41 min read

🎧 #059 - Cisco DeVries on gamifying grid flexibility and why fighting climate change depends on it

“If you get utility rate payers to act together like a symphony and reduce their energy a little bit at these key times, that net effect is actually remarkable."


—Cisco DeVries

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Episode 59 is a conversation with Cisco DeVries, CEO of OhmConnect, a startup in the grid-interactive building space.

Summary

We unpacked why all of you listening to this should, and eventually will care about virtual power plants and grid interaction, and how OhmConnect is enabling it today in California, Australia, and soon, Texas.

And how could I forget, Cisco candidly shares his experience of being featured on John Oliver's HBO show, Last Week Tonight. So don't miss that.

Without further ado, please enjoy Nexus Podcast, Episode 59.

  1. OhmConnect (0:36)
  2. Last Week Tonight with John Oliver (0:59)
  3. PACE (2:51)
  4. Matt Golden (6:32)
  5. Zynga (22:31)
  6. Resi Station (46:07)
  7. FERC Order 2222 (46:07)

You can find Cisco DeVries on LinkedIn.

Enjoy!

Thoughts, comments, reactions? Let us know in the comments.

Highlights

  • Cisco's response to John Oliver's segment on PACE (6:25)
  • What is OhmConnect? (12:38)
  • The two primary problems OhmConnect had to solve: engage consumers on one side and sell their aggregated demand on the other. (17:38)
  • Why grid interaction in California is mostly focused on residential buildings right now. (25:21)
  • The two reasons we need grid interaction and why every building will need to do it (28:15)
  • the public policy side of this and what needs to change to unlock this concept worldwide (45:40)

Music credit: Dream Big by Audiobinger—licensed under an Attribution-NonCommercial-ShareAlike License.

Full transcript

Note: transcript was created using an imperfect machine learning tool and lightly edited by a human (so you can get the gist). Please forgive errors!

James Dice: [00:00:03] hello friends, welcome to the nexus podcast. I'm your host James dice each week. I fire questions that the leaders of the smart buildings industry to try to figure out where we're headed and how we can get there faster without all the marketing fluff. I'm pushing my learning to the limit. And I'm so glad to have you here following along.

Episode 59 as a conversation with Cisco DeVries, CEO of OhmConnect, a startup in the grid interactive building space.

We unpacked why all of you listening to this should, and eventually will care about virtual power plants and grid interaction, and how OhmConnect is enabling it today in California, Australia, and soon, Texas. And how could I forget, Cisco candidly shares his experience of being featured on John Oliver's HBO show, Last Week Tonight. So don't miss that.

Without further ado, please enjoy Nexus Podcast, Episode 59. All right. Hello, Cisco. Welcome to the show. Can you introduce yourself?

Cisco DeVries: [00:01:08] Great to be here. Thanks for having me. I'm Cisco DeVries. I'm the CEO of OhmConnect based in Oakland, California.

James Dice: [00:01:16] Awesome. Excited to dig into what M connect does. Can we start with a little personal introduction though? Can you give us a little

Cisco DeVries: [00:01:23] hit at your, your background?

Yeah, I am not your traditional tech or energy CEO. I didn't start off to become an entrepreneur. Instead, I actually was a appointee for president Clinton and the U S department of energy among some other roles in his administration back in the glory, days of the mid to late nineties. I went to graduate school in public policy at UC Berkeley.

So I say public policy graduate school is like, if you're just too dorky to handle getting an MBA, that's, that's your choice. And I was exactly right. And I have wonderful experience and great friends, and I learned a ton of grades. But one of the things that you really figure out in all of this is, is that what I should say, one of the things that I really figured out about myself and all of this is once I get sort of fixated on a problem, on a problem we can solve, it's really hard to get me off of it.

And I think that's kind of what led me down the road to starting companies was one after another, just like looking at a problem, like, Hey, how do we solve this? And then at some point with financing figured that there was a way that we could solve this problem, that involved the private sector as well.

And I just kept going and moved on over. And so I fit the last 15 years as a, in the startup world now.

James Dice: [00:02:45] Awesome. Awesome. So one of the things that, you know, it sounds like you're well known for is the creation of PACE financing. Can you, can you talk about that and you know, what is pace and kind of where what's the state of pace today?

Cisco DeVries: [00:03:01] Yeah. So pay stands for property assessed, clean energy, and the concept is actually really simple, which is we can let people do improvements, solar or energy efficiency type improvements on their homes or business. And instead of having to pay the full upfront cost of that improvement you can instead pay it over 10 or 20 or even 30 years as a line item on your property tax bill.

So it just becomes another element of your property taxes as a specific line item. So you'll see how it. A school bond or a sewer fee or whatever, and then there'll be your, your pace assessment. And so it's a great way in to open up long-term relatively low cost financing to a whole swath of people who might not otherwise have access to it.

But certainly just to, to line up the fact that energy project. We reduce energy bills, but do so, you know, modestly over years. And now we can try and align those energy savings and energy bill savings with a payment on your property tax bill so that people can end up, you know, not being out of pocket, anything even on an annual basis.

So I was really focused on how we deliver financing, how we get people to do solar and energy projects given the upfront cost issue. And that led me down the road. Of figuring out pace. So the thing to realize about properties as clean energy is that and look, I'm proud of the role I played in creating it is that it's a little bit like inventing a peanut butter and jelly sandwich.

I didn't invent peanut butter and I didn't invent jelly. I am just the guy that figured out that makes a yummy sandwich. And what I mean by that is the law we use in California to allow pace is actually a hundred years old. And it's been used thousands of times in communities across the state. It's rare to have a community that hasn't used this rule, but it's been for some other things like underground utility districts or paving streets or other things.

