We’re on the verge of one of the biggest energy shifts in decades: the increasing use of demand side resources.
They’re often referred to as Virtual Power Plants, or VPPs. Add together thousands of rooftop solar installations and home batteries and you reach levels of power equal to medium sized power plants. They add power capacity, can provide key grid support in ancillary services, and give consumers uninterrupted power during outages of any kind.
Unfortunately, the budget bill passed yesterday by the Senate would make this much harder. (We talked about the bill and its implications but we recorded on June 23 before we knew how bad it would actually be.)
VPPs are already working in Texas, and started to gain momentum.
This week on the Energy Capital podcast, I spoke with Blake Richetta, CEO of Sonnen USA, and one of the most forward-thinking leaders in the clean energy world. We broke down what’s happening in Texas, why the rest of the country isn’t paying attention, and what’s at stake if we get this wrong.
The Big Idea: Solar Alone Isn’t Enough. Batteries Make It Work.
Blake lays it out clearly: The economics of rooftop solar by itself don’t work very well. You need a battery to make the math work.
At midday, solar power is often so abundant it’s not worth much on wholesale markets. But during the evening — when people are getting home, turning on ACs, cooking, watching TV and the sun is setting — prices rise.
A battery allows you to store cheap solar and sell it when it matters most.
As Blake put it, that allows you to shape load perfectly and inject energy optimally.
It’s not only a savings strategy; it’s also a boon to grid reliability.
And if thousands of homes do this together? You’ve got a power plant, one that’s already connected, decentralized and closest to load, and can scale to solve some really difficult locational problems on the grid.
What’s a VPP, and Why Are Texas Homeowners Getting One for No Upfront Cost?
This isn’t theoretical. This is live in Texas.
Sonnen and their Texas partner, SOLRITE, have already deployed over 3,000 residential batteries into a fully operational Virtual Power Plant. Here’s what makes it different:
A zero-upfront-cost offer for homeowners
40 kWh, 9.6kW battery storage system: bigger than what most homes get
A locked-in energy rate (~12¢/kWh with a small escalator), generally lower than market prices
The ability to participate in grid services without even noticing
Texans get resilience and savings. The grid gets flexibility and stability. The model works.
Key Takeaways
Batteries unlock the real value of solar: economically and operationally.
Texans want energy independence and resilience to extreme weather events, and this model delivers it.
Competitive markets enable this kind of innovation in Texas in a way other states can’t match.
The grid gets stronger when consumers get stronger.
The President and Congress are poised to significantly slow down what Texans are doing.
What Comes Next
Sonnen and SOLRITE are betting big on a Texas-led VPP revolution. But there’s still work to do:
Unlocking distribution-level grid value (like locational value and deferred infrastructure costs)
Expanding ADER pilot (aggregated distributed resource) programs
Supporting U.S.-based battery manufacturing to reduce foreign dependency
Ensuring that federal policy doesn’t kill the momentum just as it starts to scale.
Texans remember what it feels like when the power goes out. VPPs offer a smarter, cleaner, more resilient future, without needing to sacrifice freedom or reliability.
We finally have the technology.
We finally have the market model.
Now we need the political will to help Texans strengthen themselves and strengthen the grid, too.
Timestamps
00:00 – Introduction
03:00 – How Sonnen helped develop Virtual Power Plants and paired solar w/ storage
06:00 – Using Texas’ competitive market to make VPPs available for $0 upfront cost
12:00 – Consumers’ cost to get a VPP through a retailer and a “VPA”
17:00 – How VPP economics work for Sonnen and its partners (hint: it’s the batteries)
19:30 – The market is sending signals for “firming” right now
22:00 – The resiliency benefits of solar & storage, advantages over generators
26:00 – Grid following vs. grid forming batteries for backup power
32:00 – ADER pilot in Texas, grid services from VPPs
33:30 – Fundamental goal: shape load perfectly and inject energy optimally
37:00 – The potential to monetize the distribution value of VPPs and ADERs
41:00 – How Distribution System Planning using DERs could lower costs
45:00 – Tapping into locational and temporal value of distributed energy
51:00 – Why some utilities make the leap to VPPs and tap the value of DERs
55:00 – How vertically integrated utilities in Texas could benefit from VPPs
57:30 – Implications of federal budget bill on residential DERs (as of June 23)
1:02:00 – How market value can, in time, replace tax credits
1:03:30 – sonnen’s manufacturing in America to realize the tax credit adder sonnen’s manufacturing in America to realize the tax credit adder
1:05:00 – Final thoughts on being a “disruptor” in the market
Resources
Sonnen USA (home battery & VPP solutions)
We’re Not Relying on the Texas Grid This Summer. Michael Hardy, Texas Monthly.
Transcript
Doug Lewin (00:07.928)
Virtual power plants have massive potential to make the grid more reliable and resilient and lower costs for consumers. But all that hangs in the balance. Welcome to the Energy Capital Podcast. I'm your host, Doug Lue, and my guest this week is Sonen CEO, Blake Richetta. Sonnen is a German manufacturer doing a large business in the United States, particularly in Utah, California, Texas.
Doug Lewin (00:36.114)
among their leading states. We recorded this on the 23rd. So just about a week ago and just at the very point that the Senate language was starting to come out, we were actually recording in the morning, so that language wasn't out yet. We were not able, obviously, to talk about the very latest of what is going in the Senate as this podcast is dropping. That said, it is highly relevant.
Doug Lewin (01:04.299)
because we did talk about the threat to the tax credits that help people get solar in storage at their homes. So when the next hurricane or ice storm or whatever it is hits or just a general power outage, which happened all the time, 95 % of them are on the distribution grid. And it's just because the wind blows really hard. A storm comes through, lightning hits a transformer, whatever it might be that knocks the grid out. People want to have solar and storage at their home.
Doug Lewin (01:32.91)
It's good for them to have that resilience. It's also good for the grid when those distributed assets can participate to support the grid. This is something Blake and I got into in great detail. I learned a ton, as you'll hear. A lot of times, asked questions about things I didn't understand. Learned a lot from Blake and really excited about the promise for virtual power plants, distributed energy resources, particularly in the Texas construct. But before we get into this, I think it's really important to say, given the moment that this
Doug Lewin (02:02.488)
podcast is gonna be dropping. All of that is in serious, serious doubt. And if you are somebody that was hoping to have solar and storage in your home or hoping that distributed solar and storage could make the grid stronger, all of that is very much in peril. I will be covering that at the newsletter and further on the podcast.gluon.com. But for now, enjoy this great conversation with Blake Riketa, CEO of Sonin US. Thank you.
Doug Lewin (02:32.814)
I'm Clay Kraketta. Welcome to the Energy Capital Podcast.
Blake Richetta (02:35.746)
Thank you, Doug. It's such a pleasure to be here.
Doug Lewin (02:38.786)
Great to have you. We've been obviously trying to get this together for a while. Really excited about the things you guys are doing at Sonnen, particularly in the Texas market, but let's just start at a high level. What is Sonnen for folks that don't know? Brief with this answer if you can, because I want to get into all kinds of different policy things, but it's important that people know what Sonnen is. So let's start there.
