Understanding Virtual Power Plants & What They Mean for Solar Installers

I'll say that our business is stronger than it is ever been. The success of Grocery is where I see company and growing consistent. It really is your people. I mean, the story is not, does it make power because they all make power. The story is what does it power. This is what solar installers need to know with your host, Irvay Biliay and Joe Marhamati. Hi there, it's hervay and Joe Luatz, solar installers need to know where we interview solar cios and experts on how they run their business on the solar car start. We ask their private revenue numbers, we give actual advice and learn about trade secrets so you can run and grow your solar business. Joe and I build a solar company from 0 to 12 million sales and got successfully acquired. If you'd like to do the same or do better, go to somewhere.com/blog to get actionable behind-the-scenes lessons on running and growing your solar business. And now without further ado, let's jump right into the next episode. Welcome, Clinton O'Neal, to the podcast, what's your installers need to know. Hey there. Thanks for having me, Irvay. I'm glad to be here. So, Clinton, you have had several positions and one of them recently was you were the Electric Utility Commissioner for the City of Love Lent. You worked at Sunrun, you were a partner performance manager. You were also at Lumisor in Boulder, Colorado, and Lighthouse, also in Boulder, Colorado. So, you've been in the solar industry for quite some time. And you were also running your own consulting company, because you're doing energy, I see. Yeah, that's right. So, I've been in renewables for the last 17 years, looked for a handful of different operations, done some things on my own. I actually got my start in Hawaii before all that, where I ran a full scale EPC developer as well. Wow. It's very knowledgeable about the solar industry, you've been in it for a while. And why now you are, you have a recent knee job with EG4 electronics where you need a VPP and DR development manager. So, maybe first about EG4 electronics, you want to give a bit of a history of the company, because that name recently started really popping up everywhere. Games, the CEO is also quite an active recently in all the lobbying. Who is and what does EG4 electronics do? Yeah. Yeah. It is a newer name to the industry, but we specialize in hybrid inverters and energy storage. Right. So, we've been creating and manufacturing our own products for about four or five years now. And it really got a lot of momentum in the industry. We have a unique approach blending in kind of the technical capabilities of the product to support the end users and really support the installers to make sure that they're successful at the deployment of energy storage that's kind of seamlessly integrated with both the home and the solar and hopefully some future devices as well. All right. And we've got exactly the EG4 electronics is a combination of three companies. You have the signature solar, the distributor company, and EG4 is building its own inverters and batteries. And then they also have a quiet outback power, which is like a very well known naming the industry for a long time. That's correct. Is that correct? Yeah. That's it. All right. Well, let's dive in about virtual power plants. So let's not assume everybody's fully aware of what that actually means. But why don't we start? Could you explain us to Clinton what of the PPP is? Yeah. Well, it's magic. So we were working so hard as an industry in the past couple of decades and really deploying the grid-tight solar and the last decade energy storage. And it's really an effort and a culmination of bringing all those devices together, having the solar work hand in hand with the energy storage. And then instead of just living behind the meter, we're taking those assets and those deployments and enabling them to provide service in front of the meter. And then we take it one step further and not just at the single site level, but we're taking and stitching together all of these various homes or various facilities for C&I. And then we aggregate or add them together or capacity goes up. And it has a similar look and feel to a traditional centralized power plant. So when we can successfully integrate and aggregate all of these devices together into one larger system, now we have a power plant. And we're starting to see a lot of interesting business models, a lot of opportunities and a lot of what we're calling VPP products, surface in the industry and then they're both good vehicles for for installers, the end users and the utilities all the way up to the market level for energy. So you mentioned you take solar panels that are installed on homes and commercial buildings, you take batteries, you stitch it all together and then who's the end client, who has an off switch to turn those batteries or these charge them or charge them with the end user. Yeah. That's a great question. And I think that right now that's still being defined in the in this segment. But primarily as it stands right now, it's the energy markets, right? So the primary product when we think about operating the VPP is we stitch it all together, like you said, and then we operate, meaning we dispatch energy storage primarily. And that power is then bid into the energy market. And there's value there and there's a whole bunch of other services that can be enjoyed from that as well. But primarily the current state of the market is market level programs sponsored either by an ISO or a larger IU O investor on utility. And we have now models and platforms and business models that are underneath of those programs to support it. So we have platforms and then we also have aggregators that are doing the stitching, right? So they're they're building the software and they're building the tech infrastructure to put all these pieces together so that when the market wants to turn the switch to the on position that the power actually flows. Let's speak about the different layers in the VPP world. You mentioned you have aggregators wells do you have in