So all I did was sort of figure out this existing state tool could be used to fight this new battle and then got the very first kind of program up and running and kept working on that for, for a number.

James Dice: [00:05:17] Really cool. So that's how it's kind of spread across the country then is that all these different states probably have that same statute that they can then apply

Cisco DeVries: [00:05:25] really a good point.

Exactly. Right. And so I think oftentimes in the battle on climate or energy, We get pretty excited about shiny new objects and brand new ways of doing things. And in my experience it is actually a lot easier to make change by adjusting something old that people already are familiar with than it is to create something that might in theory be better, but is brand new.

And that's a tough trade-off, but one of the things that happened with pace is that because essentially every state had a version. The law that California had. In fact, the concept dates back to the 17 hundreds in Philadelphia. Oh, wow. There's actually a connection to Ben Franklin and there's somewhere.

Which is pretty cool. Yeah. All we need to do is amend this little rule and there we go. And now I think, you know, 35 36 states have adopted pace legislation and there's been, you know, I dunno coming up on $10 billion worth of projects. Wow.

James Dice: [00:06:25] Really cool.

So, So obviously there's something to bring up here that happened in the mainstream media. I saw a post by, I think it was Matt Golden, who's a mutual connection of ours, talked about PACE being on John Oliver. And I was just watching it yesterday before this interview, and your name popped up on there. So it's been quite the interesting week for you. PACE has become a famous topic this week in the US and you were part of it. So how's that been?

Cisco DeVries: [00:06:56] Yeah. Well, I think infamous is the word you're looking for actually.

So yeah, John Oliver, one of my favorites, of course, it's gotta be your heroes picked up on a real issue that showed up on PACE, which is that that there are two problems that have really emerged with PACE Financing. And we'll talk about all the good stuff cause, because John didn't, but let's just focus on what has gone wrong or where the funds have been.

And the first problem is that the home improvement industry, folks who do home contracting work, it's a pretty lousy industry as far as quality control and customer happiness. And I'll often like if I was went back when I was doing PACE, and it's been a few years since I'm involved in the PACE industry, but in front of people it'd be taught me.

I'm like, all right, those of you who own a home, how many of you have done a home improvement project? And people would raise their hand. I'm like, okay, for how many of you has that gone awesome? And like everybody's hand goes down, maybe one or two step I'm like, right. So here's the problem, we are counting on that industry to save the world.

Yeah, and it is not up to that challenge, right? So we got to figure out what to do about the fact that the folks doing the work in the homes tend to be mom and pop shops. And some of them really have quality challenges and other things, and most of them are great. I mean, this is not to say that there aren't mostly great contractors out there, but this is a tough industry.

And it also has some folks that are fraudsters. So we in the PACE industry, when I was still in it, and then subsequently having left, didn't do, in some cases the best job of figuring out how to squash that, how to deal with that. At the same time, it's also way bigger than PACE. So just assuming that pace can somehow solve that problem

was a mistake. There is a role for government to come in and figure out how we're going to regulate and improve that industry. There's another problem in that, not all the PACE companies have necessarily taken all the steps that they should have taken to protect consumers as well. And so I think both of those are real issues and you know, I think if you look at the overall numbers and say, oh, there's been hundreds of thousands of projects, and frankly there's only been a, you know, really a handful of terrible outcomes.

And, but, you know, and that's on a statistical basis, that's true. But it doesn't stop the fact that if a grandmother gets bamboozled by some home improvement contractor using PACE, that is just a terrible outcome. And we have to figure out how to resolve that issue. So John Oliver jumped in and I think went down that road pointing out that I was the inventor of pace and that my name is funny.

And then moving on. And I think, you know, it's fair to point out where things have gone wrong. What I think is unfair or more challenging here is what are we going to do to fix it? And how are we gonna fix it fast? Because we don't have a lot of time and climate to just be like, the perfect is the enemy of the good year.

So I'm a hundred I'm in favor of zero grandmothers being bamboozled. We need to stop this, but we also need to figure out how to not let the perfect be the enemy of the good and not be moving forward with large scale energy retrofits in homes. And I do think John Oliver missed the boat in really trying to at least acknowledge the challenge that we face in trying to deal with these issues.

James Dice: [00:10:14] Yeah.  I felt like it missed the boat. I feel like it was unfair to you and your name, but I also felt like he missed the boat in terms of like, it was almost like he spent 20 minutes talking about it, but not addressing the fact that climate change is a huge issue and much bigger issue for all of us, then a couple of people getting screwed on their homes.

Yeah.

Cisco DeVries: [00:10:33] Totally. Look, he's a comedian and yeah, I guess my name is funny. I'll, I'll talk to my parents about that. But the reality though, is there's one thing to come back around both the 10 years I spent at PACE, all the work we've done, the challenges have come up is that this is hard.

Change is hard. Dealing with climate change is hard. It touches a lot of different parts of people's lives. And we're both going to have to get faster and more nimble, but we're also going to have to get better because we can't just keep, we can't make this, you know, I, you know, I was probably a little naive going into PACE about what was going to happen when it scaled and we can't make it, you know, I'm not going to make that mistake again.

And I think in general, we can't make that mistake again. Yeah, absolutely.

James Dice: [00:11:14] Cool. Well, thanks for sharing your side of your side of things. Selphyl it's just, for me, I felt like, you know, being as like all of us that are fighting for the clean energy industry, seeing that come out in a negative way, it was just like, well, yeah, we're, we're trying really hard.

That's not helpful to have you know, mainstream people like John jumping on it and that.

