Can you give me a brief background to yourself and to OhmConnect and what the company does?
I've been in the clean energy, energy and entrepreneurial space for my whole career. Early on, I was an appointee for President Clinton in the US department of energy, among some other roles in the administration. That was my first big energy connection. I spent time in and out of the public and private sectors, but about 12 years ago, I founded a company called Renew Financial that had, created a new financing product called PACE - for property assessed clean energy. And then I founded a company to help get that jump-started. PACE is now a global $10 billion industry, thereabouts. The company did well and I left a couple years ago having financed the upgrades of about a hundred thousand homes while as the head of Renew Financial. I then became very focused on a very important conversation, to the future of a zero carbon grid, around the fact that if we're going to have a zero carbon electrical grid, there's really no easy way to get there.
The issue of flexing residential demand, in real time, to deal with both intermittency and evening peaks when the sun comes down - it was in that discussion that I got to know the folks at Ohm Connect. They recruited me to come in as the CEO and I've been here for coming up on a year and it's a great team. We're solving a really important and difficult problem, and I'm excited to get a chance to chat with you about it.
Can you give me a bit of a rundown on what demand response is and how it works?
Demand response is a very important component of the grid of the future and it fits in different categories. As you know, one of the critical parts of an electrical grid, and the thing that makes it different from almost everything else, is that supply and demand have to be balanced in perfect symmetry at all times, 24 hours a day down to the second. To do that, normally what's happened is we've built power plants way beyond what we normally need in order to be able to ramp up supply. So we have solar now, but of course before solar it was coal and nuclear and natural gas and everything else. This huge infrastructure was constructed to fit the demand.
On hot summer days, for the most part, demand is highest. Demand response is really just trying to look at the other side so that we don't just have to build the heck out of everything. We could in fact just reduce demand a bit instead of having to increase supply. If you think about how expensive it is having a power plant sit idle and not working, except for 1 percent of the time, which is pretty common now, demand response becomes a really valuable, incredibly important part of how we can balance the electrical grid and save money. It gets even more important with renewables because wind and solar both have intermittency issues during the day, when the wind doesn't blow or the sun goes behind a cloud for example.
At night, the sun goes down and there’s nothing you can do about it - it's just off. So that means that if you're going to have as much power as possible, at night, you've got to switch to natural gas or other types of fossil fuels to generate, and that's not so helpful either. So demand response is just about how do we get the demand side down? How do we get the people using energy to use less of that energy or use their energy at different times so we can better balance the grid?
And what's great about now, just taking it one step down to where Ohm Connect sits in this, is I think the model that we have, which is really important, is that we act like a power plant, networking millions of homes. At key times when the grid signals that it is congested or dirty or very expensive, we can automatically, and instantaneously reduce demand across huge swaths of geography in large amounts - and that means that the grid managers don't have to turn on dirty fossil fuel plants. Instead, they pay us just like we were a [conventional] power plant. They were going to pay that money for a power plant to turn on and generate 150 megawatts anyway, instead they pay that to us and then we turn around and share that revenue with our users. So all the people that were participating, they become little tiny little power plants, and they get paid for it as well.
These really great changes turn us into a tool that can be used regularly and which acts, for the grid and for utilities, like a conventional power plant. That really makes us very useful and the economics mean we don't have to be subsidised for just getting paid the same that a power plant would get paid, but our system is getting turned on instead of that fossil fuel power plant.
That's an interesting point about you paying people - that's a really good incentive for people to do this.
What we have found over and over again is that people do care about the environment tremendously. They want to do the right thing, but we have to get the economics right. They're not going to do it if it costs them a lot of money. So a lot of my career has been trying to solve that problem in different ways. This is probably the most elegant way I've ever seen it, and it is really direct. So what happens is, we say to folks that at seven o'clock tonight, power is really expensive and we need them to reduce their usage and we'll pay them for doing that. We know from the smart meter exactly how much they normally use and also how much we want them to use, and if they reduce their energy use by so much, we’ll pay them for doing that.