that world to make it all happen? Yeah. So it's a combination. So it really starts up at the market, right? So the market has a need and there's going to be like a market desk players. So that would be the ones that are actually working with the ISOs and RTOs to handle those scheduling, right? Those scheduling activities and the bidding for the actual energy markets. So there's market desk players, which will ingest what the aggregators are putting together. So there are aggregator companies or DIRMS distributed energy resource management systems that are essentially a software stack that are either via API or some other direct protocol bringing these devices together so that they can slice and dice it and and make sure that it's connected when it needs to be connected and signaled when it needs to be still. So that's the aggregator level. And then below that and kind of sometimes parallel with that are all the utilities, right? So the utilities are also a part of this equation where we have a direct connection physically with them because of our systems, but we also need to integrate with their IT systems and OT's of operational technologies. And so that at the distribution and transmission level, these these systems have their checks and balances and and and operationalize it all. And then below that's all of us, right, the grid edge, the installers, the OEMs, so we all we all have a piece to play in a virtual PowerPoint. Yeah, no, let's speak about all the benefits. So we speak about a capacity market, but what are other things that a virtual PowerPoint could be doing other ways to play out it? Yeah, so capacity is kind of the primary primary product right now. I think that there's more development to be done on what capacity what a capacity product can do below the market level. So when we think about capacity, the most of the utilities are wanting to understand, you know, what's my avoided cost. So if I take an aggregated resource like many, many DERs or many home batteries, what's that? What does that substitute, right? Like what does that cross out as opposed to the day, the way that I'm operating day to day now? And as you get farther down that line, the market down to the grid edge, you start to see kind of different benefits, which is what you're alluding to. So capacity is always kind of there because when we discharge, we discharge a rated capacity, right? So it's kind of a native to the way that our products operate, but they get more sophisticated the closer they get towards the grid edge because we have things like congestion or relief. So if the grid operators are having parts of their service territory or their distribution network that are constrained, we can start to divide our resources and slice it up more nimble than what a centralized power plant is capable of doing. So we can provide that kind of relief. And other things would be things like frequency or regulation, feeder support at the distribution level to help with substation, operation, and as well as as forecasting, and I have a tremendous opportunity to provide visibility to the grid operators, which helps them make decisions for planning, which could be as efficient as far as like deferred upgrades, or maybe even even line support to cancel an upgrade. And then I'm also thinking about reactive power, you could also use that to generate reactive power. It doesn't travel like regular power. So yeah, a lot of different things that virtual power plants could be doing. Well, let's speak about the devices on virtual power plants because there is something called the man response. We do these already have the man response programs from smart thermostats that it could turn on and off. Pretty cool. Yeah. If necessary. So the man response, how is that different from a virtual power plant? And what are all the devices that could be included in a virtual? Yeah, and that's a great topic. So demand response is comes from demand side management, which is from the more of the energy efficiency world. And what we're looking to achieve with demand response is really just shifting our time of use and reducing our consumption. So when we have a device like a thermostat, which is probably the most popular demand response device, we're just looking to pre cool home or shift the time in which an age vacuum is going to operate to avoid peak scenarios within a utilities operation. So we're just kind of shifting the energy that's already been used or going to be used to normalize or optimize grid operations. And when we think when we think through demand response, it was really kind of the gateway to BP because we were successful with smart thermostat programs that aggregating them and disaggregating them and then also having that visibility, which triggered us to create these these software infrastructure and platforms to start to actually use it. And so the next step up from demand response, I like to call a kind of advanced demand response is still not quite a VPP is taking multiple DR devices, so like a thermostat or a heat pump or anything that is an intelligent device behind the meter that can curtail its consumption of power. So we can take all of those and we can start to aggregate those to work kind of simultaneously in a tandem and we get compounding load reduction or or load shifting just by just by shifting our demand. And so that kind of bundle package and advanced demand response scenario proves very valuable, right? Because we avoid a lot of peaks and a lot of costs which can then has a chrysal down effect for all of the customers as far as like rate control. So we take that to the next step, which is where we start getting to BP so we start to add the battery, right? And we start to add the on-site generation and those two pieces are critical to opening the door in this market because the battery is like the is like the Swiss Army knife, right? The battery can do everything we want it to do kind of absorb or discharge or charge or go grid and visible and self consume, I mean, then when we start to layer on what we're already doing demand response wise, well, now we can we can shift the