Virtual Power Plants with Geoff Ferrell (Senior Vice President @ sonnen, Inc)

This is like bees. These are tens of thousands, hundreds of thousands, eventually millions of individual nodes sitting on the grid edge in people's homes and businesses. And when we do it right, the individual homeowner or business is benefiting from from being part of this program. They are receiving a lower utility bill.

They are receiving some type of a grid reward for having done these things and we owe that to them. That's the way the business model works. When you zoom out, we start to look at clusters and we start to look at geographies. Maybe a a subdivision that sits behind a transformer or a a data center that's sitting behind a transformer.

And then we start to look at these things together and we say, okay. If I take ten thousand of these individual systems, I now have fifty megawatts of energy that I can bid into the market. I now have a hundred megawatt hours of capacity that I can bid into the market and that I can use in the market. So we very much look like at grid scale, we look like a power plant.

Hello, and welcome back to Transmission.

As the adoption of residential storage gains traction, the opportunity for these assets to give back to the grid and even earn a revenue is made possible with the help of virtual power plants. In today's episode, Jeff Farrell, senior vice president of global CNI and VPP project business in the Americas at Sonnen Inc, joins Quentin to discuss the potential of virtual power plants. If you're enjoying the podcast, please hit subscribe so you never miss an episode, and leave us a review wherever you listen. Let's jump in.

Hello, Jeff. Welcome to the podcast.

Good morning. Good afternoon. Thanks for having me.

It's a pleasure. I must admit, I've been a bit of a fanboy of Sonnen for many years, so it's a real pleasure to have you on. Doing hardware is very, very difficult. Doing hardware in Europe is even more difficult, and it's been, great to see the success story that Sonnen has has been on. Before we get stuck into that, though, Jeff, do you wanna just tell us about you and what you do at Sonnen and a bit about the company, please?

Sure. Sure. Yeah. Let's start with the company. Yeah. So Sonnen Sonnen is a originally a German stationary energy storage manufacturer founded in twenty ten.

Our mission from day one was clean and affordable energy for everyone by way of of of a piece of hardware and then doing things with that hardware most commonly connected to solar. But solar is certainly not necessary to make some of the things that we do across the across the planet work really well. So what I'm sure we'll go into that more. Me, myself, my name is Jeff Farrell.

I'm a a senior vice president of our virtual power plants and project business, specifically for Sonon Inc, which is the US, the US subsidiary of the company. I've been with Sonnen, about, well, going on five years now. I come from construction, so I was an engineer by education in the construction field, residential and commercial for about ten, eleven years before I came over to Sonnen. And I too am a fanboy.

I actually started as a customer. So as a as a construction chief technology officer for a construction company, we were building highly sustainable, durable, healthy, energy efficient housing. And we were doing it in such a way that it was at market rate. Everyone could access it.

It wasn't for the one percenters. It wasn't for a niche, part of the market. And we decided that we had an opportunity in conjunction with the utility to do solar small solar in a battery. And when I was looking for a battery, I came across Zonin.

It was exactly what we were looking for. That was, gosh, about nine years ago now. So I spent four years integrating Zonin batteries into the homes I was building and then had the opportunity to come over to Zonin and and take it nationwide. And and here we here we sit.

And if you if you're listening to this and you haven't come across this company yet, I think the my take on it is Sonnen was the first company really to position residential storage for the home for the consumer. And, of course, Tesla, Powerwall, and loads of other companies have copied this now. But you guys had some great designs, hardware that looked good in the home, and lots and lots of great imagery about pulling up in your EV, this beautiful house, and this thing on the wall. The marketing was fantastic. And then, of course, German engineering and doing anything with battery cells out of Europe has been tricky because so much of it has been dominated by the Far East. And Sonnen has managed to do this and be a massive success.

So kudos to the company. Let's talk a little bit about the history of the company. And I know there was a big there was a big transaction a few years ago where you you got bought by Shell. That was obviously massive.

Can you talk about the last decade or so, what the journey's been like for the company? I know you haven't been there for the whole whole time, but what the the mission for the company was and where you started and where you are now. And there's been some news about someone perhaps being up for sale. We should probably talk about that as well.

Okay. Yeah. We could talk about that. Yeah. I mean, day one, our founders, Christoph Osterman and Torsten Steffenhofer, their vision was stationary energy storage systems for the residential market.

And and it was in response to the German market very specifically, starting to change some policies around what what in the US we would call net metering. You could call it a grid feed in tariff in other parts of the country specific to solar. Germany, as many parts of the country or parts of the world have done, have done a really great job with some subsidies, with some incentives around solar, getting a lot of solar into the grid. And then at some point, you hit an inflection point.

You say, hey. This really great thing is now starting we're kinda going backwards. We're starting to see an increase in ESG. We're seeing an increase in carbon.