Blake Richetta (02:57.39)
Sure. Sonnen is a pretty special company. I joined Sonnen in 2016 when I left Tesla because of the incredible advancements that Sonnen had made in the European market and specifically in the German market, which is still really a world leading position in the virtual power plant based energy system. And we looked towards Sonnen even at Tesla with inspiration of how do they do what they do? How they achieve so much as such a
Blake Richetta (03:26.892)
at that point, small company that was really fast moving sort of startup. This was back in 2016. Sonnen started in 2008 with the innovation process of the first battery, 2010 launched the first product to the German market. And a very short summarized answer is that Sonnen, which in the German language is the Sonnen, which is the plural of sun, sort of like suns. There's no real English translation. Sunny battery, I don't know, was inspired by this idea that
Blake Richetta (03:56.854)
solar needed to have a greater purpose and that the intermittency of solar was a dead end for the German energy system, which was already being seen economically and scientifically. And then we needed to harness and harmonize solar, help it produce real value for the grid and serve real authentic grid services and also help balance the grid. that led to the concept of the virtual power plant, which Sonnen was the
Blake Richetta (04:25.528)
first in the world for residential batteries to ever launch back in 2012, which is like ancient history. mean, at Tesla, were still trying to figure out the Model S and figure out the Roadster back then. And so you fast forward to now and this whole idea of networking batteries and swarm dispatching them and locational clusters to perform grid services that replace power plant energy or infrastructure to really help energy transition truly be affected.
Blake Richetta (04:55.522)
has been the central purpose of Sonnen. And we have the largest virtual power plant in the European Union, 180,000 houses. And then we have some very substantial virtual power plants here in America with the biggest utility managed directly controlled VPP in the country here in Utah. Now almost 6,000 houses. we have smaller VPPs in California and Puerto Rico and other states. And as you pointed out, we have a big...
Blake Richetta (05:24.266)
launch happening in Texas with our VPP. Let's
Doug Lewin (05:27.19)
Let's
Doug Lewin (05:27.41)
just jump right in and talk about that. There's a lot of different directions we could go, but let's, let's talk about Texas. It's the energy capital podcast. How many homes do you have here? What's your aspiration? And like, obviously it's not a sales pitch, but we do want customers to kind of understand like, what does this mean for them? How would they actually get a hold of these? So yeah, let's, let's jump right into Texas. What's going on.
Blake Richetta (05:48.75)
Absolutely. Well, the Texas VVV is led by our partners. They are just an incredible organization. highly recommend you maybe looking at having the CEO of this company on because he is such a pioneer company called Solright. S O L R I T E. Regan George is the founder and innovator in chief there. And what Regan basically set out to do is use the deregulated Texan market structure to create a
Blake Richetta (06:17.624)
framework for the virtual power plant that looks very much like what has been achieved in Europe, because Germany's a totally deregulated energy market. The most close thing to it in America is indeed Texas. But he wanted to do it in an American way. And he wanted to do it in a way that enabled people to get solar and battery in their home and join the virtual power plant without paying anything at all upfront. And having
Blake Richetta (06:46.958)
substantial backup power, is another thing that the German market's not very concerned about, is backup power. And so having really a American VPP in the deregulated Texan market was the mission. And that's being achieved. So to your question, I believe there are well over 3000 houses now and they just launched. What was it? Not even real.
Doug Lewin (07:09.088)
January. I think the announcement was in January. Yeah.
Blake Richetta (07:13.288)
And moving so fast, they're raising substantial capital and they've used fundamental principles to be able to do a true and scalable virtual power plant in Texas that are, I think, principles that might've been, well, I don't know, maybe lost on some other companies and other types of entities, but they're relatively risky. But at the same time, these fundamentals, if pursued, allow you to have a full VPP with a full value stack.
Blake Richetta (07:42.882)
And that's what's SoulRite has basically launched. That's their innovation is financially and then market wise and all this stuff making work.
Doug Lewin (07:51.886)
So this is going to be just a heads up for the listeners. We are going to get a lot more into this in future months and dare I say years because the Texas competitive market is such a fascinating thing. So just a level set for folks that may not know. So about 75 % of ERCOT is in competition. Austin Energy and CPS in San Antonio are as well as the co-ops are exceptions to that.
Doug Lewin (08:16.694)
and the sort of nomenclature of the market, they're often referred to as NOEs or non-opt-in entities because they didn't opt into competition. But the rest of the state, and that would cover most of the DFW area, there's couple, you know, Denton and a few other sort of carve-outs there, but basically most of the DFW area, almost all the Houston area, Corpus Christi, Laredo, Lubbock just opted in in the last year or two, are all competitive. And that means that consumers can choose
Doug Lewin (08:43.617)
their own energy providers. That is pretty unique in the United States. There is customer choice, obviously, in a dozen or 15 other states, but that's kind of more limited to commercial customers, whereas here residential can actually choose. So a lot of people still have never chosen, like 20 years after they could have chosen, a lot of people are still with their legacy provider, which turns out to be Reliant or TXU. Those are kind of the legacies, but there's all this possibility in the market out there. And for years, I've been working in this space for 20 years. remember
Doug Lewin (09:13.396)
literally 15, 20 years ago at the Capitol, people talking about this is how we're going to get these new technologies out to market. It's the competition, right? It's the competitive market that's going to deliver that. And I think just in the last couple of years, we're really starting to see that happen. So when you talk about market fundamentals, you're talking about a company in this case, Solright, working with you to provide the technology and then marketing that to customers and saying,
Doug Lewin (09:39.626)
what's important to you. And for customers, know, it's a choice, right? Nobody's in Texas required to do this. But if they decide that they don't want to have to pay upfront for solar and storage, but they're willing to enter into a longer term deal. And maybe this is where I should have a conversation with Mr. George. I think you said his name is, but as much as you're comfortable speaking about that, I'd love to, I think people are really curious about this and want to know. So maybe if you could talk about that a little bit more, like what does that look like from a customer side?
Blake Richetta (10:06.86)
Yeah, sure. Absolutely. And just to cap off on what you had said, caps on what you had said earlier, the market fundamentals, you're right. The competition, the free enterprise that is enabled in Texas has really inspired a lot of this. Ironically, you can look at Utah where we have this enormous VPP success as well. It's interesting. It's a vertically integrated old school energy market, Rocky Mountain power, exactly. And now all of Pacific corps, we're in four states now.
Doug Lewin (10:29.292)
Is it Rocky Mountain Power?
Blake Richetta (10:36.844)
And it's interesting that was a success that was based on certain fundamentals and also had, let's call it some conservative, ethos, color to it. And of course we also had the support of the quote unquote liberal because we always do when it comes to renewable energy, but we have this other side support that I think is really special. It's a growing story now, but the virtual PowerPoint being a technology and infrastructure that
Blake Richetta (11:04.706)
both sides of the aisle can get behind, which is kind cool. And now we're seeing that in Texas, but ironically, Utah sees themselves as very conservative and they arrived at this vertically integrated model is good and that's conservative to them. Texas also conservative, but sees that free market classical liberal conservatives, conservative view as the way the Texan system wanted to progress, of course, with free enterprise.
Doug Lewin (11:31.906)
More of a Milton Friedman kind of a conservatism.
Blake Richetta (11:35.498)
Yes, exactly. So I think there's a funny somewhat of a connection here. It's interesting is that once again, here's a market that's somewhat conservative, but the VPP ends up being something that seems to really resonate well. And I think will resonate with consumers and regulators and retail electric providers. And we get both sides of the aisle, if you will, excited about it. So that's just a foundational statement for me as it pertains to the consumer. Yeah. So in Texas, the consumer can choose.