So we have customers who are making, in some cases, hundreds of dollars over the course of the summer, just for being very careful about when they use energy and taking their cue from us. That motivation turns out to be really critical because people want to do the right thing but the economics have to be right. I think what we've done really is create an incredibly fun system. People feel like it's little bit of a game, but underneath it all is that customers are getting paid to do the right thing.
You mentioned smart meters just then, so this presumably depends on Californians having a lot of smart devices and smart meters in their homes. Is there any resistance to that in the US because in the UK there's quite a bit of suspicion around smart meters. So how is that working out over there?
California was one of the first areas of the country to really roll out smart meters and there was some resistance just as there has been concern in general about all of these new smart devices. Because like anything, they are a two way street, they give you a benefit, but they also provide information upstream and that makes people nervous. One of the big problems with smart meters is that everyone said we're going to roll out these fancy new machines, put them in your house, be able to track your energy down to the minute or the second or whatever, it's going to be great for you. But, there was nothing on the other side that explained the benefits. Nobody actually saw their bill go down really. It was just like, it's a fancy meter, and the utilities got a lot of information, but there was clearly visible benefits. At least with my Alexa, it may be listening to me but it plays music and some other things that I want. The smart meter had none of those things for most people. What's really cool about Ohm Connect is now the smart meter does do things for people. If you have a smart meter, we can pay you for reducing your energy at key times and you can see when you're using energy and can get paid differentially based on that.
By creating value to consumers, that they can see, touch, feel, earn, that helps them feel a lot more comfortable about their smart meters and the information they are supplying. The second thing is you just have to be really, really careful about privacy. That information can never be used for anything else but a very specific set of user prescribed use cases. So we can use that information to tell you how much energy you used and what we want you to use and whether you hit it, but there's no selling that information on. You can't violate people's trust.
That’s very important. I think people were concerned about that. Hopefully now we are seeing that it's not so scary and people are being great. I can tell you, having been in the finance industry, that smart meter data is better protected than most of anything else down that route.
I'll just talk for a moment about devices, because that's really been an interesting one. What we found for most people, is that our users tend not to be first adopters. By that I mean we have 1,300 of our users have Tesla cars and things like that, and so they are early adopters, that is to say people who love that stuff. 90 percent of the people that really participate in our programs tend not to be early adopters. These folks are those ordinary people who work for a living with homes and families, so they haven't really had great clean energy, or a clean tech solution that matters to them. They haven't really had a lot of smart devices that make much sense to them either. We ended up being the first reason that people switched to a device. We just give them a text message and tell them this is a good time to reduce your energy usage and then they do and then we pay them. We explain to them that if they put this little smart adapter on the plug for the fridge or the air conditioning unit on the wall or window, we can quietly control that device a little bit here and there, for which we pay them more money and they won't even have to do anything. They then see how it could pay well for them.
So we've seen that, for many of our customers who get it, this is the first smart device they get. We are their entry to that whole world of smart devices, because we've finally given them something that makes sense and is useful rather than something that's great for folks that have a lot of extra money or really want to be the first adopters on new technology. So today we control about 50,000 devices and most of them are everything from lights to cable boxes, but we love air conditioning and refrigerators and all that, so we tend to be the smart device for everybody else who hasn't considered this sort of thing previously.
At the moment, is this is just in California or are you planning to kind of promote this elsewhere?
Currently we are in California, Toronto, Canada, and we’ve also gone live in Australia. In the US we'll be expanding over the course of the next 12 to 18 months, pretty considerably. The nice thing is what we do is not limited to California. California has a good green reputation, but it's actually not one of even the best places to do this. There's a lot of other States and federal law in the US requires all wholesale markets, electrical markets to accept what we do and pay us for it.
So once this is in place, how can the grid can be made suitable for more renewable energy, what kind of technologies are approaching in the near future?