We're seeing an increase in the need for peaking energy at certain hours of the day, and it happens to be when the sun goes down. So so you hit this you hit this point. You do a really great thing. You get mass adoption of solar.

You get a lot of solar on businesses, homes, you know, schools, but, you know, a grid edge, if you will, kind of kind of scenarios predominantly.

And then what you say is, okay. How do we better harness the solar? How do we how do we make solar firm more firm, more dispatchable, more reliable?

And the answer was was a battery was a battery system and a a grid connected Internet connected battery more specifically, where you could soak up excess solar during sunny hours that wasn't being consumed by the home directly. You could tell the battery, hold that charge, dispatch that charge during these particular hours, or to reply to particular signals in the marketplace. When the market place says, hey. We're short on energy.

Prices are going up. If you could deliver energy like a power plant, that's really valuable to us. Tell us what you can do and do it, and we'll pay you for that. And and, basically, what what our founders saw was an opportunity in the European market to do just that with tens of thousands, hun or hundreds of thousands of individual nodes in people's homes, again, in Europe at the grid edge where they could participate in what is now being called a virtual power plant.

We'll we can go into that later as well because that's kind of a term that's become blockchain or or green energy or, you know, some of these it's gotten a little bit a little bit heavy and long in the tooth, so we can talk about that more. But, essentially, they they were they were they identified ways where individual consumers could have this, hardware in their home, could participate in rate plans or in, programs where they could use their solar, use their battery more more smartly, more surgically, and get paid to do so. And and I think that was really kind of the start of it. And then in the US, that's taken a couple of different formats.

We have a really robust business in, Spain and Italy and Australia as well, kinda doing very similar things. So, again, the hardware is great. But as you as you identify, Quentin, that's a tough market. There's a lot of push for commoditization of of of batteries, which could happen very easily like we've seen with solar panels or, you know, with inverters to a certain extent.

And I think Zonin sees it a little bit differently where we're using the the energy storage system as a gateway to the home. It is an electrical, piece of infrastructure that gets us into the home. And then it really is the virtual power plant and these other dynamic, you know, SaaS services, if you will, that we that we use the battery to then harness that are really the unique value proposition of Sonon.

In that case, has Sonon shifting its focus, if I if I heard you correctly, where the the the hardware is only one piece of the puzzle, but the the big market opportunity you're going after is the software and the virtual power plant and automating the home. Is that where you're headed?

I'd say a hundred percent. A hundred percent. The the the hardware is important, and hardware is important because there is some really bad hardware out there. There's some unsafe hardware. There's some hardware that if you do what we do to our batteries, you know, over the course of a year, the state of charge of that battery is gonna be diminished very quickly, and you could have very unhappy homeowners.

We certainly have seen that in the US probably more more so than in Europe, where where for years it was sold as a backup battery. So the battery literally sits in your home, in your basement, on the side of your home waiting for a power outage. And if that battery is hit three, four, five times a year for a couple hours, you don't care about cycle count. You don't you know, you don't necessarily care about those things.

But when you are performing grid services, when you are using the battery through a virtual power plant or through, market mechanisms where you are cycling that battery every day, the chemistry matters. The durability matters. The safety of that battery matters. It's it's a connection to the Internet.

The effectiveness of that connection matters. So yeah. So from Zonin's perspective, the hardware is very important. The battery as a reservoir, as a gas tank, if you will, for for energy, whether that's grid energy or solar energy or wind, you know, whatever whatever the source may be, is extremely important.

But then to harness that reservoir through the virtual power plant, through software, through market signals is is the end goal. That is how we affect energy transition. It is the ability to be firm, dispatchable, dynamic, and to really respond to these very dynamic signals, you know, wherever we're operating at in the world.

Let's get an idea about the company now. So where's the company located? How many people do you have? How many batteries do you have out there in the real world doing stuff?

Sure. Sure. Yeah. Founded in twenty ten in, Bavaria, Germany, the the name of the village, literally a village, is, Wilpolds Reed.

It has been said that there may be more cows than people in the village. It's really very quaint, about an hour and a half west of of Munich, so down the south of of Germany. Currently, I think I heard from the boss last week that we're about twelve hundred employees, worldwide. So that is spread out between various offices around Germany, Spain, Italy, the UK a little bit, Australia, and then we've got a pretty firm contingent here in the United States that is sales support operations and some of our r and d functions.

Great. And we're gonna talk about VPP, virtual power plants in a lot of detail in a minute. But we just talk about what what's it like now that Sonnen is part of Shell? So so Shell bought Sonnen a few years ago for, I think, it's five hundred million euros and recently announced that they were gonna dispose of sell the the asset, I think, at the end of last year. And it looks like the valuation is three or four four x up on that. So someone's been really good growing at a clip. What's it been like as part of the journey being part of Shell and now thinking about pastures new?

Yeah. It's a great question. Yeah. Absolutely. So, yeah, purchased by Shell in twenty nineteen. The valuation has has has gone up quite a bit.

