any of those deals? Do you see data centers, their need for speed to power, their giant bags of money, their urgency? Do you see that as a viable route to scale for this kind of flexibility stuff or does it make you nervous? I mean, it's certainly. Is a valuable route to scale. I think one of the things we're struggling with today is the market structures in, say, a PJM do fundamentally advantage large load flex over residential load flex. The battery example is sort of case in point, right? Is if you put a large battery behind a large commercial facility, you're much more clearly able to manage that battery without ever having to export it. So you're going to get the full. The full value of the battery. And whereas in a home, you're not going to. So there's just not as much of an economic rationale to deploy batteries in residential as there are in commercial. So that is a current blocker. I do, though, think that where things are changing, I think they must change and this is potentially going to be benefiting consumers. And in the end, this all only works if customers are seeing benefits in lowering their bills. But it's some sort of the license to operate. So today, you know, there's a huge debate around community opposition to data centers. And there are a variety of drivers of that opposition. But I think one of the important ones is consumer perception, actually, and real lived experience that my electric bill is going, these things are being built and my bills are going up. So the question becomes, how do you actually turn the data center into something that's going to lower the bill? I think there's a going to increase utilization and that over time. But that doesn't actually give bill relief right away. Yeah, this gets to serve an interesting concept in the social license to operate, which is should a data center be partnering with a utility and a company like Uplight to offer subsidized load flexibility measures across every customer in a specific geographic area? Yeah. Should a utility and a data center figure out a way to fund subsidized batteries, highly subsidized EV chargers, highly subsidized smart thermostats? Those deals are starting to pop up, like rewiring America just signed one with PG&E and Google is starting to happen. That's right. I think the key there that just becomes you have to have mass distribution for it to work, right? You have to be able to credibly go to every resident in Ashtabula County, Ohio, and say, if you sign up for Octopus powered by Uplight, you will get $20 off your bill. Right, right. And not everyone might sign up, but I think sort of view that, hey, I can benefit and I've been a benefit in a way that it tied to the thing that I'm anxious about, which is a higher electric bill. One of the other big community concerns is, and I would be concerned certainly, is if a data center is going in and they're going to build 200 megawatts of reciprocating gas engine behind the meter that's going to be pumping out NOx, I'm not happy about that. And so to the degree that load flexibility can help to push back against this trend of behind the meter fossil, that's just a good thing. Yeah. One other question about VPs in general, I had a guest, Bruce Nordman, a few months ago, and his whole thesis is we could take out these middlemen entirely if you just had time and location specific rates, communicated every 15 minutes or five minutes or whatever, and you had devices that were smart that could receive that price signal and respond in the way that is best for the residents in which they are sitting. If you just had real-time prices and responsive devices, you wouldn't need all these elaborate products that go and gather this stuff up. And then skim off some of the value. Do you, I guess, agree fundamentally with that proposition? And do you think eventually we're going to evolve in that direction where there's just sort of an automatic communication between utility prices and devices and all this elaborate layer in between is going to disappear? Do you think that could ever really happen? So I agree with part of it and I disagree with part of it. I don't actually fundamentally buy into the need for dynamic pricing. Because so much of the consumer value of load flex, it should be in more simplistic shifting from the daily high cost to the daily low cost period. So you don't think you need that kind of granularity? I don't think you need that granularity to get a significant amount of the consumer utility. And some of that is because you don't need hugely dynamic shifting of loads to achieve distribution benefits. In energy, that may be right, that there are five or 10 hours a year, 25, 30 hours a year from a price perspective that are the ones you have to capture. But increasingly, so much of the value of flexibility is increasing load utilization on the network, which allows you to slow some of the CapEx build. And I don't need that level of dynamism to capture that. So we tend to drive towards very complex dynamic pricing. rates. And that might solve the tail part of the problem. But I think you can get a hell of a lot of devices connected and delivering value without dynamic prices. Where I do agree, though, is that seamless connection. And how do we make it such that these devices seamlessly connect into that core utility system? Again, this is the part of the bet with uplight is uplight is that layer. It's the single pane of glass for the utility that connects into the core utility system. And then the question is, what signals do we want to give? Is it a dispatch signal? Or is it just a signal that is tied to the time of use rate that that customer may have? Ideally, it's both. And there's some sort of co optimization that is occurring. So the idea that we create seamless layers of connectivity is important. But even in a world where you have dynamic rates, you still need to find a way to connect the device to the dynamic rate signal. Establishing that connection is the the expensive part because that's the customer acquisition. - Okay, wrapping up, let's look, Five years out. So insofar as you have any sort of clear view, I wonder, five years out, what would you like to see? What levels of participation would you like to see? How many sort of gigawatts under management would you like to see? Do you have sort of like five-year goals despite the kind of short-term volatility and all this? I think five years from now, there's no reason why 20, 30 gigawatts or more are connected. And I almost don't think about it in terms of, well, like 20 gigawatts versus 25 versus 30. I think in more in terms of every electric vehicle will be connected. I think Tesla's announcement this last week that go forward all new Model 3s and Model Ys will have bidirectional charging enabled is a great indication. GM made a similar announcement. All their new models will be. So you just think about this, right? That in five years, we should be able to sell and install fully all in a battery into a household for less than $10,000, $5,000. Every electric vehicle will be seamlessly bidirectional without significant home electric upgrades required. I mean, those two things alone will mean millions of homes will have battery or potentially two batteries because they'll have their EV battery and then they'll have their low-cost. Home battery as well. Maybe one in their stove, maybe one above their refrigerator, maybe one embedded in their air conditioner. And that's exactly right. And so I think that world is the world we will see in five years. And I think that will be a world that is better for consumers. I'm optimistic. I think rates are going to go down for consumers in the next five years because we're going to see tens of millions of consumers able to actively benefit from the load flexibility in the 30s. things that they have in their homes. Well, let's hope. Your lips to God's ears, as my grandfather used to say. All right. Thank you, Nick. Thanks for taking so long. This is super fun. I appreciate it. Always fun. Yeah. Cool. Thank you. All right. Thanks, everybody. You've been listening to Volts, founded and hosted by me, David Roberts, produced by Nate Peavy, and supported entirely through the generosity of listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. See you next time.