Blake Richetta (12:03.97)
course, whatever retail electric provider they like, like you said, in the deregulated areas of the Texas energy system in ERCOT. And if they choose to go with Solright, Solright will give them options of retail electric providers that support the virtual power plant. So then they still have the power to choose a retail electric provider, but they have to choose a retail electric provider that actually supports the virtual power point concept. If they don't, then there's no way it
Doug Lewin (12:31.756)
So Solrite itself is not an REP. are not a retail electric provider. They're partnering with
Blake Richetta (12:36.502)
No, and that's a pretty good separation. think they are financing. They own the solar and the batteries. So look, it's Urquhart stuff that's maybe not great there for retail electric provider. And they are selling it. Well, they're not selling the equipment. They're selling these agreements, these power purchase agreements, which they call a virtual power plant power purchase agreement, which is way too many P's. So they shorten it to VPA, world's first VPA. And so
Blake Richetta (13:04.306)
They're providing the financing, they're doing the installation, they own the assets and they provide this agreement with the homeowner regarding these assets. And then as far as what the homeowner is paying for with Sol-Rite, they're paying a monthly fee for a fixed amount of solar production from the solar array on the roof, which is either coincidentally when it's produced, also consumed in the home, or it's time shifted and harnessed in my battery and then harmonized with the load later in the day or
Blake Richetta (13:33.974)
If it is above the solar production that the homeowner purchased, then that solar can actually be activated within the Ricat market after it's been harnessed in the battery. anyway, so to go back to your basic question. So what's happening here is the customer is signing up for an agreement with Solrite. Solrite is paying for the installation and the equipment of solar and battery in their home. Unprecedented amount of batteries, 40 kilowatt hours average of energy reservoir for
Blake Richetta (14:02.082)
backup power, is way, way, way higher than the Texan average and a decent size solar array. The customer pays monthly for the solar production and they get all the backup power effectively for free. And so this is really cool. It's a really neat option. And I'll finish with this. The rate that the customer is paying for the solar production from the Solar Right Solar Array is basically around
Blake Richetta (14:30.67)
retail market rate or even a little lower. And why that's substantial is that most of the solar PPAs in Texas today, the rate that you pay for solar production is actually quite a bit higher. So you're seeing 19 cents, 20 cents, 21 cents for PPAs.
Doug Lewin (14:46.99)
Are you talking about like for residential customer? It's 19 cents. Okay. Okay. Right. Cause as I saying, the commercial market, we're looking at like $40, $50 a megawatt hour would to be four or five cents, but for customers, it's much higher for, for residential customers. No, no, no. front of the meter, utility scale. Huge distinction. Just wanted to make sure we were clear on that.
Blake Richetta (15:00.598)
You mean in front of the no-
Blake Richetta (15:03.753)
Right.
Blake Richetta (15:08.522)
not correct to say four cents. Right. Not four cents for commercial behind the meter, brother. But yeah, for in front of the meter solar farm utility scale, you're obviously you would see a 45 cents for commercial behind the meter. I don't know the exact number quite a bit higher. Residential behind the meter would be the highest. Right. So 19 or 20 cents. mean, anyway, so if commercial residential Texans paying whatever 13, 14, 15 cents or something for their electricity.
Doug Lewin (15:24.664)
Yes.
Blake Richetta (15:37.058)
for sole right to charge 12 is really good. mean, it's just below the, and it's way, way, way below the other residential PPA competitors, if you will. So the customer is signing an agreement that they're going to allow all this stuff to be put in their house. They're going to pay this amount and they're going to use a retail electric provider that supports the virtual power plant. If they don't want to use a retail electric provider that supports the VPP sometime in the future, they can completely
Blake Richetta (16:06.946)
go away from it. But what happens then is there's a new fee that Solrite has to charge them because they're no longer able. Solrite's not able to monetize the battery anymore.
Doug Lewin (16:16.194)
So if they were to leave, there is like sort of like an exit fee or something like that. But as long as they stay with them, that 12 cents is guaranteed over the 25 years. Wow. Okay. So that's, mean, that's,
Blake Richetta (16:26.99)
Oh,
Blake Richetta (16:27.25)
by the way, there's a little tiny escalator, it's like, gosh, you have to ask for reading. It's like 2 % or 1.5%.
Doug Lewin (16:33.804)
No, no, that's fine. I will interview him at some point and we can find more. And even before we put this out, Blake, we can get to Regan and just say, give us the information. We'll post it on the show notes. So people have all the, know, obviously anything we say here, here's where like I'm the son of a lawyer. Read the terms and conditions that we'll post. But I want people to have as much specific information, but also kind of this general understanding of what's the size and shape of the offer. So that's what we're trying to do here for the particulars. can read the T's and C's. So.
Doug Lewin (17:03.062)
I would imagine the solar component is going to vary house to house and solar is very valuable, but really like the secret sauce here is the batteries. And I'm talking to you with Sonin, so like this is kind of teeing this up for you, but you talked a minute ago about like the shifting factor there, right? You can actually store up that solar. So that's where when you talk about like 19 cents, right? In the middle of the day in Texas,
Doug Lewin (17:29.848)
We're recording on a very hot summer day. Peak's going to be somewhere around 80 gigawatts. The price is going to be like two or three cents on the wholesale markets. It's very hard to make that work, but if you can shift, if you can store up that solar power and then deploy it back to the grid in a battery, sometimes even at the net peak when the sun is down and demand's still high, sometimes we're still in a four or five cents. But some days in Texas, know, cap is $5,000 a megawatt hour. There's ancillary service market. So there's lots of different ways.
Doug Lewin (17:59.832)
kind of monetize that. You said there's a 40 kWh battery. You're actually doing two batteries that are 4.8 kW, roughly 5 kW, 20 kWh each. So you're putting a 10 kW, 40 kWh system on every house, pretty much standard.
Blake Richetta (18:16.81)
And 9.6 kilowatts, 40 kilowatt hours. Yeah. And that's exactly right. And I think the fundamental here is that solar by itself, especially at the end of the distribution system adjacent to the customer's load behind the meter can be good, as you said, but it's also intermittent and relatively can be volatile, variable energy generation. And it depends on what market you look at to see the extent of that. But certainly in the German market and the California market, we've seen it pretty
Blake Richetta (18:47.79)
And, it's been very substantial what renewable energy has done, both positive but also negative to managing the energy system. So this idea of, yeah, if I'm just pumping solar into the grid at noon because it's sunny, the Texas energy system will punish me for that unless I have this solar buyback program with a retail electric provider that gives me this high rate. The problem with that is the retail electric provider is somehow
Blake Richetta (19:16.034)
subsidizing this whole thing because like you just said if the retail electric provider is buying electricity from you just because you're Pumping solar into the grid because it's sunny and they're buying it from you at 14 cents a kilowatt hour but the the market rate at that time is before sense Even if they're balancing their book it makes no sense to them But they do it anyway because they're trying to get a customer and that's all fine and good But eventually that hits a wall no different than that meter in Dinnie, California
Doug Lewin (19:43.01)
I
Doug Lewin (19:43.1)
mean, honestly, Blake, we've already hit that wall. Like really nobody's offering net metering because of what you just described. Like it just doesn't make sense financially. So we just don't see. And this is one of my like biggest critiques with like people that are pushing some of these like firming proposals and stuff like that. It's like what you just described, the market is sending the signal for firming. The signal from the market is quite clear. Like if you don't have batteries, the economics of solar just don't work that well. So put a battery with it.
Blake Richetta (20:08.312)
Perfectly said. So the idea exactly how you said is basically, look, what we want to do is harness that solar. We want to harmonize it with grid operation. And of course, what that means is we're going to stop it from flowing into the grid unfettered. That's step one. And by the way, that goes to a little bit more of a modern European look to the design, but Americanizing it. So in the European Union, we see way bigger batteries and smaller solar arrays now. And now we're seeing that in California as well.
Doug Lewin (20:33.227)
Interesting.
Blake Richetta (20:36.334)
And it's X is what you see with solar, it's the same thing. So instead of crazy 120 % offset kind of thing that you see for years and years in America. Instead, it's no, it's a 70 % offset and then a huge battery. And this is very logical because then I can definitely catch all the excess solar and drink it in the battery and hold it and then and bottle it up and then use it. And to your point, I might use it against a load later in the day or I might inject into the grid. And you know what? If there's not enough solar.