Yeah. So it's you know, I I credit that a lot to the leadership of Shell and to the leadership of of Zonan, like, you know, based in Germany. The things that we've done over the last couple years, we have grown tremendously. I think the resources and the the the organization that Shell has brought to us, you know, kind of moving from a startup to a grow up to, you know, a little bit more mature company operating in multiple continents and in many markets has been phenomenal for us.

So they certainly have an interesting balance sheet that we we love to harness to to aid the energy transition. And really just being part of that larger story around lower carbon fuels, zero carbon fuels, really looking at what the energy system's gonna look like in the future has has been an incredible journey, certainly in the five in the four and a half, five years that I've been part of it. More specifically, yeah, they did announce, they did announce a a a partial sale or I guess you could words you use the word divestment in zone in. You know, to be clear, what what has been put out there is they're not trying to sell sell us.

They are looking for partners. I think they're they're trying to sell a portion of the company. And and my opinion, purely my opinion, is that we could do more. You know, Zonin could do more.

We we are a technology company, and Shell is an energy company. The thought process and the way you operate in the structures and those two things are are a little bit different. So I think I think Shell has seen value in bringing in a partner that that has some more of those competencies that that does have interests in exploiting those those possibilities and our nimbleness as a technology company. And I think that's where we're at.

I really I really do. I've I haven't been in any of those conversations, so don't ask me to to kinda be a fly on the wall and tell you what's happened because I wasn't invited. But talks continue from what we're told, you know, at least internally. And I I think we're all very hopeful that Shell will find a great partner to help us continue to grow and and be a a leader in the marketplace both in the hardware and the virtual power plant fronts.

Yeah. We're excited to see what happens there. But energy in the residential world is all about distribution, isn't it? So any channel partners or the more homes you can get into, the better.

Now let's talk about virtual power plants or VPPs, which you're right, actually. It's been through the wringer a little bit. VPPs were there's a few few things or words that you know, DERMs or VPP or grid edge, all these things that have been totally overused and lots of promises made in the last decade and some in some cases, didn't really deliver and in other cases did. So let's talk a little bit about what a virtual power plant really is and what's diff what what what makes it virtual?

Yeah. So I think the word virtual is probably the first misnomer in the whole dang thing. Virtual is a little misleading. These are real assets bolted to people's homes hooked up to their electrical system. So, you know, when you look at the word DERMS or or, distributed energy, you know, resources, you know, what all the acronyms we throw at it, and we're terrible with acronyms in this in this industry.

A a lot of that was originally built around what we would call demand response. That's that's kind of been the term that's been been around for decades, demand response. This is, I'd like to control the thermostat in your home. I'd like to turn your lights on and off. I'd like to overheat or underheat your water heater and maybe, you know, maybe do these things that where I can add load or deduct load from your home using these connected devices.

And and and the issue the issue has always been that those are tied to behavior.

And and and, unfortunately, east in the US, the other issue is a lot of the housing stock in the United States doesn't lend itself to some of these techniques very well. But, you know, homes built twenty years ago are very, very leaky. So when you use a thermostat and you do this, you know, what we would call a precool and whole kind of strategy where you would overcool the home prior to the peak period and say, okay. Now we're gonna stop your thermostat.

Not gonna use it. I've cooled your home a little bit lower. It's not uncomfortably cold. It's not a meat locker, but we'll we'll use that cool.

We wanna drift through the peak period. It just doesn't work because a lot of that air conditioning leaks out of a home, you know, in about forty five minutes an hour tops. You got people coming and going. You're cooking dinner.

So so this this whole idea of demand response and controlling people's appliances like water heaters or thermostats or lighting is difficult because ultimately what's gonna happen is you come home, your home's uncomfortable one way or the other, you're probably not thinking about the fact that you've signed up for this program that's gonna pay you twenty five bucks at the end of the year. You go over to your thermostat and you hit the button and you and you make yourself comfortable. So demand response programs have always had this behavioral component that's been really difficult. And what happens is you have megawatts and megawatts and megawatts of capacity.

And then when you go to market, you basically have to discount that heavily. And you say, I I'm gonna bid fifty percent of it because I don't know. Susie might come home and crank her thermostat up because her house is uncomfortable. We just don't know. And there's a lot of math around that. I think people know how effective those programs are.

In the case of an energy storage system, specifically one bolted to your house and plugged into your into your, your electrical panel, it's completely behavior independent.

If if if I move energy around or if I harness solar or if I discharge your battery or if I charge from the grid and then later discharge from that battery to, you know, to balance out the economics of it, you never felt it. You're gonna come home, you're gonna cook, you're gonna clean, you're gonna do laundry, you're gonna, you know, plug in your iPad, watch TV, whatever. It's completely independent of behavior. So the the advantage of a battery based virtual power plant or distributed energy management system is that we are not behavior dependent.