Cisco DeVries: [00:11:38] Yeah. And, you know, he could have easily written the other piece, which is all the good, you know, but the other side of that, I, I I'm with ya and it is frustrating. And I think our, the climate warriors spend too much time getting in a circle and shooting at each other.

Yeah. For who's got the better climate warrior plan or who made a mistake with what climate effort. And I think we need to stop that totally.

James Dice: [00:12:01] All right. Let's talk about what you're doing today. So you said it's been a few years since you're working on pace. So what is it and, and how does it, how does it work

Cisco DeVries: [00:12:10] own connect?

I, so I joined home connect to CEO a couple years ago, but the company is seven years old and it was founded by a group of just incredibly talented, thoughtful people who I'm thankful every day had both the fortitude to stick with a really difficult person. Yeah, and the skills to help try and solve it.

And then I'm also thankful that a couple of years ago, as they really solved the problems, they invited me to join them as the CEO. And so I get to claim credit for all their great work. OhmConnect is actually a really cool fun idea, that is incredibly important, but also nearly impossible to pull off.

Okay. Here's what it is. So the idea is that we can actually pay individual residential customers, electric customers to reduce their energy use during key times when the grid is stressed and dirty and expensive. And so if you get residential utility rate payers, get residential customers to act together like a symphony and reduce their energy use in their homes a little bit at these key times that net effect across hundreds of thousands of homes is actually remarkable.

It's hundreds of megawatts, then now we're going to soon be talking about gigawatts, of energy reductions. And you can pay them because those energy reductions, the reduction in energy use as measured, not just theoretical, but measured at meters sold into the wholesale electricity market as if it were power.

So, what you can do is turn hundreds of thousands of homes, reducing energy, a little bit all together, essentially into a virtual power plant that instead of producing power reduces the need for power, reduces demand, and takes the place of traditional fossil fuel peaker power plants that would otherwise have to turn on.

And really the best part is federal law for 10 years has already required all the wholesale markets to treat demand reduction megawatts exactly the same as supply production megawatts. So a megawatt of reduced demand should be paid exactly the same amount of money that a megawatt of supply produced of generated from a natural gas plant.

So here is all of a sudden, this is what I love is like, oh, there are billions of dollars transacting. Right? Already that are going essentially from rate payers, paying their bills back through the wholesale energy markets on day to day basis and over to these fossil fuel generators to burn fossil fuels and generate power.

And instead we can start to redirect that flow towards individual customers so they can in fact earn the money for the reduction. So it makes everybody their own little power plant. So, OhmConnect's slogan is just, save energy, get paid, and people do. That's the thing, people's minds kind of blow up when you hear about it.

It's like, if you reduce energy, use a little bit, I will pay you a cash money. Yeah. And so that's how OhmConnect operates. And today we are about 160,000 - 170,000 customers in California. Okay. 55,000 customers in Australia and launching into Texas in the next few weeks. Cool. Okay. And altogether we can reduce, you know, 100 to 200 megawatts of energy at a given time.

And that's both useful day to day on the grid, but it's also useful in emergencies when supplies are short.

James Dice: [00:15:47] Very cool. We actually have quite the audience in Australia. So you might, you might be hearing from some

Cisco DeVries: [00:15:52] nexus. I'm happy to, it's been, we launched in partnership with origin energy in Australia a year ago, almost a year ago, not even.

And it's been a great partnership. It's the first time we've ever partnered in our program side with the utility or energy and comment, and we were nervous about it. But I have to say that it's been a, it's been a great part.

James Dice: [00:16:10] So obviously this is a residential program right now, but the reason I wanted to have you on and unpack this is because, you know, obviously there's a trend towards buildings, commercial buildings as well, eventually interacting with, with the grid, providing this kind of the same grid services.

So let's zoom in on the, like the consumer side of this real quick. So one of the things I want you told me about the last time we talked was like, if you Google. Is connect and then stop it, it autocorrects to a scam. So like, how has it been sort of managing the, you know, the consumer side of this and like you know, convincing people that it's not too good to be true.

It just is

Cisco DeVries: [00:16:53] the way it is. Yeah. Well, let, let me do it right now and then I'll just read off some of the that's all I'll do it right now. I'm going to read off some of the Opportunities here it is his own connect. I just started to write it down. Is that connect legit? Is it worth it? Is it safe? Is it real?

Is it a scam? So you got your whole list of options legit, legitimate. And that is our biggest challenge people. We're a free service that gives you free smart devices for your home and pay. Right. And so people are like, oh, all right, that's not a thing what's going on. That's a scam of some kind, what are you really getting at there?

But and So we spend an enormous amount of time trying to figure out how to get people over that reluctance to trust us and to trust this concept and look, ultimately, they do have to trust OhmConnect to work with them and help manage their energy. But that is a lot easier for us to do if they at least trust the concept.

And so we're really working on both of those, how to get people to understand how this works. And that is really the number one thing that we're about. Only about like we have people come in sign up a lot of people just kind of bail out because they're like, oh, they get nervous or they're not really sure, or whatever. So we've been really trying to figure out how to engage people and, you know, that's a place where like, we were like, okay, what have we brought in an A list actress to like, help us explain at that moment. And so we were trying that like, we're like, okay, how do we help people believe this is actually safe and, and not a scam.

Yeah, I went to your website

James Dice: [00:18:35] and like the first it's very prominent video of Kristen Bell pops up and it's like, yeah, I can see that that's just a challenge. And this is a challenge that you guys are living right now. I think that in the commercial side of things, there are a lot of companies with similar approaches to the market and they're going to need to approach this same problem, obviously to a different, you know, a different stakeholder.