Blake Richetta (21:06.52)
to really perfect that load shape. Unlike old school solar where there was this kind of weird myth that, you just pump all the solar to the grid. Then later in the day, you pull the same solar back out. of course, it's a physics perspective. That's not how that works from an electrons perspective. at any rate, so what we're doing is saying, of course, no, you're either going to harness that solar and offset your load later. If it makes more sense, the Texas energy system based on price signals, you're going to inject it. You might withdraw from the grid later, but hey,
Blake Richetta (21:36.128)
If solar's not working that well for a day because it's cloudy, you might need to withdraw from the grid during a super off peak period and use those electrons against load. And this is a very, very smart thing for the Texas energy system, but something that people don't do generally in the United States for many reasons, but now we will be doing. yeah, that's the fundamental that just to compliment what you said.
Doug Lewin (22:02.284)
I want to talk about another component of this. So there's obviously the market value, which we could talk about for a lot longer, but I want to talk a little bit about the resilience value. think I heard you say that like that doesn't have as big a value maybe in Germany or Europe. Maybe it's just cause there's like not hurricanes there and stuff like that. But like, I'm curious what you're seeing in Texas in the market. And we'll put a link in the show notes. Texas monthly had an article from one of the writers, I it was Michael Hardy, who
Doug Lewin (22:31.81)
had bought a generator in his first home in Houston, and he described the experience of getting a generator. And I was sort of reading that and cringing a little bit because I'm like, really should have gotten solar storage because the generator, you're probably not going to use it day in, day out. Like you're going to use it only in an emergency. With solar and storage, you've got it for the emergency, but you're using it day in, day out to lower the cost of power and to...
Doug Lewin (22:57.73)
help the grid, if that's something you care about. And this is where I really think like, regardless of ideology, temperament, like there is something in this for everybody. If you care about the grid, it's great for the grid. You don't care about the grid, you only care about your house. It's great for that too. Like it really, you anyway, so let's talk a little bit about the resilience factor. And if you're seeing that in some of the discussions, them, the kitchen table discussions that you and your company are having with customers in Texas.
Blake Richetta (23:28.108)
Yeah, I two points because you brought up two great points. One resiliency and then real quick before, you're right. What the customer connects to. So the beautiful thing about the Solrite model is that you're not coming out of pocket $75,000 for an installation of solar and batteries. And so it's a very different mental process where you hear, Hey, we're not going to charge anything upfront. And it's just a monthly fee that is for the kilowatt hours produced from the solar and then you get the backup power for free. And you're right. People think, well, that's really nice financially.
Blake Richetta (23:57.806)
It's also good backup power wise. And then what you do is you, if you're a salesperson, you authentically lay around the other cool parts. say, look, this is actually solar. That's got a much bigger purpose than just regular solar. Can you believe you get a little power plant in your house? And it's actually doing the same kind of thing as a power plant. And if you do care about fighting climate change, this is a better way to do it. And you might say, homeowners are already going to check out at that point. Actually the research that we have shows that's not the case.
Blake Richetta (24:24.814)
Most people that we've interviewed a bunch of techs at Homework, which was fun. They kind of get into it when they know they're getting these other key benefits as a foundations. They know they're getting low cost solar and backup power. And when you add on what you're doing in a greater level, people think that's neat. Oh, that's cool. That's really neat. They had to brag into their customer. No, sorry, the customers, their friends, something like this. So anyway, we can go back to that stuff later. But as far as the resiliency thing, I
Doug Lewin (24:51.736)
love
Doug Lewin (24:51.936)
that, by the way, and we should dive further into that. But yeah, go on with resiliency. We'll come back to customers. It's really cool. Yeah.
Blake Richetta (24:57.47)
It's
Blake Richetta (24:57.68)
very different than spending 75,000 something. And you're like, I'm not spending 75,000 to save Texas's energy grid. What does that even mean? Right. But it's different when you don't pay it. So resiliency. Yeah. This is really interesting, Doug, because I came from Tesla over to Sonnen and we were in awe, of course, of this idea of swarm dispatching for locational value, substation value, non-bars alternative, all these cool things that we were doing at Sonnen was doing in Germany. And then I look closer to the products and like, ooh.
Blake Richetta (25:28.494)
Over 98 % of the batteries in Germany didn't even have backup power at all. There's not even a grid forming inverter. I'm like, No, batteries in Germany. Batteries in Germany.
Doug Lewin (25:35.47)
98 % of the solar
Doug Lewin (25:40.814)
98 % of the batteries in Germany didn't have backup.
Blake Richetta (25:44.802)
Yeah, can't do back up at all. Okay.
Doug Lewin (25:47.37)
they just can't provide it. they were literally just for the homeowner at their house and couldn't do anything for the grid.
Blake Richetta (25:54.274)
Nope, not at all. No backup power. If the power went out, the solar and the battery would just turn off, which is how most... No backup power.
Doug Lewin (26:04.49)
There wasn't like an IEEE 1547 or something like it wasn't configured to island. So it would just shut down when the grid went down.
Blake Richetta (26:12.942)
That's, well, that's part of it. 1547 would be interesting, but really the fundamentals are, let's start with the fundamental, which is, do you care about having backup power or not? If the answer is no, the way I design an inverter is as grid following only and not grid form. So when you go into nano grid mode, you have to grid form and 1547 aside, I can do nano grid without 1547, but I could just be a grid forming inverter. But if I'm a grid following inverter and I cannot change the grid forming, which by the way is a much cheaper way to build an inverter. So you save a lot of money.
Doug Lewin (26:25.73)
I see.
Blake Richetta (26:42.23)
a lot of money by building an inverter that doesn't grid form and doesn't form a nano grid. So first of all, there's this huge cost in all American energy storage systems and most Americans don't even know could be taken out completely if they were in Europe. And you might say, why does anybody want a battery if it doesn't do backup power? Well, because the virtual power plant was the whole reason. The self-consumption first, the harnessing the solar and using it properly because in Germany, basically, if you're injecting solar, say this
Blake Richetta (27:10.23)
legislation called the Anoyabata and the Ganges, which is like their version of net metering. And effectively by about 2015, if you're injecting solar into the grid, most of Germany, you're not getting anything. You can get far. So the battery market became an essential and very important part of the business, but it wasn't about backup power. was about, my gosh, I need a battery or my solar's useless. And it's going to be great. I'll get, you know, finance by monetization.
Blake Richetta (27:40.334)
And that only changed a little bit when the Russians invaded Ukraine. And then you saw some Germans wanted to have some backup power because they thought there could be a war. then that kind of went away now too. So it up to like 10 % of the market. Now it's stacked down to two or 3%. So why I tell you all this is that Sonin's this awesome leader in virtual power plant. We're so excited to Americanize that. But we had no experience in backup power, barely at all.
Blake Richetta (28:07.466)
American energy storage companies are the polar opposite. They're all backup power. That's the only thing they think they're supposed to do. And they have no idea how to do a genuine virtual power plant. And so we're very fortunate. There were years ahead still of even the closest American company on this VPP thing, but we definitely had to play catch up on the backup power thing. So to your point, do people care about backup power in America? And in Texas, the answer is, yeah. And we had to build
Blake Richetta (28:37.506)
grid forming inverters and backup power capable products. And also German loads are much smaller than American. So you had to make a more robust and beefy. So long story long, we have achieved that backup power need for Americans to feel good about having backup power and the VPP. And that is the Sonin USA unique solution.
Doug Lewin (29:03.214)
Okay, love this. All right, and thank you for indulging my dumb questions, but I feel like that sometimes the dumb questions are the best ones. So I needed to understand what you were saying there. It's actually incredibly important, right? Because this is a big issue at ERCOT right now. And I'm sure, I hope that what he requisited, Dan Woodford and the whole crew at ERCOT operations, Pablo Vegas, everybody over there listens to this because this is a big issue. There are NPRRs right now around grid following versus grid forming.