We are bolted to the wall. I'm not worried is this thing plugged in or not. I'm not worried is it a hot day or cold day. I'm not worried about these other things that may or may not exist in my ecosystem because my ecosystem is bolted to the home and independent of what might be going on in the home at the moment.

So when you talk about virtual power plants, are you talking about a large fleet of domestic sites that you aggregate up and treat like a power plant? Or are you talking about each home being its own little power plant?

The answer is yes. So so essentially yeah. I mean, complicated complicated answer. Sorry. You'll think of it as bees.

In fact, we use the word swarm control a lot within the industry. This is like bees. These are tens of thousands, hundreds of thousands, eventually millions of individual nodes sitting on the grid edge in people's homes and businesses. And and and when we do it right, the individual homeowner or business is benefiting from from being part of this program.

They are receiving a lower utility bill. They are receiving some type of a grid reward for having done these things, and we owe that to them. That's the way the business model works. When you zoom out, we start to look at clusters or we start to look at geographies, maybe a a subdivision that sits behind a transformer or a a data center that's sitting behind a transformer.

And then we start to look at these things together and we say, okay. If I take ten thousand of these individual systems, I now have fifty megawatts of energy that I can bid into the market. I now have a hundred megawatt hours of capacity that I can bid into the market and that I can use in the market.

So we very much look like at grid scale, we look like a power plant. The advantage is we're in hundreds, thousands of different locations where we can inject or absorb energy in very small increments across multiple nodes, across multiple substations, if you will, as opposed to being one massive facility a hundred miles, fifty miles outside of town, and then you have to transmit all that power down great big transmission lines, divvy that down through substations, and then get it out where that creates a lot of congestion, creates a lot of wear and tear on the electrical infrastructure, and inevitably drives up operating and maintenance costs.

If we do it from the grid edge and we and we attack the problem from hundreds of thousands of places, we completely negate all the concerns around overloading of transformers, overloading loading of substations, additional congestion on the grid because we can really target the way we respond to those signals very, very surgically, either geographically based or, you know, kind of sub lap, you know, whatever whatever the the the kind of the tell is that we're getting from the marketplace.

So So let's talk for a little bit. Let's take stock on where Sonnen's at right now. So how many of these battery systems have you got installed out there? How many different sites have got Sonnen batteries on them?

And then of of those, what proportion of those are taking part in a, you know, your virtual power plant solution? And what proportion are saying, no. I'm just gonna handle it myself. So for example, you know, lots of friends of mine have got batteries installed in their home, and in many cases, they're just taking solar power.

They're not doing anything particularly smart around it. Somewhat might be linked to a carbon API. I've got some very nerdy friends. Right?

So some of them might be linked to some carbon APIs. Some of them might be just day ahead prices, but they're just doing it more for for fun. So Sure. What proportion of your Sonnen batteries are part of this big VPP thing?

And, yeah, what is what what are all these numbers look like?

Yep. Yeah. Yeah. Great. Yeah. Great. Great. Great question. Yeah. Worldwide, I believe we're I believe we're over a hundred and seventy thousand systems installed worldwide.

The vast majority are sold and installed for the purposes of being part of a virtual power plant. So the the vast majority of our customers aren't looking for backup. You know, to be perfectly honest, at least here in the US, if you're looking for a backup battery, there are other far less expensive solutions. But but when you do harness the monetization potential of a zone and battery, either on your own, which is a great use case, just the same self consumption or you're you're you're in total nerd and now you're you're jockeying your battery on your own every day.

If you're harnessing that battery for maximum monetization or you are joining one of our zoning communities or zoning connect, you know, whatever the brand is, wherever you're at in the world, and letting us do it for you, what you're what you're saying is I I want to achieve all those goals. I want to lower my carbon footprint. I wanna be part of energy transition. I want to invest in a battery that's going to last me ten, fifteen, twenty years doing that and be part of that community and be part of that that that thought process that an individual home or business can be part of the solution in a real in a in a real way, not just, you know, solar net metering, you know, in markets where they have very low, you know, potential.

So I I would say my my guess is worldwide, well over eighty percent of the batteries that we've sold are actively participating in virtual power plants today. Europe is a high, high, high number. The United States is a high number. Over ninety percent of our sales happening today are being sold into marketplaces where they're using either Zona Connect or a utility program, that aims to harness the battery on a day on a daily basis in some way, as the genesis for buying a Zona battery versus somebody else's.

Wow. So we're we're looking at hundred thousand or so plus of these batteries taking part in your virtual power plant. And then for Sonnen, do you sell a battery and then it what's the value proposition? Is it, hey. Come and buy a battery and put it on your house for, I don't know, how how many dollars? Or come and buy a battery and take our VPP service, and we're gonna make you more money or save you more carbon or something like that? How does it how does the sale process work, and what decision does a customer have to make?