But I think it's a huge like, why should a building owner care about interacting with the grid? I think it's a huge hurdle that not enough people talk about. You know, the DOE just came out with this, you know roadmap for grid interactive buildings. And I was a little bit like unenthused with the actual piece of it around like the perception of why they should care.

Right. And getting over that initial hump of people's attention, basically.

Cisco DeVries: [00:19:29] It's a challenge in the commercial space and industrial space. That's the challenge in the residential space and while they're slightly different audiences. It's exactly there are very big similarities between them.

And I think ultimately, you know, both the commercial property owner or renter or anything else in a residential customer faced the same questions, which is, what the hell is this and why should I do it? Why do I trust this? This seems sketchy. The second is, oh, is it going to, is it going to be an inconvenience or cost me money?

Or is my food going to rot in my fridge? Or am I not gonna be able to run my business when I need to? Like, there's a lot of fear that comes about what this could mean and how you address those things. And then there's a final point, which is, is it worth it? Okay, maybe it's not a scam. I can buy that.

And maybe I'm reasonably confident you're not going to let my food rot, or you're not going to turn off my kitchen in the middle of the lunch rush at my restaurant or whatever the issue is. You know, is the juice worth the squeeze, right? And am I going to get paid enough? Is this going to be worthwhile enough?

Is it going to be called all the time? How's that going to work? And so you really have to solve all of those issues in order to get anybody to allow their building or home to be used like this. And I think that's where I'm connected actually excelled is it really got built from the customer app, which is let's start, not with utility programs or government.

In fact, there wasn't any of that at the time and just let's build this concept and see how we get customers to engage. Okay. And then start building and go from there. So the customer side first, I think that's pretty unusual in the energy industry, right?

James Dice: [00:21:15] Absolutely. Oh yeah.

And yeah, especially in the, you know, the contractor world, like all of those are kind of, you know, I have this widget, here. Right? Versus the other way around. So how have you guys solved that progression of the way you just described there?

Cisco DeVries: [00:21:34] Well, I mean, look, it's a work in progress, but the reason I'm here today is that we've solved two of them. We have more or less solved, or at least partly an importantly solved two of the most difficult challenges.

The first one is how you engage a customer and get them to do anything about energy and then do it again and again and again, right? That's like the white whale of this, of our world. And the second is then how do you get all of those tiny little energy savings organized and aggregated and done in a way that can be used and understood and executed in the energy markets as if it were power from the pipeline.

And that's really where things had come in. A couple of, you know, where I came in a couple of years ago, it was really having finally, after five years cracked that nut. On the first side, how do you get consumers? The chief technology officer of the company, who's one of the sort of early days founders was the CTO at Zynga.

The large game maker that was  essentially invented or at least sort of popularized social gaming, words with friends and Farmville and all of those things, if you remember. Okay. So he was with them from zero to going through going public. And they went from, you know, a few thousand people or whatever it was users to, you know, hundreds of millions around the world.

And that focus of like, It's not one thing. It is a constant set of how of testing. So we're testing every day we were testing every week. There's probably hundreds of multivariate tests going on, where we're learning, how does a customer engage with us in terms of sign-up? In terms of the sign-up flow. In terms of their performance during an event there, how do they decide to get a device and connect it with us?

All of those things are things that we test relentlessly. And so when I arrived at the company, I was like, well, what's the secret sauce? No one else in the world has figured out how to do this successfully, and we have. Now that I'm here, can you let me in on the secret? And they're like, nope, there's no secret..

It was just really hard. It's like, it was just, it's like a 0.5% here and 1% improvement there and just do that year after year after year. And all of a sudden you have something that works, but it's based on the fact that we have enormous amounts of data and we've done 40 million tests.

And out of that, we've learned, and our algorithms have learned how to do things better and how to predict performance and all those things. But it was very much a start with the customer and build up. And that's how we got it done. Credit Kadir Lee and his team had to do as the CTO for bringing consumer tech and gaming into this.

Hmm. Which, you know, is a huge part of it. We've created a game, it's kind of fun. If you win the game, you get paid and the better you get at the game, the more you get paid. And it just so happens that this in our game, the game is learning what in your home uses the most energy and what you can reduce conveniently and easily when we need you to.

James Dice: [00:24:41] Absolutely. That's so cool. And I saw that there's like, there's a hashtag  hour. And like, you know, there's some sort of social media virality built into it as well.

Cisco DeVries: [00:24:52] That's right. And we have this great community of people like on Facebook and Instagram that are all chatting about how they do stuff and what they do.

And it's been fun. Really cool.

James Dice: [00:25:01] I think there's, there's at the same time, a lot too. Learn by that, but in the commercial world, like most of this audience, there's, there's different things that need to be applied in, like from jumping to residential or commercial that we're going to have to, like, those people are going to have to crack those nuts.

Cisco DeVries: [00:25:21] And I mean, somebody who commercial's always been a little further ahead of residential in this space, right? Because you have larger facilities that can reduce larger amounts, more predictable ways. It's bespoke. They're one-off often or you know, that it's not a mass produced thing like we're doing with residential.

The problem on the commercial side though is not just that we need to get better at scaling commercial and commercial building demand, response and DER in general. It's also that the time of day that we need demand response has changed. And so it's less important that it's commercial now and I'm not sure people have grokked that totally.

You look at California, when do we have our, when do we have our, our peak? When do we have our problems? It's at eight o'clock at night. Wow. Okay. It's happening because it's when the sun's gone down. So when the sun goes down in California, we lose 10 plus gigawatts of solar or more, right. We lose this enormous resource and it's at the same time that all these people are getting home, turning on their air conditioner and doing their dishes and wash, doing their laundry.

