To decarbonize the US electric grid, the key focus should not be on wide-scale decentralization of energy production and management.
We need to prioritize building a “personalization layer” between utilities and energy consumers to enable grid infrastructure renovation plans to truly reduce 40% of the US total carbon emissions.
To better understand this, we need to investigate why utilities exist and the incentives of the 250 people in the US that control our grid infrastructure. From there we can understand the real driving force behind the trend of Distributed Energy Resources (DERs) and Virtual Power Plants (VPPs). Once we have context on those two critical areas, you’ll see how a “personalization layer” is the real opportunity realm for climate entrepreneurs looking to build a solution that drives global impact and financial returns.
Contrary to popular belief, utilities exist to maintain — not renovate
We’ve all been frustrated when our power goes down and especially so when it goes down for extended periods of time. During those moments we turn to the internet to fuel those frustrations about how unreliable utilities really are.
Rightfully so, but what we need to realize is that utilities exist purely to ensure reliability across the grid to the best of their ability – regardless of which supplier you choose to use. The public utility model is a quasi-public-private partnership that was fundamentally started back in the 1800s and exists to ensure energy consumers get reliable and nearly at-cost electricity by rate-basing any new infrastructure needed.
This forced commoditization and control through the Public Utilities Commission (PUC) has spurred huge economic growth since then, but with changing energy needs we need a serious revamp of the infrastructure we decided on when Edison and Tesla were going at each other.
A lot of our anger is misdirected, as asking utilities and broadly the PUC to solve our modern-day energy needs is like asking a monkey to become a world-class swimmer as opposed to doing what it’s best at – swinging from trees.
Utilities and the PUC’s purpose is to ensure electricity rates are near at-cost and reliable with the infrastructure architecture we’ve laid.
DERs, VPPs, and Solar broadly serve an energy consumer’s specific needs and goals
We have to seek innovative infrastructure solutions elsewhere, which has led to the rise of solar on our roofs and the movement of Distributed Energy Resources (DERs) & Virtual Power Plants (VPPs). Effectively, we’ve moved towards just building our own power plants and backup power to ensure our rapidly growing energy needs are met in a cost-effective way.
A lot of this is thanks to the solar ITC creation in 2006 by Bush and then extended and expanded by Obama in 2009.
Due to this, people and companies in areas where energy is unreliable began to invest in solar + storage systems. Naturally, adopting any type of energy efficiency solution or solar is always justified with the financials but in reality, it’s an emotional purchase caused by changing energy needs and poor experiences.
During this buying process – where you’re naturally maintaining your anger against the utility you buy from – you get personalized system sizing and solutions from local solar installers who thoroughly understand your specific energy needs and goals.
The past decade for solar and storage has been huge. Many consumers are buying and even the grid has begun to decarbonize through the installation of large solar systems which are included in utility Integrated Resource Plans (IRPs). The consumer demand here actually influenced a new “Trusted Energy Adviser” role that existed back in the early days of utilities.
There actually was a time when you’d call your local utility to buy things like washing machines!
Today we’re getting a similar experience from solar installers who are customizing solutions specific to your homes. Communities are getting a similar experience from EPCs (Engineering, Procurement, Construction) when getting microgrids deployed – which falls under the DERs bucket.
This entire tailoring and personalization process is actually something that requires capturing data on your energy usage and understanding your upcoming purchases – like buying an EV or swapping your HVAC over to a heat pump. Once you have a tailored solution for your home or community (depending on what scale you’re serving regionally) you only then go to the utility to interconnect your system into the wider grid.
These kinds of tailoring and personalization efforts end up capturing a ton of localized data on individual homes. Everything from HVAC usage, energy usage profiles, and patterns can provide an installer the ability to identify efficiency upgrade opportunities and energy resilience-building upgrades that are also climate-friendly, which resolves the emotional need that may have led you down that path.
To decarbonize the US grid we need to provide region-specific proposals personalized to the region’s specific needs
Now that we understand that utilities and the PUC will do what enables them to both maintain reliability across the grid and provide electricity at a near at-cost rate AND understand that the rise of DERs (solar + storage) is due to the hyper-personalization of the needs/expectations of the consumer – be it residential or commercial – we can see a link between personalizing infrastructure plans and having the utility + PUC of that region keeping that infrastructure running and affordable to customers.
Companies and startups today are missing the opportunity by going to utilities in the hopes that they play the role of the “Trusted Energy Adviser” when in reality they should become champions in concentrated regions where they either have a hardware or software solution that serves reliability or climate-focused concerns of consumers.
The goal for companies should be to find any way possible to aggregate a statistically significant amount of data around energy usage and energy efficiency profiles of individual homes and commercial properties – behind the meter. The companies that pull this off can suddenly tailor experiences just like our experiences and recommendations get tailored to on platforms like YouTube, LinkedIn, and Twitter.
Being able to factor in and predict energy consumption and build a plan specific to a region allows these companies to be included in proposals that turn communities into microgrids and are largely supported by renewables.
These companies then can participate in the long-term revenue these new infrastructure developments can kick off in both deregulated and regulated states. All it takes is being that personalization layer for a community of any size and coming to a utility with a proposal that they can buy, own and operate (usually). They can then take that proposal and get the PUC to approve it to be rate-based for the consumers in that region.
Here are examples of this beginning to emerge
The companies that are winning in the energy space are already prioritizing this “personalization layer” to win customers and decarbonize the grid rapidly – with the support of utilities and the PUC.
The beauty of this is that new business models are being opened up by policy shifts like FERC 2222 to enable a transactive grid where energy can be bought and sold from your neighbors. Beyond that companies are working on solving different parts of the data problem by building affordable and high accuracy sensors to understand appliance level energy consumption at homes and commercial buildings.
Solar installers are almost becoming advocates and community leaders that understand the future buying behavior of consumers in that region. Startups are working on optimizing energy usage throughout the home/buildings and capturing data on how, when, and where energy should be consumed to provide an optimal usage profile.
Utility-scale EPCs are now using that data and information to better design and architect solar projects and utilities are using these various data streams to make better buying decisions to ensure they can meet their north star metric of reliability. While the PUC is using policy levers to ensure consumers get the renewables they want by creating new markets within the grid to make the financials of DERs more attractive.
Fundamentally, solar and the broader sustainability movement paired with the advancements in IoT solutions, AI, connectivity, and EVs have ushered in a full transformation of the grid by opening up a new “personalization layer” for new companies to come in and play a role in rapidly decarbonizing the grid.
In turn, enabling us to reduce the US’ carbon emissions by 40% and win a small battle against climate change.
About The Author
Swarnav S Pujari
Founder of The Impact
Swarnav has over 10 years of experience in the energy & climate tech space, holds 2 patents and is active in the tech, climate and media industries. He specializes in Product/Product Innovation as well as Go-To-Market and Growth Strategy.
By training he’s a Materials Engineer with a background in research from his time at Georgia Tech and University of Illinois (UIUC).
He founded TouchLight a utility backed energy company focused on developing IP for utilities and startups pushing electrification forward. He also serves as the appointed Chairman for the Town of Yorktown’s Climate Smart Communities Task Force, where he helps with drafting legislation and enabling sustainability efforts within the town.
Concurrently, Swarnav founded The Impact to help investors, emerging founders and driven climate enthusiasts discover and identify new climate-tech startups, technologies and opportunities before they hit the traditional media sources.