Again, the answer is both. I I think I think if you're looking for, you know, a few things about the hardware let's start with the hardware. Again, since day one, the zone and battery has been lithium iron phosphate based chemistry since day one. We we we've never believed in some of these other chemistries that maybe work really well in cars or that work in a a more commoditized battery. And we've never and we've always wanted to steer clear of cobalt, you know, just for for all of its recyclability and kind of economic and and oppressive, you know, attributes that that come with that type of you know, with with that mineral.

So lithium ion phosphate for David calling out NMC there.

So you don't you don't use NMC batteries. You just use LFP and been doing that since day naught. Yep. Yeah. Okay. And the the argument there is supply chain? The supply chain is the problem?

Is that Not not as well.

Maybe in the maybe in the beginning, yeah, supply chain. A lot of these other chemistries were being dominated for the auto industry. And in in the beginning, you would never put lithium iron phosphate in a car. Like, the thing would weigh a ton.

You know, it would last forever. Yes. But it would weigh a ton. You know? So in the beginning, we people thought we were crazy.

Like like, literally, somebody from one of our competitors said, you'll never make it. Lithium iron phosphate is too expensive. It's too heavy. It's not energy dense enough.

Well, if if you're installing this in your home, if it's in your basement or your garage or somewhere, what do you care what it weighs? You know? If we're efficient in in the layout of the battery and we're not taking up your whole garage, take up your whole bat your basement, the weight doesn't necessarily matter, so you can sacrifice that a little bit. And what we were more interested in was if this isn't a garage, if this isn't a basement, if this is under your son or daughter or grandma's bedroom, what do you really want?

You want the safest chemistry that will last you decades, that you can monetize, that you can that you can earn your money back on, that will, you know, pay you back and and will help you be part of this thing that you're investing in. So so from a hardware standpoint, that was the call from day one. We we didn't wanna use a car cell. We didn't wanna use these other cells.

We wanted to use this. And and in the beginning, Quintin, I would agree the supply chain was very underutilizing lithium iron phosphate. Now fast forward fifteen years, and what are we seeing? Everybody's moving away from NMC.

They're moving away from aluminum cobalt. They're they're moving towards lithium iron phosphate even in cars. So the the supply chain is is getting a little more strained. I think the infrastructure has caught up.

But more importantly, what we're seeing in the industry is we're seeing an acceptance that this was the way to go, that longevity, durability, safety matter, whether it's a car or a stationary energy storage system, and we've seen the industry come our way. So were our founders geniuses? Yes. You know, did I say that on the podcast?

Maybe. So, you know, shout out to Torsten and and and Christophe. You guys got it right fifteen years ago, and we we appreciate that.

Well, yeah, I saw a thing the other day that I think almost half of all EVs built now have got LFP, so lithium phosphate batteries in them. And, yeah, they are lower lower energy density.

The the the margins are changing, actually. They're they're they're much more dense energy capacity than they used to be. And, yeah, wildly cheaper and much more comfortable with supply chains. Well, depending on whether there is a whole podcast in itself about cell chemistry supply chains.

I think that there's a lot more to it than just cobalt bad, but never mind. Okay. Right. Let's get back to virtual power plants because that's what we're here to talk about.

So how how do these batteries participate in the market? I know that, Sonnen, you said, you know, almost two hundred thousand, these, systems around the world, and there's lots of different types of markets. But let's keep it quite broad. Are you participating in energy markets or ancillary services markets or other things, reserve services?

And how are you thinking about maximizing the revenue from this asset class, which is has a lot of regulatory challenges, metering challenges? There's a whole ton of difference between doing stuff in someone's home versus normal demands demand type response versus grid scale. So how are you thinking about getting all of these batteries into grid scale markets?

Yeah. Absolutely. So it it it is it is very much, fraught with challenges. The the the key the key is to look at markets and understand what we can do now.

What is the value proposition we can create now? Does it make sense to have a battery tied to solar without solar? Can can we monetize that? Can we create a business case now?

And and what I would say, at least in the US, is energy is easy. Power products are easy.

That that that kind of follows the model that's been blazed for us around demand response. It was shed load, apply load. The fact that we can go negative, the fact that we could, you know, in net inject with a battery, whereas, you know, a thermostat obviously can't do that is is interesting. Some markets recognize our ability to do that and do pay and monetize that.

Other markets are zero out your meter. We'll we'll pay you to zero out your meter. That's a great thing for the grid. That's a great thing for the infrastructure.

There's money to be had there. From a from a technology standpoint, we could do all of it. We could do spending reserves, non spending reserves. We could do ancillary services, energy markets, power markets, resource adequacy, you know, is is a big one.

I understand from a technology point of view, just to push you on that, you've it's possible. But which markets are you actually accessing?

It depends on the market. You know, what I what I would say in let's use California for as an example. In California, we are actively participating in both energy and power markets. We are actively participating in resource adequacy, and we are actively participating in spinning reserves, through some of our partnerships.