And the kids are fired up all the devices they can fire up and all that's happening. And so what you see is this massive ramp met mostly by natural gas. Every night. And that ramp is, you know, in California is often 15 gigawatts in three hours, which is the equivalent of turning on like almost 20 San Francisco's across the state of California.

Wow. And there's no renewable to meet it for the most part. That's almost all met by traditional generator. So with that problem, you have to be able to deal with the eight o'clock at night where you're 65% of your demand is residential. You've got to figure out a soft residential, and then on the commercial side there's stuff they can do.

But there's generally a reason commercial entities are running eight o'clock at night, right? They're less, that is less flexible commercial demand than you might otherwise have other times. So one of the reasons I went down the residential road and connected to home connect to everything else was because I became pretty convinced that is important as commercial is, residential is much more important because we have to solve that evening peak when the sun goes down or we're going to blow up the grid.

Absolutely.

James Dice: [00:27:36] And I'm one of the places where the two kind of combined together is like a multi-res, like bigger buildings, but a bunch of apartments that's

right in there.

Cisco DeVries: [00:27:44] So great way of handling it and something, frankly, I don't think we haven't done yet. Really much of the renters, people who live in the building may participate. But in terms of like the scale, you can get a multifamily is something we're just beginning to explore.

Really cool. Really cool. Yeah. There's probably a bunch that can be done there.

I'm just thinking about the building. Yeah. Right now, you know, it's a central HVAC system with local thermostats, obviously local local zones. And there's probably a ton that can be done there as well.

James Dice: [00:28:15] So in terms of the climate change aspect of this, then, so there's one piece here that you're talking about, which is grid stability, right? Let's let's not

pull down the grid at 8:00 PM when all those people fire up their air conditioners. The other piece of it, right, is we want to run 24/7 on renewables. So that's the way I'm understanding it. This is a buildings guy coming into the climate change problem, but do we need big commercial, medium commercial?

Do we need all of these to eventually become more flexible in the way that they use electricity to solve both of those problems?

Cisco DeVries: [00:28:53] Yes. Well look, ultimately we need essentially every building to be grid interactive. Okay. And I think that traditionally we've called this demand response, which is, I think an outdated term.

And at the very least, it, it means something to old school energy people that doesn't reflect the current state. So let's just break that down a little bit for a minute.

James Dice: [00:29:16] Yeah.

Cisco DeVries: [00:29:17] What are we trying to solve? As you just pointed out, like really well, is that we're not just trying to solve one single problem here.

We've grown into several problems. So problem number one is the grid in the United States is old. It is fragile. It is in need of a $4 trillion upgrade and it was designed to be one way, meaning large scale generation down through transmission to distribution, to homes and businesses. So we have a fundamentally flawed and old and falling apart grid.

And I don't think people really understood how serious that problem was until what happened in Texas happened in Texas, right? Where the grid has collapsed. And you're like, oh, things are not good. So on top of that, we're adding climate stress, massive heat waves, cold snaps, all this stuff is actually then stressing the grid, which is already stressed and old, et cetera.

Now you add on, so we have these emergencies. So we say like, we have, you know, heat wave emergency in California, we have blackouts or a cold snap in Texas and blackouts, and we're going to see a lot more of those things. That's the bigger scale, like, oh my gosh, we're gonna have more emergencies, but then there's the day in and day out emergency that happened simply from renewables.

As we add more renewables to the grid, it's great. They're cheaper. They're clean, you know, we're all in favor of them. At least both of us are.

James Dice: [00:30:45] Mostly.

Cisco DeVries: [00:30:47] Probably unless you're just your hate casting. We should have a whole, like, instead of podcasting, like a hate casting. Like you just listen to people that drive you crazy and you totally disagree with. All of us, probably listening to this are believers in that, but we have to accept that there are shortcomings of renewables, which is they are intermittent at all times, wind blows or doesn't blow, the clouds cover over facilities, solar facilities.

And we also know they're intermittent every night in solar because the sun goes down. It just turns off like that's just a plan to intermittency. And so because of that, we have to be able to figure out how to adjust to demand in real time. And because we can't just adjust supply anymore, like we used to. We have a non flexible intermittent supply.

And so therefore we have to create a flexible demand and that turns the hundred year history of our grid on his head. Yeah. And so what we're trying to do here is rapidly put renewables to work and then solve the intermittency issues. And really there's only two ways to solve the intermittency issues

and these challenges. One is storage, which we need tons of and is great and getting cheaper, but it's nowhere near the scale it needs to be. And two, we have flexible demand. We have the ability for buildings to respond to demand, to the changes in supply. We've got to do both of those things at enormous scale. To date, everybody loves batteries.

You can touch a battery, you can hold a battery. It's like, oh, it's a pretty battery. Like, it just, it feels like it's a storage unit. Like I have a gas tank now I have a battery. Like it's a thing when it holds energy and it is incredibly appealing from some sort of psychological way, right. The rigidity to reduce demand is actually way faster and cheaper and we're actually doing it at a huge scale, but no, it's not cute and cuddly. So we really have to figure out how to get demand, response, flexible demand to become cute and cuddly, like storage that appears at least visible. But that's what we're trying to solve for, those are the problems we're facing as with the grid, climate change, and renewables.

And those are the only two solutions we have besides burning fossil fuels to generate power. And we've just overemphasized storage to date, or at least I shouldn't say that we've probably emphasized storage plenty. We should probably even do more. We need to emphasize flexible demand at the same level we're emphasizing storage.