In California there is this thing called a duck curve, which means that California is very big overall user of energy, even in the middle of the night. From 2012, eight years ago, to 2020, things haven't changed. You’re just looking at non-renewable megawatts, everything that isn't renewable, mostly natural gas, nuclear, or some other stuff, but no solar or wind. In the morning, people get up and you have this little bit of an increase in energy usage, just as the sun comes up. What’s great though is that we've done this amazing job with solar here in that we've just essentially eliminated the vast majority of fossil fuel based energy production that we need during the day, in eight years. This is one of the great success stories of modern times. So instead of having, even just eight years ago, a peak in the middle of the day, we now have this giant trough, a huge success.
Here's the problem though. The sun goes down every day. Nothing we can do about that, and it goes down at exactly the same time everybody gets home, turns on their lights, their air conditioning and everything else, starts cooking dinner, puts their dishwasher on, their washing machine.
It's a little different during COVID, obviously, but you still have this same category. So what happens is, not only does the sun come down, everybody’s energy use goes up. The demand on the grid actually is now a peak that happens usually around eight o'clock at night. So we have two big problems. The first is the ramp. The grid was never designed for this kind of massive ramping every single day. So every day you can imagine they're turning on power plants, ramping stuff up because we have to put 20 plus gigawatts onto the grid over the course of just a couple of hours.
That happens mostly by turning on really dirty old fossil fuel plants that otherwise sit idle. Then the other thing is it's a residential demand. So 70 percent of this piece of this demand peak 65 percent to 70 percent is residential. So there's no way to reduce that demand without going after people's houses, without households changing. It's a tough time for people to change, because they're busy, at home, cooking dinner for the kids for example.
The great thing that Ohm Connect has done is that we come in during that peak, which is also when the grid is dirtiest and when it is most expensive and we reduce it. So we're really pushing that head down a bit and that is really important because it means that the grid is no longer as stressed and it's not as expensive. We don't have to turn on as many power plants during the day.
The first big thing that's important about renewables and how we're managing the grid is that the grid is increasingly fragile because of this. This is a success story, we're managing it, but if we want to go to 100 percent renewable, there's no way to meet this ramp in demand at night, unless we do demand reduction.
Over time, and we're starting to do this now, this is part of our new product this year, we have to deal with intermittency during the day because with renewables, sunset happens and the amount of wind energy slows down, and some of it's not very predictable. So stuff happens suddenly at noon, the wind suddenly slows down, we need power, and that's another place we can show up and help.
So we show up with just a few minutes notice and we can reduce tens to hundreds of megawatts instantly just using devices in people's homes. Renewables are super important for the future of our species, they are incredibly economic now, way more economic than anything else, but we have to solve the intermittency issues and we especially have to solve this in California, where there is a big evening peak. That’s where we saw that Ohm Connect is critical to solving both problems, and we are by far the cheapest solution to both of those problems as well.
So what kind of potential savings are we looking at in terms of emissions reduction and cost reduction?
On a cost reduction basis, we can, compared to a traditional natural gas peaking power plant, cost about one 30th of the cost to build the capacity with that plant. So, to sign up customers and get them active, we cost half as much as they [gas plants] do to provide the same number of megawatts on demand - and we're zero carbon all the way up. So we're just better on every single frame. What's been interesting is that we're at scale, we peaked last summer at 165 megawatts of dispatch at a time.
We want to get much bigger of course, we're looking to grow into the gigawatts over the next few years, but it's still very difficult to get really sort of the old school utility folks to believe it's true, even though the math proves it. You can show them the data from the grid and they're just not sure that's really going to happen all the time. Well, we did it 187 times last year. We dispatched on average over 110 percent of what folks asked us to produce. They then ask "can you do it again for a full another year?” So there's just a lot of mental shifting that has to take place.
And that's one of the hardest things. It’s getting people who are householders to believe this is true and that they should participate and understand it, to get that sort of old school utility industry mentality to buy into the fact that this is now possible and reliable. We've made huge progress on both. Last year, we paid out to California households a little over $3 million in direct payments. So you can kind of see the dollars add up, right?
For a lot of folks, that’s really important. This is back to school shopping money. It is money that deals with an unexpected car repair. There's a lot of people for whom that is a very, very important slug of emergency cash.