So a battery a battery is great for this. As long as you have great telemetry, great telemetry rates and your hardware can respond quickly, turns out a battery is the fastest, cheapest asset to achieve these goals. It's faster than power plant. It's faster than thermostats.

It's faster than a pump. It's it's faster than all these things. We can we can rapidly respond to and dispatch megawatt hours and megawatts from people's batteries in a very efficient way, and that and that really increases the value of being able to provide those services.

It might it might sound a little bit odd to our listeners. It certainly did to me to hear of fleet batteries participating in spinning reserve when they don't spin.

That's right. They don't spin. So so so what is interesting about that is, at least in the US, the the idea behind nonspinning reserves is is really kind of in its infancy, whereas spinning reserves have been understood for a very long time. So while a battery does not spin, while we are a grid following inverter, in terms of kind of being classified and being able to monetize what a battery can do, it turns out we drop into a lot of spinning reserves classes just because they know how to define it better. But I think in the future, non spin is actually gonna offer better monetization, especially if they value the the rapid response time that a battery can bring as opposed to a spinning reserve might.

Let's talk about challenges for a second. So I think we're probably on the same page that there is a massive potential here for virtual power plants and behind the meter batteries to really shape global power markets.

But it's not really happening it's it's sorry. It is happening, but it needs to go much, much quicker. So my question to you, Jeff, is what is holding us back at the moment? What what are the challenges for getting these virtual power plants at mega scale, like totally reshaping power market scale? And are these technical? Are these regulatory? Are these commercial challenges?

How do we make this thing go way, way faster?

Yeah. I think I think there's two I think there's two main kind of categories. The the the first category that kinda holds us back is is is regulatory. What can you do with a battery?

What can't you do with the battery? And then a lot of that comes from either the the the the RTO, the DSO, or the in the US, the ISO, the independent system operator kind of area, understanding how these assets interact with the grid, how they can meter them, how they can they can say, I asked you for three megawatts. Did you give me three megawatts, and how do I validate that? So regulatory is a big piece.

And and and, obviously, that regulatory is informed by the commercial piece of it. How do you how do you monetize? How do you value the participation of these distributed assets that are sitting behind utility meters? And and and that's of major importance to to the distribution or, you know, or the vertically integrated utility depending on where you're at in the world.

How do I how do I value what this homeowner or what this business is doing for me behind the meter, credit them properly, make sure that I'm still also paying for the infrastructure that I've put in place and creating a a viable business model? And then how do I push that upstream to my regulators to say, here are the things that we can do. Here's how we understand it. Here's what we how how we believe we can read these things. And then here are the technologies that we need to be able to do that. And I think one of the major things that we're seeing shift in the in the industry right now is metering, specifically.

For years and years and years, it was the utility meter on the side of the house, that big glass socket meter. That was the bible.

If if it ran forward in Europe under the stairs often.

Under the yes. Exactly. If it ran forward, you paid for it. If it ran backwards, they paid you back.

Or they didn't. Or they just said, oh, I didn't want the energy. I don't have to pay you. Why am I gonna pay you for it? So for years, that was the only way we could true up. That was the only way we could really understand what was happening in that home. And then, of course, you know, the really old school meters that that, like, have dials.

You you didn't have any interval data. It was like, I I read the meter thirty days ago. It was this number. Now it's this number. You have to pay for that, yeah, delta.

As bet as meters have gotten better, as we've gotten as we've gotten to, like, AMI meters, for example, we get better intervals, fifteen minute intervals, one hour intervals, whatever it might be, to really understand what are these energy movements.

Because I think the key for utilities and the key for regulators is to understand that all kilowatt hours aren't created equal.

A kilowatt pushed back into the grid or a kilowatt not consumed during a peak period, let's say, five PM in the evening on the in the middle of summer, is extremely valuable compared to a kilowatt hour consumed at two o'clock in the morning. They are different things. And being able to understand where did that energy come from, how was it used, how how was it monetized is really important. And and and one of the big shifts that we're seeing, again, at least here in the US, is we're starting to see some programs rely on the metering of an energy storage system specifically.

They say, okay. We've got our glass meter. That's fine. But if your system includes a revenue grade certified meter, we'd like to access that data, and we'd be happy to use your data because you collect it better than we do.

You understand the energy movements within the home better than we do, and we can make better decisions. We can monetize better, and we can ensure that these kilowatt hours are being credited to the right stakeholder properly on a minute by minute, second by second basis, whatever is needed.

So we've got a little bit of work to do there. But pretty exciting that you can use a I assume you're talking about someone there. You can use one of your installed batteries as a fiscal meter. Is that right? You could you can actually I assume you can do all the actual payments and I don't know. I don't know the the right parlance for this, but a fiscal meter.

Yep. Yeah. It is it is a, yeah, it is a true monetization meter. So it it is a it is a it is a it is a reading.