Doug Lewin (29:31.724)
You're you're saying is on the distributed side, at least through your model, and I'd imagine most of the companies that are working on distributed, for the reason you just said, because resilience is so important to customers, are going to be doing grid forming. That means we could be getting a whole lot of assets distributed all around the grid that they can potentially, they can potentially use. I'm putting that in air quotes for people just listening, because at the end of the day, and this is again, the beauty of the competitive market,
Doug Lewin (29:59.358)
Unlike in a place where you have a vertically integrated utility that's gonna control that, unlike in a place where it's going through the grid operator to do it, it's actually going through the retail electric provider and their partners, close to the customer, making sure it's a good customer experience. Because if it's not a good customer experience, you got nothing, right? Like your business is dead in the water. But still, these grid forming assets all over the grid to help deal with problems.
Doug Lewin (30:25.76)
like what happened in Spain in April. If you had a lot of grid forming inverter batteries on the grid, that would have made a big difference here. We're about to have them. Okay. Yeah. Yeah. Anything else you want to say about that or we can...
Blake Richetta (30:38.936)
No,
Blake Richetta (30:39.176)
I didn't mean to catch up. Look, our fleet in Spain, like almost all batteries in Spain don't do backup power, so that wasn't very helpful. But if you had backup power, then that would have been great. Anyway, I think the American solution of both VPP, smart battery that works with the grid and a battery that can actually provide backup power is a great optimization.
Doug Lewin (30:59.896)
So you get the best of both worlds. got that resiliency benefit for the home. Also, because it's grid forming, it's actually, its benefit to the grid is much, much greater as we were just describing.
Blake Richetta (31:11.054)
Yeah, I mean, it's the biggest benefit for the grid forming local device is that you're able to have backup power for a building. You're able to basically close off a little energy system and become your own little grid. And that's the biggest value that's different. But yeah, as far as the virtual PowerPoint grid services, it adds a little bit, but not a ton. It could in the future add more. But yeah, so anyway, the point is that Americans who are always benchmarking Generac and
Blake Richetta (31:40.428)
backup generators can get a battery that actually does this whole virtual power plant magic and also does the backup power. that's how to know.
Doug Lewin (31:50.03)
It's pretty incredible. It's pretty amazing. So let's talk. There's a couple different things I want to go into. I want to go to the sort of transmission system operator side in the ADR task force. And then I want to come back to the distribution side and do a little compare and contrast because Europe has DSOs, distribution system operators. We don't have those in America. I want to get into all that. let's... Someday maybe. We were just talking about grid forming and the potentials. So the biggest benefit you said is the...
Doug Lewin (32:18.86)
backup power on site and that's a huge benefit. But isn't that where the ADR pilot in Texas, the aggregated distributed energy resource pilot is heading that these distributed resources actually can provide benefit to the grid in the form of ancillary services?
Blake Richetta (32:35.726)
Yeah, and that has nothing to do with the grid forming inverter So it's just a little bit different on the nomenclature so you can do I mean in Germany we do nine grid services is the most advanced residential battery-based VPP on the planet by far and most of those batteries are not grid form, so that's now as it pertains to ADR and what Adder is doing and the opportunity it's providing I think it's a terrific program I think people like Arushi Sharma Frank are really
Doug Lewin (32:47.51)
Got it.
Blake Richetta (33:04.534)
were terrific in the way that they drove this and all the many people in Texas that drove this. But I I have a relationship with her and I know she's, I feel like she's just brilliant. And I think Adder is ADER is really a good overall program. And you're right. It's trying to drive towards a deeper value stack for batteries. And I think the way that Solrite has launched this, which is kind of neat, is it takes the fundamental first of shape load perfectly. And
Blake Richetta (33:34.188)
by doing so, and by the way, I'll add to that, also inject energy optimally. Just by doing that, you increase the profitability of the retail electric provider quite a bit. And if you have a fundamental concept that says, the profitability of the retail electric provider went from X to Y because of the battery, well, you don't need any, because Texas is so well-built in the deregulated structure, you actually don't,
Blake Richetta (34:03.982)
don't say this too passionately, but you don't need anything else. You don't even need ADR to be able to say, okay, well, what was the extraordinary profit created by this daily cycle? Well, that extraordinary profit basically needs to be split with the owner of the battery, in this case, Solrite. And what that does is it allows Solrite to spend money on all this stuff. They're taking a risk, a big risk. But if they believe in it and they really believe in the value,
Blake Richetta (34:31.575)
They can raise billions like they've already raised over a billion for the consumers of Texas to have all this equipment. And they're betting on the fact that the extraordinary value brought by the battery when they split the profit with the retail electric provider will make it make sense because what they're getting from the homeowner doesn't do it. So basically the capstone it the magic here is that without even having ADR, you have this powerful model that just lies on the foundation of our cot system.
Blake Richetta (35:02.21)
And then if you add on, if you're going to add on non-spinning reserves and frequency response, woo, that's just terrific. I'd be very excited at all the different grid services that we could add on. And a much more, let's call it, even if you take a look at locational value and you said, Hey, with 30,000 batteries in this area of west of the DFW area or whatever, making that up as far as a load pocket, that actually has X amount of value, both
Blake Richetta (35:30.22)
mitigating, peaking power plants and mitigating infrastructure. Wow. That would be a lot more monetization. I think that's the direction ADR would go and where Texas in general is going. So capstone is that the fundamental statement for me or overall statement is by using the basics, we make this work and it's very scalable. You do need a pioneering financier that bets on all this, which is very hard to find. Nobody wants to bet on this.
Blake Richetta (35:59.564)
And then the final piece is at a retail electric provider that wants to do it. And then the final piece is that on top of that, we can add all these other things to actually get the full value of the battery.
Doug Lewin (36:11.65)
Yeah, so that ends up being kind of gravy on the potatoes, ricing on the cake. The cake itself is the market fundamentals of sort of shifting that power around and injecting the power into the grid when it's needed. Then you can potentially monetize ancillary services for increased revenue and things like that. So there's still though, the question of the distribution grid. So this has got to still be a problem I'd imagine, right? Because so...
Doug Lewin (36:40.226)
distribution costs have gone up quite a bit all over the place, but including in Texas, we're up to like five or six cents KWH on the distribution grid, I think you correct me if I'm wrong, but it's like five, six, and at least an encore and center point, I'm not exactly sure what it is in AEP or some of the others, but probably right about there. And when you're charging that battery, well, I guess you're charging it from the solar. So I guess you can avoid that.
Doug Lewin (37:02.722)
five to six, but when were talking about earlier, maybe you're pulling from the grid at certain times, you're paying five. What I want to get to here, Blake, you can answer any part of this you want, but what I want to get to here is that's great that the main part of the revenue can be made back from the bulk market, from what's essentially the transmission system operator market, from the ERCOT market. But these are distributed resources that have massive value to the distribution grid, and we don't monetize that value yet.
Doug Lewin (37:30.976)
And my view of the world, that will hold back the scalability of these DERs unless they're able to bring that value. doesn't mean they won't scale though. They will scale. I do believe, especially with the dropping prices of batteries and we should talk about that too, that these technologies will scale and we'll start to see them all over the place, but it'll happen much faster. Customers will get that benefit quicker if we can get to some value given to these resources on the distribution grid too, right?
Blake Richetta (38:01.75)
You're exactly right. So to complement what you're saying and kind of tell you where we're at now and why it works, but where we should go is what you're saying. So where we're at now. Yeah. When you withdraw from the grid, you pay the distribution fee. Sure. But you would pay the same distribution fee at 6 PM versus two in the morning. So now let's say that I'm withdrawing from the grid at two in the morning and the total all in price of the kilowatt hours. I don't know. Pick the number. I'm not sure. Let's call it.