So on the emissions side, we do have our emissions that we track. One of the great things is that we are zero carbon. Generally speaking, when we dispatch our users, it is instead of a natural gas plant turning on, so you can really track the exact emissions numbers.
You mentioned something about making California 100% renewable - what kind of time scale are we looking at for that?
California has set a law in which it wants to be a hundred percent renewable by 2045. It’s got various stages in which to get there and it's actually ahead of schedule. It keeps setting these targets, and people think we can't possibly do that - and then we just keep hitting those targets ahead of schedule. We have to get to a 100 percent zero carbon on the grid. We've got about 20, 25 years to go and we've made enormous progress in the last few years, but as everyone will tell you at this point, it's the last 20 percent that is going to be the hardest because that's where these peaking issues come in. Once you get to about 80 percent zero carbon, and there are days today where for a couple of hours, the entire state runs at zero carbon, during the middle of the day we are often at a zero carbon grid, but to deal with the night-time issues we're running out of things we can do until we have two solutions, and really the only two solutions that are zero carbon at scale are storage and what we do - demand response. We're going to have to do some of both. Storage is important, but it's still quite expensive and it's still fairly small relative to where it needs to be.
We think storage will be an important part of it, and then we'll be an important part of it. Those two together are what's going to happen to help us bridge the gap between kind of what we could do today and what zero carbon really looks like.
Who are your partners on this?
Utilities and other load-serving entities procure power from us, but we work with all kinds of folks. So we work a lot with Google and we control, I don't know, probably something around 20,000 Google devices in people's homes, a lot of nest thermostats for example, but also Google home minis and other things that can control lights and stuff like that. So we have a lot of technology partners, Google being one of them, where we have done deep integration and are able to control those devices, and they're big supporters of what we've been doing.
So that's obviously important on the technology side. On the grid side, it's really important that we have a direct line of communication with the grid managers, and in California, like many places, the retail energy providers and utilities are distinct from the sort of overall independent system operators that run the sort of backbone grid and manage the transactions of buying and selling. So we spend a lot of time working in California with the CISO. The California Independent System Operator (CISO) is a key partner in how we integrate our type energy behaviour into a grid that was never designed for that. They’ve been very helpful. It's hard, but they've been a great partner.
We also partner with entities all over the country, all over the state and country that are trying to help give their customers a way to save money or do something good for the environment. Everything from the Sierra club, which is one of the big environmental organisations here, to some of these organisations that really help families figure out how to save extra money - life hacks - how do you save $5 on this? How do you save $10 on that? We found that by partnering with environmental organisations and organisations that support these families, we can really become very helpful. We both win.
Is there anything else that you would like to share with our readers?
The only thing that I would say that's really exciting, and what's really new for us right now, is what we call auto Ohms. This is where we have behavioural users, to whom we send text messages, and lots of other folks, and we've really moved towards this place where we now have 15,000 behavioural users. We're already at 15,000 households where we can control at least one of their devices, 24 hours a day, seven days a week. Anytime the grid needs it, we can quietly power down or change the setting on their device, on their refrigerator or their thermostat just for 15 minutes. So for the most part, people don't even know it’s happening. This is where we have to get it right - dynamic real time grid engagement where people don't have to do anything about it and it doesn't affect their life very much. For example, a situation in which the only way I know what's happened, and we had a really hot heat wave in California this last few days, is I go to the fridge and open it and the light's not on. Just for 15 minutes, the fridge is fine. The food's fine. 15 minutes is no problem. People think that the light's out and then realise it must be an auto Ohm, and then they go and check and in fact, yes it is and so we’re currently providing a resource to the grid and people also get paid for this, without ven knowing what happened - the money just shows up. It’s a really nice circle. I think that's a huge step forward for us, a big leap and really a window into the future of the grid. It’s one of these areas that is super important. It's not as sexy as a solar panel. You can't quite put your arms around it and love it. This is very different. It's a plug on your fridge. That’s not as cool as a solar panel, but it is in fact going to be just as important as solar and other types of renewables to the success of decarbonisation.
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