way the house is consuming power that battery may have an on-site generation so they can top itself off to support the grid, or support the customer. And as we build these platforms and these programs out, we we have a very refined amount of control. And the batteries like is that Swiss Army knife and the medical control demand response is where you just change the lens, you can look to it and but with a VPP, you can self produce power and push it back onto the grid. So yeah, very very different kind of like you said advanced battery response. I've seen several utilities now switching to the battery spot, just changing the name to VPP. I guess that's a that's the first play, first step in our direction, and yes, sign at a time there. But let's go back to when you were an electric utility commission for the city of Loveland, you talked with a lot of players in the VPP, could you explain what a city was trying to accomplish at a time and and maybe can even mention the major players that are in the market that we can drop some days like the energy hubs and then some other aggregators, maybe some of the software players like a leap that provides access to certain markets together with a flip doing some lot of the similar items and then the pure API players therapy. Yeah, certainly, we also played, we did the same. We have access to all the orders to 1000 systems, so we do the same way, control, platform. So we we we we we we also play on the market, of course, but feel free to jump in and say what the goal was for the city of Loveland. Is that possible? Yes, city of Loveland is located in Northern Colorado and we're, I mean, disability owned distribution utility, so electric distribution grid only, but we're also part of an ownership group where we are in our generation and transmission utility in the Northern Colorado region. And we have a non carbon goal for 100% non carbon by by 2030 and part of that planning and implementation process was several per chairman's over the last four or five years in mostly technology. So either upgrading or changing the existing technologies at the distribution level and then the generation and transmission level to be VPP ready. So we're looking at things like advanced distribution management systems or ADMS, AMI projects of course. So switching all the meters over to AMI, I'm finishing those out, but then also building out the meter data management systems so that we can actually ingest use that AMI data into a Derms, right? So we have distributed and we management system Derms, which we went to procurement on. The kind of the goal here originally is to have a operational VPP that we're starting to backfill with devices and enrollments and subscriptions for a future entrance into the market. So we're actually going to be joining SPP in 2026, which is a big move for us and the Derms per chairman's and a VPP or a kind of a critical piece in the modernization of the grid that we're that we're going through and we're also going through a shutdown of our coal plant. So we got a lot of things happening, but yeah, so with all those per chairman's came with a lot of research and due diligence on a lot of the different players in this space both on the utility kind of operational technology side think like OATI, OSI, true enterprise kind of utility software Derms, but then there's also players like leap and players like C power who are to market access players who are helping are helping give those market desk services to help utilities navigate what that looks like to schedule and participate with whichever energy market they're they're participating in and then we have of course all of the, I guess, edge Derms or non enterprise Derms, which would be like your energy hubs, your virtual speakers over the world who are tech platforms that are directly integrating with utilities, right? So so their primary customer is a utility and they can help facilitate program design, program administration and ultimately connect that and integrate that with market access players like leap. So we just went over a few, yeah, thank you for dropping some things makes it a lot more clear for people. Always the benefit like we have a lot of social is listening to the podcast, they will have to deal with the tax rate going away, residential in January. How is a VPP in any way beneficial for a solar installer? Yeah, I think that there's still there's some interesting opportunities that are starting to surface. I think that there is opportunity probably first and kind of establishing a baseline. So as these programs and these grid services become important to become more requirement for the utility, if that utility is active in that space and the installers and that territory, we're going to see an uptake of VPP ready requirements, meaning we need more systems either retrofitted to become VPP eligible or installing new equipment that is already VPP ready out of the box. So I think that's going to build up to more of a steady kind of pipeline of of projects and work for installers that they can begin to forecast and rely on. And then I think there's some creative models coming out on what that looks like as as it go forward with partnerships or strategic partnerships between maybe a combination of like an OEM and installer and a financial product or a finance provider and like a third-party ownership model where some of these VPP programs start to evaluate what opportunities there are to do revenue sharing with, you know, of course, the homeowners who have the devices but also the players involved in keeping them running, installing them to begin with and then making sure that they're ready to be called upon and like all the way up to the market. Yeah, that's that's why I see a sold installers role that doubt out of the equation to make it happen. You need an installer that goes install and maintain those batteries. Anyways, I see a revenue share model. I mean, that's what some voice is is working on so that we have a revenue share model with that sole installer. So the benefits, the way I see them today is all for utilities and the ISOs but if the revenue