Doug Lewin (38:27.288)
Well, at two in the morning or at noon, frankly, it's probably eight cents because you're paying like two cents in wholesale power and six cents in the distribution cost. But that distribution cost, as you said, is the same whether there's scarcity or not. And that's kind of screwed up.
Blake Richetta (38:41.474)
No,
Blake Richetta (38:41.654)
you're right. It's not cool, but at least what it does today, which is not ideal, but it creates. right. Fine. Is it. Aventages for the retail electric provider to withdraw energy from the grid at two in the morning and time shifted potentially against six PM. So the retail electric provider is not delivering that same kilowatt hour at six PM, which of course, including the distribution charges, you also have higher ERCOT energy charges at that point, potentially. So when you think about that spread, okay.
Blake Richetta (39:11.49)
That's still an interesting monetization mechanism, especially when what you're saying is as long as I can increase the profitability of the retail electric provider and they split it with the owner of the battery, then any of these spreads are a win. Now to support your point, is it nearly as much as there should be? And then I say spread, but let's just say compensation for the battery and the value of the battery. No, not at all. And you're right.
Blake Richetta (39:39.426)
biggest value we've seen, at least scientifically and economically in Europe for the battery swarms and battery networks that are at the end of the distribution system and adjacent to load is really more on distribution system flexibility and on infrastructure and on infrastructure investments being deferred and on just the balancing of that system. There's a lot of value to that and there's a lot of real monetization that should be seen for that. And you're right.
Blake Richetta (40:09.28)
in Texas that's still a work in progress. But I think the reason why the right is a great first step is instead of saying, we need all this figured out by Euricot now before anybody invests a billion dollars. Instead, sole right said, no, we're going to raise a billion dollars and invest it in Texas's consumers based on these basic principles.
Blake Richetta (40:38.326)
of the daily cycle and of a load shape and to inject wind versus not to inject. And even if we're not getting paid nearly and all we're doing splitting the extraordinary profit with the retail electric provider. And even if that's not nearly the real energy system value of the battery, we're still going to do it. Why? Because, well, it works for the first several years. The IRR is okay. And then we bet on the future of what you're talking about, all the things you're talking about.
Blake Richetta (41:07.566)
And that should in theory, to your point, increase the value stack of the battery and further increase the monetization to be more fair. But fundamentally, we can't wait for all that to have investors. that's the problem. In my opinion, my friend, is that most investors and most competitors and most players in the industry are basically like, well, it does a pencil.
Doug Lewin (41:29.67)
Their attitude is we'll wait till it's perfect and it's obvious, but when it's perfect and it's obvious, then all the money flows into that space and you lose the advantage of being a first mover. So I just want to give an example of this for the listener. So let's think about a home that's built in the DFW area. It's a new home. So it's got, it's pretty energy efficient. We've got a decent building code in Texas, but you know, on a hot summer day, it's probably going to use what? 5kW give or take. Is that a decent number? that?
Doug Lewin (41:58.99)
Two I, two L. Peak power on a hot day, 105 degrees in Dallas.
Blake Richetta (41:59.596)
Power perspective for peak power.
Blake Richetta (42:04.586)
How big's the house?
Doug Lewin (42:06.735)
I mean, in Dallas, Fort Worth, 3,000 square feet would be small in Dallas, Fort Worth, right?
Blake Richetta (42:11.18)
No,
Blake Richetta (42:12.012)
the same big houses. I would go more towards six kilowatts or seven, but that's that's just off the of my head.
Doug Lewin (42:18.744)
So six or seven. So let's say then they just bought a F-150 Lightning or whatever. They got an EV, right? And they got a level two charger. So now what are you looking at? Another five or six on top of that?
Blake Richetta (42:34.25)
Yeah,
Blake Richetta (42:34.7)
of course. You have, if you're doing a level two charger of the electric car, then you're doubling that pretty easily. Maybe a little more like my level two charger at home is it's pushing up towards nine kilowatts.
Doug Lewin (42:45.72)
Okay.
Doug Lewin (42:46.0)
So now if you're a distribution utility, you could make the case to your regulator, I have to build enough distribution infrastructure to have 15 KW instantaneous demand for every house in that new subdivision.
Blake Richetta (43:00.808)
or or
Doug Lewin (43:02.446)
Or,
Doug Lewin (43:02.726)
would you like to finish this statement? Looks like you want to finish the... I if it's a market. don't if it's an incentive. It's something I'm trying to figure out. One of the things I love about this space is not all the answers are ready-made off the shelf, but we have a competitive market in Texas. We have a competitive and conservative, in the classic sense, ethos of competitive forces. Is there some way to say...
Blake Richetta (43:06.264)
thought. Feel free. No, please.
Doug Lewin (43:31.832)
Hey, load shape really matters and building a system that is 15 kW for every single house would cost maybe not three times as much as a five kW for every house, but like at least 50 % more, twice as much, something like that. So let's have some kind of market signal that these new homes are all built with solar and storage. So you get, as you described it earlier, like a perfect load shape. That doesn't mean you have to put a 15 kW solar.
Doug Lewin (43:59.542)
array on it. might be a small five or six with the battery, but now you're keeping it at four or five, maybe even two or three KW at its peak because you're just smoothing that out using the batteries. again, that distribution value, which I would argue is extreme. There's some studies on this in Texas, Texas, and the Energy Business Alliance a few years ago before the cost of power was on the distribution side was going up as much as it has the last five years.
Doug Lewin (44:26.84)
quantified it as like a half a billion or so benefit every year for what they call non-wires alternatives. I think it's in the many, many billions of dollars a year at this point. But at this point, that's all on the company. It's all investor risk. It's all on the customer to fund. is no market signal on the distribution side to say that that smoothing and bringing from 15 KW down to five is valuable.
Blake Richetta (44:53.33)
That's very true. The locational value specifically added on to what you're saying exponentially increases this argument. So if there is a very congested circuit or node or substation load pocket that we're able to effectively smooth and balance, well, the value could be enormous. And we, of course, we see some of this quite a bit in European Union. So in Germany, we balance solar plus electric vehicle plus load plus grid signals and they're
Blake Richetta (45:23.278)
They have, it's a law in Germany that everybody that wants to can opt into a price structure that changes every 15 minutes. So it's very much like a very real, real time kind of, it's not really real time, but you know, it's, ish, very intense time of use. call it.
Doug Lewin (45:39.371)
Is there a cap on that? What is the highest it can go? Do you know?
Blake Richetta (45:44.008)
no, I don't know what's going on right now as far as the pricing. But yeah, the pricing is generally pretty high. It used to be really, really high when everything was super unbalanced. And now it's come down a bit. Then the war made it go back up again and now it's back down again. as they figured out a good alternate sources for gas, but maybe another topic for sure. But as far as the distribution system value goes, yeah, just being able to say
Blake Richetta (46:11.64)
Do not charge your electric car at peak period. Here's a really nice incentive for that. Number two, here's a really nice monetization incentive to make sure you time shift excess solar to offset load during peak period, at least a reasonable amount. These are two pretty basic functions. They're not the most difficult to me. We're doing...
Doug Lewin (46:16.428)
NetPeak
Blake Richetta (46:36.92)
Fast frequency response, regulation up, two second response time, which is required in Germany, it's bananas, and really aggressive reactive power, grid services, voltage support. This stuff I'm talking about is like the meat and potatoes, a simple VPP. And to your point, none of that's really valuable in America yet. Super valuable. In other words, what you're saying is entirely true in the sense that the real value of that
Blake Richetta (47:05.098)
load pocket being decongested and being balanced properly in the distribution system. It doesn't really have any mechanism to show the value. I guess the only thing is, like I said, at least the energy prices can be different at different times. And so we can try to use that, but distribution incentives are not there. So hopefully this is what happens in the future. We actually have a code name to the project. We call it Dragonfly, which is kind of like Dragonfly is like this new beginning symbolizes new beginning in some
Blake Richetta (47:34.552)
cultures and whatnot and this new level. And so we're trying to do whatever we can at Sonin to influence this full grid services value stack happening in America, which would really be beautiful. Yeah.