James Dice: [00:33:22] Yeah. It's like, there's this whole other piece of the marketplace that's like, I got my diesel generator fired up, you know, they don't want cute and cuddly. They want like, you know, a different marketing message or branding message.

Cisco DeVries: [00:33:34] That's right, exactly. Well, yeah, exactly, well, that's like the Ford F-150 I want a badass battery.

I want a battery battery too, let's do it. A long time ago, I realized that I was done trying to convince people that climate change was real and we should do something and I'm all about trying to sneak it in.

James Dice: [00:33:49] Yeah.

Cisco DeVries: [00:33:50] Like if you choose to battle climate because you're getting something else you want,

great. I don't need to convince you of anything, you're doing what you need to do. Like, so I call it like the kale in the smoothie, probably because I'm a dad, but like, you know, when your kids are young and they won't eat anything green, you're like, how about a smoothie? And like, I do love smoothies.

You're like, great. And then like, while they're not looking, you're stuffing kale into the blender and I'm like, this is a perfect metaphor for climate. Like I don't need them to believe they want to eat spinach. I just need them to eat this.

James Dice: [00:34:21] Yeah, absolutely. That's awesome.

Hey guys, just another quick note from our sponsor nexus labs. And then we'll get back to the show. This episode is brought to you by nexus foundations, our introductory course on the smart buildings industry. If you're new to the industry, this course is for you. If you're an industry vet, but want to understand how technology is changing things.

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So do I have right then that, like these changes are happening rapidly to the grid in California and then now in Texas, a little bit in New York, but eventually they're going to, it's going to spread throughout the country over to Europe.

Like, like these problems, we have to get

solved everywhere. Well, and you already see the fragility of the grid and the number of blackouts across the countries. If you look at the data they'll reliability of the grid in general is just, is, is declining pretty dramatically. And that's not just a California and Texas thing that is national and international, the issue around, you know, and every state and every place that's chosen, some sort of zero carbon grid plan.

You know, which is much, if not most of the country and now much of the, sort of, you know, the world in Europe and parts of Asia you have to confront this. There's like I said, there's no way you can have a zero carbon grid and not do flexible demand. You'll just blow it up. Yeah. There are places you're seeing more of this for different reasons than others, California being one it's further ahead on the renewables curve.

But if you look at New York, And just to understand for a second, the like they've had forever an enormous problem getting generation of any kind down into the city of New York. So the everything's upstate or out of state. And then there are just a certain number of ways to get those electrons into the city of New York.

Right. And it's immediate area, and that's just created enormous problems over the years as well. And it's going to worse as we lose fossil fuel generation. So they're struggling and scrambling with. And then add on top of all of that, we're gonna electrify all the vehicles. Right? Right. So that's the, like the sneaky little thing at the end of this that we didn't even talk about yet, which is how in the heck are we going to take this fragile grid?

That's already failing that. We're trying to push renewables onto, and at the same time, assume that everybody's going to plug their car in at night when they get home and it's going to be okay.

Right, right. You know, I have an electric car, it uses a ton of electricity when you're charging. So all of these states everywhere on the country, whether you're into climate or not, you have to start solving for the fact that you have your electrifying vehicles and other things. And then you've got Biden's clean energy plan, which is envisioning a transition by 2035, which is important and great.

Yeah. We are not. Yeah, I w I want to

talk about Biden and sort of overall regulation in a minute. Can you, can you talk a little bit about, like, you guys are one type of virtual power plant, right. That solves this problem that we're talking about. What are the other types like? Cause we're hearing this word, virtual power plant.

We're hearing this word aggregator a lot more and I don't know. Those terms. So a lot of what I do on nexus is try to translate acronyms terminology. So people and try to try to like demystify some of it. So like, what I'm getting a sense of is that there are a bunch of different types of aggregators across the different problems that need to be solved across the different building types, across the different systems that are being aggregated.

You guys are just one of those. Am I thinking about that correctly?

Cisco DeVries: [00:38:23] Oh, absolutely. And I think part of the problem with the virtual power plant term is just that it does mean different things to different people in different ways. And it's not like if you look it up on the internet, which at one point I did, I was like, oh, you can kind of make almost anything into a VPP.

Yeah. And that's not as they bad because essentially where I come down on it, and this is a fairly loose definition, but  I think it's reasonably fair is just to say anything we can create, that mimics the characteristics of traditional generation in some important way, but is in fact distributed across lots of locations,

it's not centralized. That's kind of what we're getting at with a VPP, right? What we're saying is it's not a single power plant, but it operates as a power plant, that it operates as a network of things across a wider area. You know, people can argue, I'm sure that people will argue that I've missed some important component here.

But the reason I say that is we overemphasize the power side. Oh, it's storage. Therefore it's VPP or it's generating that's what makes it a power plant. Well, no, that's not necessarily the case. What matters is, can you, in some important ways, mimic the characteristics of traditional supply?

Can you dispatch? Can you turn it up and down? Is it controllable? Is it connected to the grid? So once we start to talk about VPPs as whether it's storage or solar plus storage or other types of demand reduction efforts and everything else, and combine all those in a way that's dispatchable, predictable and reliable, that's what a VPP should be.

And it can be any combination of those things in any sort of way, but it's got to be connected into the system, in my opinion. And it's got to solve for the fact that we can't burn fossil fuels to do that anymore.

James Dice: [00:40:17] Totally. And one of the pieces that as I'm learning more about this, I had Matt, I mentioned Matt golden.

I had him on the podcast in January

with, did you go to work? Not really. I love Matt. He's one of my best friends, but yeah, me too.