It is a value. It is an a level of accuracy that the ISO markets and the utilities are comfortable using. And as long as they have visibility and they know that, you know, that they can validate what's what's being said and the customer is being billed and credited properly. They they we are starting to see that in certain in certain markets.

That is awesome. That is awesome. We've got a long way to go in in the UK to get there, I think.

But that is exactly where we should be heading. Let's talk about the next few years then. Where are virtual power plants and within the through the lens of domestic battery systems? Where are these virtual power plants headed? What are you guys excited about in the next five years, say, and what are you working on?

Sure. Sure. Yeah. I I I mean, I would say virtual power plant in general or, you know, distributed energy management systems in general are the backbone of of of where this is going.

I I think more and more what you're gonna see from the industry is as they're selling a piece of hardware, it is anchored in that ongoing service. It is anchored in those those recurring revenue models or those recurring savings models for for consumers where you are offering a service where you are professionally monitoring their system, you're managing their system, you are allowing them access to certain portions of the marketplace, like spin and non spinning reserves. You know, an individual battery homeowner would never have access to monetize the battery to do that. But at aggregate, with the licensing and and and tools that we have, we're able to do that for our consumers.

So it really becomes a customer service model, and and the battery is the gateway for it. There are some firms out there that are, you know, selling a a device. But I think unless it's attached to a stationary energy storage system, you're you're leaving you're leaving value on the table because if it's a device and you're still going back to thermostats or water heaters or pumps or EVs, let's let's not go down the the vehicle to grid rabbit hole too deeply. But if if an EV if a plugged in EV is part of that that that strategy, you come back to the same question.

Is that car home? Is it plugged in? Does it have reservoir? Has the homeowner said, no.

You can't use my battery today because I have to take my wife to the airport in an hour, so I wanna opt out of this event. So, again, you move right back to this behavior conversation where you have to say, is it available or not? So I think it's absolutely gonna be part of the landscape in the future. Absolutely.

And I think it will be a secondary device sitting behind and communicative with a stationary energy storage system and a gateway device that is basically looking at the ecosystem as a whole and making decisions. Can I call in a thermostat? Can I call in water heater? Can I call in a car? And if the answer to all those is no, you can still say, oh, well, I can still call on the stationary system because it's always available for me.

Yeah. Just a comment on and we you said you don't wanna go down the vehicle to grid rabbit hole. And I guess that makes sense. If you're in the world of installing stationary storage, then vehicle to grid and stationary storage in the home do generally compete.

Right? I think one of the things that doesn't get talked about enough, just personally, is the size difference between those two systems. So, Jim, I don't know. How many kilowatt hours is a Sonnen home battery typically on average?

Typically typically in Europe, it's a a a twenty kilowatt hours. In the US, that that tips up a little bit. We we have our big houses and large air conditioners. So I think on average, you're seeing thirty, thirty, thirty five ish kilowatt hours in the US.

Wow. That's much bigger than I thought it was. I thought it was in a sort of ten, fifteen kilowatt hour range. So and then a car is probably seventy to a hundred or in in Texas where we are with the the the electric Hummers, absolutely huge things. Massive. You are then it's not an apples and pairs conversation because the EVs have got they're they're much larger, but the use case is much different.

That's sad. Well, I mean, just just to comment on that equipment if I can. I I I don't I I think what it what would be interesting for us as an industry is to reframe that where they're not necessarily competing. I I think they are I think stationary energy storage and and an EV or multiple EVs are complementary to each other.

And and and I think what we're most interested in, one of the things that we actually monetize today in Europe is the ability to vary the rate of charge of an EV. Not necessarily pulling from the EV, but when you're charging the EV, if you can if you can alter the rate of charge and respond to price signals in the market, whether that be for frequency or for energy, the ability to communicate with these EVs is gonna be very, very important. And it and it holds an enormous potential for the exact reason you said, Quintin, which is it's a massive reservoir that that needs to be serviced. And if

you can do it more intelligently, there's a lot of money to be had and a lot of savings for consumers to be had.

I must say I'm a I'm very bullish on vehicle to grid. I think it really, really excites me. And when I say compete, sorry. I didn't mean competing for, you know, competing for market share.

I meant meant more just there is a a gross capital cost in in battery cells. And so if you have to a vehicle is something that people will call us as, is essential. Right? They're gonna buy something.

And so there's a question about the most appropriate use of where to apply that capital in cells and whatnot. But, yeah, totally with you. And if you can vary or speed up your charging rate just to get you a few extra miles to get you out the door, if I could do that in the morning and know I could do the nursery drop off with a ten minute charge, That'd be a game changer for me anyway. Okay.

We're gonna we we we've got the last two questions now. The first one is if there's something you wanna plug, now is the time. This is your time to pitch whether you're hiring or you got a big project or there's something you're excited about. This is the one, and then we're gonna get to your contrarian view.

Okay. Okay. Yeah. I I think I think I think the big plug right now is markets are evolving very, very quickly.