Doug Lewin (47:48.426)
So when you say, I just want to clarify something when you say that you're doing all this like reactive power, voltage support, all that kind of stuff in Germany and you say that's not valuable in the U.S. Like you can't do that as a distributed resource in Texas right now.
Blake Richetta (48:01.033)
It's hard to figure out how to actually get in and get paid for that. It's really rough. don't know. Frequency response, I don't even think is allowed at all still. You could verify this, for a behind the meter battery, residential behind the meter battery, and some of the other ones maybe. But man, it is really, really hard. And ADR, I think, is the vehicle to try.
Doug Lewin (48:25.91)
Right. I was just going to say, I think that's where this is all happening. But yeah, like fast frequency response in Texas, I know, because I looked into this after Spain, is 15 cycles, 250 milliseconds. So that, I could imagine, could be very hard on the distribution side just because of the communications and all that. But there's other parts of responsive reserve that are not milliseconds. They might be two seconds or four seconds or something like that. those might be possible.
Blake Richetta (48:52.148)
Two seconds is very possible for VPP.
Doug Lewin (48:54.21)
The other thing I wanted to ask, I'm not clear on, and if you're not clear on it, it's fine. We could always do this in a future episode. I maybe need to get Mr. George on of Solright and ask him some of these questions, but you were talking about the ability to monetize in different locations or different times, but is there not, for locations we have this, we do have a nodal market in Urquhart, but load is settled zonally.
Doug Lewin (49:20.312)
So are you actually able to achieve those nodal prices or no, because you're considered low? I'm confused by that. Do you know?
Blake Richetta (49:26.75)
Yeah, I don't know exactly either because this is pretty new. That being said, put it this way, whether we can or not, it's still not to your point, the value stack of taking a locational value of a really tough part of the grid, which is where we shine, know, it's where to find the mirror and the distribution to your point. It's really where we shine in the European Union, for instance. my gosh. This part of this area is in trouble.
Doug Lewin (49:29.176)
Okay, that's fine.
Blake Richetta (49:56.514)
Well, we can flex that thing all day long and really provide a ton of value. And that's the stuff that is really not, well, at least that I know of is really not being compensated for. There's no mechanism for it. But yeah, if the nodal price and zone price, yeah, I'm sure. Hopefully we can do all that stuff. We'll be doing a lot of it soon. I'm
Doug Lewin (50:17.76)
Yeah, so basically what
Doug Lewin (50:19.111)
you're saying is like on the front end, like in the early days here, the time value, very clearly that signal is there. But when you talk about a grid and where the real values are, it's time and location. And so like that's the kind of the next frontier is like, how do you deal with the locational value?
Blake Richetta (50:35.554)
Yeah, because what we would do is say, let's go deploy 5,000 batteries exactly here. In Utah. Yeah. Yeah, we did it here Utah. Here I'm in Utah. We have this enormous battery cluster because of the substation there. And there's great research that shows how much value we brought.
Doug Lewin (50:40.8)
in this place where it's needed here.
Doug Lewin (50:51.874)
So two things I want to say on that. Number one, this is a conversation that is very actively going on in the state of Texas is what kind of, it needs to be more active, but it's at least begun. What kind of distribution system planning do we have? Right? The distribution system planning happens, but it generally happens in a black box at the utility. Everybody kind of learns about it a little bit in the rate case, but it's kind of like done at that point. And like there's, there's very little.
Doug Lewin (51:19.874)
sort of interaction with different market participants that may have solutions that cost less. For a long time, I think utilities really resisted that sort of thing because if it led to less spending on the distribution grid, that of course has less profits to them. In today's world, with all the data centers coming, the industrial electrification, oil and gas electrification, process electrification, transportation electrification, like their opportunities for investment are so many.
Doug Lewin (51:48.002)
that if you reduce the opportunity for investment on one strained part of the grid, they're going to be just fine. Thank you very much. So I think we're in a new context where maybe that distribution system planning involving DER providers, that might be a conversation that is ripe at this point.
Blake Richetta (52:06.222)
I agree with you. And I think this is an interesting example to pull in the vertically integrated market, even though it's such a different model. So again, a vertical integrated market could either be really, really bad, really, good or in the middle. Who knows? It's based on the vertically integrated utility. But in the case of Rocky Mountain Power, because they're so, so, so pioneering in this space, they've shown just how much you can do quickly in this area. So as it pertains to
Blake Richetta (52:33.578)
Okay, let's look at locational value. Let's look at load pockets. Let's look at different grid services. Let's look at what the different grid services actually provide to the grid in this area. Let's make sure we're trying to get projects done in those areas. And as far as planning goes, yeah, there's no reason why there couldn't be a ton of support from behind the meter assets to
Blake Richetta (53:03.49)
help with a very long-term strategic plan on these different areas of the grid. And my gosh, here's the thing. It's a Rocky Mountain Power and I can get a Rocky Mountain Power executive on here and tell you about it. That's better for them. So the whole idea that they have to, you know, rate base everything, it's all based on their investments and their capital investments, that's how I make my, you're right, that's true, but it's much more complex than that. You know, if you're a utility executive and I'll use vertical linear utilities for a minute, just because it's a good example, it's easier.
Blake Richetta (53:30.414)
If you're a Rocky Mountain Park executive who came on your show and explained this as well, yeah, can't just make a bunch of silly investments. If we make good investments that really take away a bunch of silly investments and we show that and the commission sees it and the people see it and rates stay really reasonable, but we also have our profits still what it's supposed to be. This is better for the energy system long term. So it takes a much bigger, how do I say this?
Blake Richetta (53:59.266)
much bigger perspective from a utility to see this way. But I believe, cause I've seen it at Rocky Mountain Power, that that exists for some utilities. And so if they see this as, this is going to save a lot of money for the utility. We're still making investments, but all by lower cost, getting a lot more out of it. This is better. Let's do this. And that's what I think means. It means a lot for utilities to make that leap.
Blake Richetta (54:26.67)
But once they do, all of a sudden, virtual power plant becomes very attractive.
Doug Lewin (54:30.944)
And look, they have a lot of motivations, like clearly, depending on who you're talking to at the company, right? The higher level you go, the higher that priority is going to be. And that's not, I don't say that to be damning. It's like, that's their job. They're supposed to make money for their shareholders. get it. They also like live in their communities and want to see like real resiliency outcomes. Cause guess who gets yelled at when the power isn't flowing, right? It's they, they go to their kids soccer games and people don't like them very much. So there are these like social pressures. There's it is more complicated that we give it credit for.
Doug Lewin (55:00.682)
I do think there's huge opportunity. hope my friends at Centerpoint and Oncord AEP listen to this because distribution system planning, the DR providers can provide a whole lot of resiliency benefit and just distribution system benefit. other thing though, Blake, I think it's really important. Number one, we have vertically integrated utilities that are outside of, caught, right? So there's four of them in Texas, including Southwest Power, Excel, Swepco, AEP.
Doug Lewin (55:28.938)
Entergy in east of Houston. And then we also vertically integrated within ERCOT as well. And the value proposition there. I'm talking of Austin Energy, Virdnallis Electric Co-op, Bandera Co-op has actually really gone down this road of DERs and VPPs. Waterloo Bay Valley Electric Co-op has made a big move into that. San Antonio, CPS, these are all vertically integrated utilities. So they already have that same kind of-
Doug Lewin (55:56.992)
incentive that you're describing, blocking amount of power to look at their whole system. But there's actually even a bigger incentive because the way transmission costs are allocated, they basically appear as one big customer. So if they get that perfect load shape, as you described it, for the residential customers, they use a utility benefit and every customer in their service, Terry benefits from every house that has this. So I would love to see those munis and co-ops do a whole lot more in this space.