I mean, it's not what my best friends have really known, but he, he talks a lot. He talks really fast and that's one of the reasons why I'm asking this question right now, because I'm trying to unpack what he said on the episode.

I'm actually talking to him next week. I'm excited about it, but What he said was, and he's educated me on this, is that with energy efficiency or with demand and response, or with, you know, load flexibility, you have to actually then quantify what the building or, you know, residents would have used if it weren't for this event.

Right. And so how is that happening today? Like with what you guys do and how's that going to change? Like, how's that going to spread across the country? That, that piece of it what's, what's like, it seems like that's a core piece of making this.

Yes. And that is one of the world's experts on this issue.

And I am regularly impressed by the fact that Matt and his team at recurve, Matt will explain something to me that I won't really understand, but I'll not along. And then like six months or a year later, I'm like, oh, that's what he meant. And like, you know, like he was just a hit. He was like, I, I, I couldn't even understand it yet, but he was already there.

And so. I, I appreciate that more now that I that these things are very complicated and sometimes it takes time for even, you know, to sink in. And Matt's often ahead of the game on that. Look, it is one of the great challenges. Is that we face with anything related to reductions in energy use, whether it's energy efficiency or whether it's demand, response, flexible demand.

Is that what would have happened? Absent in intervention. Yeah. So generation, whether it's dispatching storage or whether it's a blog, PowerPoint, whatever, it's pretty easy to count, right? Yeah. Some, you know, and we know how to count and the kilowatts go out and you say, okay, catalogs are going out. Yeah, I'll count those.

And so I, I, I, on demand, you don't have that. And so you end up in these sort of like incredibly convoluted, like tortured circles, trying to figure out what would have happened and, and really what FERC and the grid operators like CAISO have done is do what a not terrible, but relatively simplistic way of dealing with that, which is they say, okay, everybody has a smart.

We're going to look at what energy they used in these increments of time. Usually 15 minutes over the last few days. And we're going to apply that to create an expected use for that. Meter that electric customer for the next day. So that's what we do. We look at your last 10 days, we make a couple of adjustments that they tell us to make related to some weather and other things and not becomes your expected energy use for every 15 minute period over the course of the next 24 hours.

Okay. So we do that for every one of our 160 whatever thousand users, every single day. So it's a lot of data, but it does give you a very specific target. We said, this is the amount I expect you will use in this hour period. And then if we call an event and you use less, I just get paid for the amount.

That is the difference. I get paid. The difference between what you are expected use was based on the last few days of use. And when you actually used at that time, so it's not about did your thermostat go on or off? Like we may have turned your thermostat setting, but that doesn't what matters in the end with is important.

Is that what matters in the end is that we are actually reading the meter and seeing what happened. We are not making any other assumptions. Got it. Now what Matt, and that's really the way that basically this works. It is an imperfect methodology. What Matt and recurve have done is apply a much more rigorous.

But still kind of open source model to figuring out using kind of a version of control groups, what would have happened, you know? And so you put all that together and then you start to get a really true picture of exactly how much energy was reduced relative to what would have happened, absent the intervention.

And so we're getting better at this, but that's, that's how that is measured today across most of the country. And, and we're hoping that we'll see some improvements in it over time.

Yeah. And the way that Matt described it to me was that when you aggregate a ton of these together, you actually have pretty close accuracy as a whole.

Whereas you might have one or two buildings in there that are

Cisco DeVries: [00:45:02] less accurate. Yeah, we have a, I mean, we, we know a percentage of our customers will not reduce. Hmm. We don't know which ones. Yeah. But that's the law of large numbers, like we talked about earlier, right? Like, so this is, this is working in our favor, which is I've become, I should say OhmConnect has become exceptionally good at predicting exactly how many megawatts we will reduce.

Not because I know exactly what your home will reduce, but because I know what a thousand homes like yours are going to do, and that becomes incredibly predictable,

James Dice: [00:45:37] really. Okay, really? I have a couple of minutes left.

I want to ask you about the public policy side of this, because you're the you're public policy expert. Reading some of your blogs and reading some of the stuff that you've written online,

it seems like there's still stuff to do on the policy side that will help make this process easier, not only for you guys, but for all the other people doing similar things. Can you, can you talk a little bit about where we're at on that and like where we're headed? I know that Ferc Order 2222 is part of this,

but I'm fuzzy on it. So maybe you can clear it

Cisco DeVries: [00:46:14] up for, me? Yeah, I think there's entire podcast dedicated to teach you to too and I will not attempt to replicate that. Look, what I'll say is that in order for flexible demand to really achieve gigawatt scale around the country we need predictable, reliable MNV.

We need to know how to measure the amount of savings and we need everyone to count the same way. And we don't need to be perfect, meaning I don't, you know, we might be wrong a little bit here or there, but we got to agree how we're going to count it because that's how you can invest in building essentially virtual power plants.

So like if I build a natural gas power, and I know how much it's going to generate, and I know how much that generation is going to get paid in the market based on my historical information,  I can make some choices and I can finance it and do those things. With flexible demand, even though we call ourselves a VPP

and when you operate in the same way, we have nowhere near the level of certainty as to how the market's going to treat us or how it's going to get counted. So you can imagine, say, I would like to build, I am the process in California. We have financed in our building a 550 megawatt virtual power plant called, Resi Station.

It is, will be one of the largest virtual power plants in the world. We're underway with it now. The problem is that the rules we operate under in California and around the country, change all the time. They're often opaque, meaning I don't even know what the rule is exactly. And different agencies, regulatory entities and others, count things different ways. So I'm in this constant kind of like adjustment, like, oh, do I care? You know, I can give you a bunch of examples about it, but it's, it's really just, it's, it's frustrating. But also it means that it scares away investment and it scares away scale. So what we really want nationally is a common understanding of how we are going to, how we're going to do this everywhere.