of those benefits, somebody's pay for it can be distributed. Obviously, to the homeowner, they own the battery but then also to the people or the players I can install. So to the way I see this and correct me if I'm wrong but the sole installer has two avenues. One is to enable everything they've ever installed, all the historical, all the legacy systems and then make it an incentive for them to keep installing and so maybe there is like a financial play here, like a discount or an incentive to add batteries in certain areas. That utility once or needs the most or so that way, it helps the sole installer by having an incentive to sell batteries. You see this in the way? Yeah, yeah. I think that is definitely one of the emerging kind of models and it helps market entrance too. There's a need on the utility side. If there's a need on the reliability or resilience side of the utility, then it becomes really compelling. So if you're in an area that has outage, you really have an opportunity to continue to open up the market as an installer that is able to offer a compelling VPP solution because the homeowner can get that energy storage, which also comes or can come with some outage protection, right? So the utilities have out that because their reliability, their reliability numbers go up because they now are having having not as many outages on the grid edge, but then that battery, like I said, is it's a Swiss army knife. It could conceivably, you know, concurrently provide outage protection, but it can also provide grid services and support the grid in time of need. And with that comes those innovative structures for incentives to alleviate the upfront cost for the homeowner because there's a utility need. And then also the installers can have a robust kind of value-based proposal and value-based solution to take to these markets and help deploy. And what you just explained recently thought out has a term, like a DCP distributor capacity procurement or distributed capacity planning, but basically, the utility needs to give out signals like a need more batteries in this area on the circuit and then installers can sell more. Why not? I don't think you do the utility speech with installers too many of them, I think. One of them sportsman does that, but like more like larger CNI level, they have, I think, a few utility clients and then they try to deploy in certain areas, but I think especially to a Sunvoy would be totally possible for utility to say, like, I would like to have more batteries in this area. So. And for you connected with all those installers in across the country, so, and then we would just give out incentives. We could even mark leads that come in as like, hey, you know, this is a top lead because it's really where you, but you tell you once more, more, more batteries being deployed with prioritized leads too, which helps the soul installers sell more and grow. So that distributed capacity planning or procurement DCP think well, you know, with the right technology in, because then it really doesn't have time to talk to all the local installers and these are not going to work with us or ISD side as a way to, it needs to be a lot faster, but Sunvoy could play a part there to just get the messages, get the signals to the installers faster. So I think in a few years, we'll see DCP operating also on a smaller issue, I love that. Yeah, I love that. So I think that you had a couple of important things there. So I think now there's a tremendous opportunity for these, like, like a distributed capacity product. And I think the utilities are starting to understand that there's that need, but they also, they also need the education I need, they need the, with the VBP providers, right? So as these products come, we want to make sure that that we can build those relationships and build that model so that there's a level of transparency, a level reliability that they know that when they're, because they're accustomed to buying capacity, right? Like that's the primary, their primary primary day to day activities is making sure that they have that committed. So when they are evaluating something new and something distributed and something very tech heavy and tech based, they want to make sure they can measure and verify it. So a challenge for our industry is making sure that we're able to support that journey that the utilities, you know, got a need from a diligent, diligence perspective to enter into those capacity agreements and be confident that if they're, you know, got to be, you know, committing to a five or ten year term of a capacity commitment that we're going to be able to be there and fill that obligation. So I think that it's an interesting time in the market with our, you know, traditional grid side type solar and storage within incentives, sunsetting, and how we, you know, we need to be very close to our customers and support them and cultivate those relationship steps and keep that going. But we also need to be close to our utilities and, and, and build those relationships and the, the, the fruits of those relationships and being able to, to position ourselves and, and provide these true value based solutions. That's what, that's what opens the door and that's what unlocks these, these opportunities with, you know, the 3000 utilities across the nation. I want to thank you to be part of the podcast for the solar installers need to know and hopefully we'll learn a bit more about VPPs and what it could mean for the solar industry, but also for utilities that have access to capacity. They just don't know it and hopefully benefits our nation, the grid on the United States. And since Sandra has clients all over the world, hopefully it can be replicated in other countries, VPPs called in America, but in Europe it's more like a home energy management systems, EMS or HGMS, but the same control of appliances are at play there. So hopefully we all learn some more. So thank you, Clinton. Thanks for having me. If you'd like to do the same or do better, go to SunVoy.com/Blog and get actionable behind the scenes lessons on running and growing your solar business.