Blake Richetta (56:21.998)
Well, yeah, and what you exactly what you saw from a reputational perspective, even then, hopefully that's what they see. Rocky Mountain Power has these really, you look it up, really, really, really positive overall reputation in Utah with consumers. I can't say that's the same even where I live in San Diego with the utilities. So first of all, the reputational value makes a lot of sense to try to have a positive reputation. And then to your point, wait a minute. Am I also getting other financial value from a system level? And by the way.
Blake Richetta (56:51.85)
is giving, empowering people that individual home backup power also creating system level resiliency and all these different failure points as opposed to one big failure point in the unidirectional grid that actually creates backup power for everyone in society in some ways, you know, because we were stopping the grid from going down in the first place if I have enough batteries and all of these things end up being values that can be considered by any forward thinking utility executive. And so, yeah, I think it's a great.
Blake Richetta (57:21.624)
thing and I hope these Texas utilities go for
Doug Lewin (57:25.09)
Last question before I ask you, the general question of if there's anything I should have asked you that I didn't. I do though want to ask you about the federal situation. We're recording on June 23rd, so by the time you hear this, dear listener, things might have changed drastically, but Blake, I would be malpractice. If I didn't ask you, how is the federal situation impacting business? Obviously, I think in both the House and the Senate, it's a cliff, not any kind of a ramp for 25D, which is the home.
Doug Lewin (57:54.612)
residential solar credit. think batteries fared better, but I don't know if they did on the residential side or if they're treated differently. Tell me a little bit about the things you're thinking through and what you're worried about, what you're maybe hopeful.
Blake Richetta (58:06.798)
Yeah, good question. And I'm happy to say that we're actually meeting with staff from a certain senator today, which is great. And this is a GOP senator that's very much trying, I think, let's say, balance things out a bit. very forward thinking gentleman. And I guess I'll go back to my earlier statement of, regardless of your politics, the VPP tends to do well on, quote unquote, both sides of the aisle. And again, we have no...
Blake Richetta (58:36.354)
problems with the quote unquote left. They're always pretty pro VPP, but also on the conservative side, we do really well as soon as we're able to speak to people and explain what solar with a greater purpose, thoughtful solar, directed and managed solar versus unfettered, what it means. my dad, I was using my dad as an example, he's a really old school conservative. And he, until I told him about everything and then on the VPP side, he didn't have any interest in renewable energy. then his
Blake Richetta (59:05.39)
I could get behind that son. And I was like, he's a very old school conservative. And I'm like, good, if my dad likes this, then I know anybody can get behind it. So I say that because I think old school solar just being on the roof and pumping solar into the grid is not going to do well likely in either the House or the Senate's version of one big beautiful bill. Speculation, of course. What do I know? I'm just a guy in
Blake Richetta (59:35.342)
CEO of a battery company. think batteries will do better. And whether you think the whole thing is bad and should all go away, regardless of your politics and whether you think that investment tax credit was 25B or 48 doesn't matter. You think it's the greatest thing in the world or not, matter. What I can at least say is I think batteries are going to do better than solar by itself. I think this is going to push change even faster and harder.
Blake Richetta (01:00:05.326)
In some ways, like a parallel world to what we saw in California, which I'm sure you're very familiar with, but the California change followed the German change by about five to seven years. You know, in the German market today, if you buy a solar array by itself, it's completely ridiculous. Nobody would do that. I guess some people would do that, but very, few. So I'm hopeful that there is a path forward for batteries. think that is likely. And I don't say it just because I'm a Sonen guy. I cause I think it is really the right thing.
Blake Richetta (01:00:35.242)
And with that foundation, we hopefully as the battery industry can carry renewable energy along with us. Solar by itself, a solar array might not have any tax credits, but batteries might. And can you make an argument with that? And again, it probably sounds, man, he's a battery guy. He's too centered on this. No, this is really the truth. This is exactly what's happening right now. So just look at the Senate's version or batteries.
Blake Richetta (01:01:05.398)
are immune to a lot of what solar is being thrashed on. I think ultimately my perception is that you'll see, like we saw in the German market, when all of their incentives went away, there will be probably a massive transition in the industry. There'll be a lot of companies that are hurt by it, but then there'll be those who rise above and make it work. And I guess the last piece is the whole domestic content piece.
Doug Lewin (01:01:34.028)
Yes.
Blake Richetta (01:01:34.894)
You know, we've been pushing on that pretty hard since the Inflation Reduction Act was passed under the Biden administration. We've been very focused on it. done very, we feel we've done very well. We're going to continue to do better. So if you're talking about American jobs, American energy dominance, American batteries, which is really good for national security, I think, and resiliency and hardening of the grid. You know, I think we have a lot of good arguments and with us, we can bring solar.
Doug Lewin (01:01:56.04)
Absolutely.
Blake Richetta (01:02:04.334)
I think so I guess in conclusion, it's not going to be easy. might be really painful. I think batteries will be in a pretty good position, but I capstone with this. whole idea you've spent several minutes of the interview on, which we call Project Dragonfly, which is to actually get in the United States, the full value stack of the battery somehow in a market mechanism or to buy a lateral contract with a utility one or the other. That's really the ultimate because if we could do that,
Blake Richetta (01:02:35.416)
I don't know we need any tax credits at all. Solar War Batteries.
Doug Lewin (01:02:38.818)
But
Doug Lewin (01:02:39.068)
to be clear, to be clear, you don't have that full value stack yet. That tax credit matters a lot to like bridge that gap to a full market. I mean, that is the dream, right? That eventually you're really getting market values for market performance and that is driving everything. But you have to acknowledge you don't jump to the absolute. Like there's a period there while we're figuring out how to value these things. And that tax credit is very valuable to bridge that.
Blake Richetta (01:03:06.434)
You're exactly right. And it makes it so companies like Soilright can go get, can go raise these billions we need them to raise. It's harder when they can't have any tax investors involved at all. It's just raw investors that have nothing to do with tax appetite. It's much easier when they have tax.
Doug Lewin (01:03:26.306)
Got it. And just very briefly, you guys are manufacturing mostly in Germany, but you have some American manufacturing.
Blake Richetta (01:03:31.96)
Yeah, we have our headquarters in stone mountain, Georgia. We're doing some very nice final assembly and finishing there. We're trying to do more and more there. We're actually looking at all kinds of options for building our inverter, our power electronics, our central processor, our battery module, all of it. But right now what we're doing is a lot of system enclosure, thermal management system, BMS, all these things, system level BMS. We're getting a lot of things for the domestic content.
Blake Richetta (01:03:59.912)
adder in the investment tax credit. And then the next thing that we can do is likely inverter and then actual battery cells. And some of that right now is being built in the European Union and then especially on the inverter side. then we have cells are still built in China, but we would like to change that.
Doug Lewin (01:04:26.176)
And this is where the bipartisan agreement needs to happen is that domestic content to bring that cell manufacturing to the United States. Like you said, I like to remind people, batteries aren't just about the grid. What are you powering drones with? Modern warfare, as we've seen in Ukraine, it's drones. You don't want to be in a position where you're dependent upon China for batteries. We need to make them in the United States.
Blake Richetta (01:04:51.33)
very well said, we would agree with you deeply as a national security level and just the let's call it stability in our energy system. Even if we were in a position of being under attack, the energy storage technology, energy storage in general offers a lot of value. And we did see the Chinese system effectively. I guess kudos to them create a world dominating position in both solar and in batteries. We certainly can change that in batteries.
Share this post