I think they're they're evolving extremely quick. I think it is difficult for the built environment, fire code, building code to keep up with, but they're they're doing their best. I I think the plug and I won't plug a product. I won't plug a market per se.

What I I think what I'll plug is that the industry as a whole needs to continue doing a great job educating and bring bringing people into the fold. And and we need we need to do a great job of of explaining the differences between c and lithium iron phosphate or solid state batteries versus, you know, you know, you know, liquid electrolyte based systems and and and how we integrate those in into into our environment and to make things easier for consumers to to to then consume and become prosumers. You know, you you you have to have a very skilled salesperson, a very skilled firm to help you make great decisions today.

It's not it's not as easy as it should be. I mean, you could buy a car much easier than you can solar in an energy storage system for your home today, and and and it simply shouldn't be that. So I think what I would plug is we we we just need to continue to come together and work as an industry to make this easier to understand, to make this easier to sell, to make this easier to adopt in the built environment, and to understand that it it really is key to energy transition. Solar alone doesn't get us there.

The sun goes down every day. There are cloudy days. Even where I'm at in San Diego, it gets cloudy here. To have another asset sitting behind it where you can still be an asset to the grid and not just be like, today I'm helpful, tomorrow I'm not, is really important to the industry.

And that and that really excites me where we're going with this and and and how the markets are really enabling further adoption of energy storage systems with or without solar on the roof.

Hundred percent agree. There's also a lot of fear and uncertainty and doubt, particularly in the consumer world because the bad news stories, particularly around safety, get amplified, you know, a thousand times and because it sells newspapers or whatever. Not to sound too much like a conspiracy theorist, but there's some work to be done there. Now let's let's go to your contrarian view. What what's the thing that you, Jeff, believe that, not a lot of other people believe?

Oh, should I keep this industry pertinent?

You honestly, you can go you can go wherever you want. Wherever you want, everything's on the table.

I I think I think we touched on a little bit. I think, I think what I believe, and this isn't just because I'm in the business selling hardware. I think what I believe is that that's a little bit contrary to to the rest of the industry is that connectivity into the home with a firm energy store with a with a battery system is going to be the anchor of this ecosystem of electrically connected things. I I I really do.

I think I think a hundred and eighty five kilowatt hour EV, you know, Hummer EV is awesome. I think we should do great things with that. And we we wanna make sure that we can continue energy transition. We can do the right things for homeowners and businesses independent of what somebody's needs might be around an EV or their air conditioner or, you know, or their their pool pump or, you know, for Pete's sake, we once had a customer where, you know, he insisted that one of the loads that we needed to back up with his battery was his koi pond because he had hundred thousand dollar koi, and he wanted to make sure they didn't die in a power outage.

So we as an industry need to adapt to those types of things.

Crucially, it was one one hundred thousand dollar koi or was it There was multiple one hundred thousand dollars on aggregate added up to a hundred thousand.

Okay.

Yeah. So no. I think each koi was, like, a hundred grand. I he he probably had multimillion dollar of of fish in this pond.

Oh, wow. That's interesting. Them to die. So is that an NFT? Is that technically an NFT?

Koi in a pond?

I don't know. I think I think that's kind of I think that's kind of where I'm at is is is how how do we how do we make those decisions? And I think one of the interesting things that that you started to kinda tickle on and and I and I didn't go down the the rabbit hole was, what if the next car you go buy, Volvo, Ford, you know, Mercedes, whatever, what if that auto manufacturer says, hey. Your car comes with an energy storage system and an EV charger. That's our brand because we'd like your car to be part of a larger ecosystem, and we've partnered with Zonin, for example, to to help you do that in a better way. So I think that's a pretty interesting channel that hasn't really emerged yet. I know Mercedes tried it a couple years ago, but it it would be interesting to see if, you know, cars of the future do come with an energy storage system standard per se or, you know, a branded charger that is interoperable and bidirectional so that we can realize this this full ecosystem.

Very cool. I mean, if the cost curve for battery cells continues to come down as fast as it is, we're gonna be throwing batteries at everything. A bit like using, solar panels for fencing panels. We're gonna have to say it's gonna be the same thing.

It's gonna be the same thing. I I'm I'm with you.

So, Jeff, wanna say a massive thank you to you for coming on the podcast. And to all of our listeners, if you wanna check out Sonnen if you've got a Sonnen battery, then go you. If you wanna check out Sonnen and all the stuff they are they're up to, we're gonna put some links in the show notes. And watch this space. VPPs are coming. They're gonna have their time.

Absolutely. Couldn't agree more. Thank you for having us. It was really, a really great conversation.

Thank you for listening to Transmission, a MODO Energy podcast. Transmission delivers conversations from industry leaders and experts exploring energy markets and the operations and technologies related to grid scale battery energy storage. Check out our other episodes by searching Transmission wherever you get your podcasts.

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