And you can get into there's a lot of detail, it gets really complicated. We mentioned one piece of it, about how the accounting takes place and how recurves working on it, but there's like a hundred of those examples. And so we really need to like step back and kind of just do this for real, and figure it out and make some agreement that we're going to stick with and answer for a few years, and let us operate

and then we can make some changes. But I just don't, you know, we can't have this constant evolution and what Ferc 2222 says, essentially, and I'm overgeneralizing, is this is here to stay. DER's  you know, all our acronyms, all these acronyms are here to stay. They are going to be treated appropriately over time in the wholesale markets.

It doesn't say exactly how. Right. That's a regulatory process still to come. But what it sets is a very clear signal that this is the future of the grid. Yeah. And that's important because it just makes sure that everybody's,  okay, we got to solve for this. And so it doesn't actually, nothing's been done exactly, but it gives people confidence

it will be. And that allows people like me to kind of make some bets,  in terms of expansion, other things. But we still have a lot to solve, not just nationally and whatever, but just in California. I mean, as I said, we have five different ways they count our demand reduction, our reductions, depending on which agency we're talking to in which part of what agency.

And we just got to get past that.

James Dice: [00:49:36] And I can just

imagine the tension it puts, the risk it puts on you guys. You're the platform with the customers on one side that you're trying to gamify and keep happy, and then this uncertain financial cashflow stream on the other side. That is a tough place to be in that puts, you know, there's just a ton of uncertainty that it should be removed for this to happen.

Cisco DeVries: [00:49:55] So yeah, but we just went through this and I is exactly right, which is, it's not just hard for us and our, and people who want to invest in the things we're building and finance it, but it's hard for our customers because they don't really understand any of this and they can't.

Right. This is a complicated mess. I barely understand it. It's my job. Yeah. So one of the changes that happened broadly speaking over the last couple of years in California, which is actually a, a, an appropriate change. But just to give you a sense of it is it used to be under the rules that we were measured, that they really cared.

The state really cared about how much a, the largest reduction a user could make. Okay. Right. Cause you were kind of looking at an emergency response, demand response, right? So you say, okay, if we really have a critical moment, how much can that use or reduce? And that becomes the value for that user, right?

Yeah. It's like, okay. The max reduction they achieve in a district period of time is their maximum reduction. And that is how we will value the total. Okay. So if your own connect. Talking to our customers. We don't explain government regulations to them about how this works. What we say is we give you an incentive, the game to learn to do that.

So we would do things like I will give you $5. If you flip your circuit breaker once. Just turn everything off. I'll give you five extra dollars. You'd be like sweet. So we had like 20,000 people flip their circuit breakers in a month. You know, now that's not necessarily a replicable demand response model, then it's super inconvenient.

Right. But we're like, okay, those are the rules. And then, you know, the states that are, you know, that's actually not what we care about because what we care about is every day you being available and engaged in the grid, not just in an emergency. So we're moving towards an average. What is the average.

That each user does? Well. No, that's probably a good change overall, but now of course, the entire game has to change. Yeah, because now I'm incentivizing a very different set, other things. And I can't explain that to people. I started like, Hey, we're changing it so that, you know, now you make more money doing this thing and that thing, would you think that people look and then they flip out and we just had this, you can go and look online.

Like we just made some of these changes a couple months ago when people were like, you're taking away all my money. And I'm like, well, actually we're just asking you to do something differently, but they've gotten good at playing the game and making money one way. And then we changed it and they got mad and I get that.

And I get why we need to change it, but this is, this gets this issue of stability and the fact that our customers now need to be retrained in entirely a substantially different approach to energy reductions, which then says, instead of circuit breaker, flipping, I'm giving you smart plugs and thermostats.

Cause what I want is consistent reductions of at least a small amount. Wow. So now that's why all of a sudden we've gone from one set of things to, Hey, I will give you an answer thermostat. Got it. Okay.

James Dice: [00:52:47] Wow. That's fascinating. And the, and the, and the gamification. More intense because now you're like, okay, I'm going to retrain you to do

Cisco DeVries: [00:52:56] this.

No, I'm like, okay. They're like, Hey, I used, we gave them an event. They were like, I only got paid X. I used to get paid. Why this new thing sucks that you've done. You're like, well, yeah, but you're playing wrong now we've changed the rules. Right. Right. And

James Dice: [00:53:09] I wasn't asked to change the rules by the way it was.

Yeah.

Cisco DeVries: [00:53:12] But I, you know, and so then I'm writing blog. I just wait probably like a month ago I published a blog post by curious how we get paid. Yeah. Here's why we've changed this stuff. I'm so I'm sorry. But also I can't pay you for things that I don't get paid for. That's not how this works. Right.

James Dice: [00:53:28] All right, Cisco.

Well, this has been a blast. I learned a lot. This is part two of my great education. After talking to Matt a couple of months. So thanks so much and, and good luck with building that a two-sided

Cisco DeVries: [00:53:42] messy platform there. Yeah. For all of you, John Oliver fans, I'll also be working on my gentrification of jazz businesses.

Perfect. Perfect. All right. Thanks. Thanks.


James Dice: [00:53:59] All right friends, thanks for listening to this episode of the Nexus Podcast. For more episodes like this and to get the weekly Nexus Newsletter, which by the way, readers have said is the best way to stay up to date on the future of the smart building industry, please subscribe at nexuslabs.online. You can find the show notes for this conversation there as well. Have a great day.