Want your home to help the grid? These startups are making it happen

Canary Media thanks Sense for its support of the Home of the Future series.

The home of the future won’t just be more efficient and powered by cleaner energy than today’s houses. It will interact with the broader energy system in ways that reward the people living there — and that help ensure there’s enough electricity for everyone else.

The power grid is already straining to keep up with current demand in the face of extreme weather, like heat waves across the West or winter storms across Texas. To address climate change, the housing sector needs to stop burning fossil fuels and switch to electricity for its energy needs, but doing so could layer a whole new challenge on this already-stressed system.

Simply electrifying all buildings significantly increases the demand for electricity, necessitating even greater buildout of renewables and wires to deliver that clean power. That adds cost and complexity to the clean energy shift when getting any grid infrastructure built is hard enough already. But if these newly electrified buildings are ​“grid-interactive” — that is, equipped with tools to control when they do and don’t use energy — then these buildings can lower the cost to keep the lights on and accelerate the adoption of clean energy.

This kind of grid interactivity is already happening, albeit at a relatively small scale: Homes can heat water or cool their interiors when renewable power is cheap and abundant, offsetting demand in the hours when grid power is dirty and expensive. Batteries offer even more flexibility, and smart electric-vehicle chargers can adjust the flow of power into cars based on momentary signals.

“I don’t think we should be calling it the ​‘home of the future’; it’s the home of the present, because the technology is already here,” said Elta Kolo, vice president at Huck Capital, which invests in the sector.

But relatively few households have achieved the full-fledged vision of generating, storing and consuming power based on signals from the grid.

“The state of grid interactivity today is very poor,” said Cisco DeVries, CEO of OhmConnect, one of the leading aggregators of grid-interactive home devices. ​“We are nowhere near where we need to be.”

Often, people don’t stand to clearly benefit from becoming more active citizens of the power network. The grid was designed to deliver electricity to passive consumers, and most regions lack systems for rewarding customers who behave in ways that help the overall system. Even when those incentives exist, folks have to care enough to participate in an obscure energy system that they know little about — or be persuaded to sign up even if they don’t.

The urgent question facing the movement for carbon-free homes, then, is how do you convince millions of people to participate in the broader energy system?

The first step is to equip homes with devices that can be controlled digitally. That’s exactly what the ​“smart-home” industry has spent years trying to do — selling connected devices based on appeals to comfort, security and energy savings.

Consumers haven’t responded as quickly or comprehensively as Silicon Valley evangelists said they would. But after years of industry efforts, smart, controllable devices are finally starting to find their way into millions of American homes.

“Households are increasingly getting smart devices, and people are saying almost universally that the top goal for their smart devices is energy savings,” DeVries said.

Smart-home adoption is a crucial stepping stone to unlocking grid-interactive homes. But the latter demand even more from residents. Once a home is outfitted with an array of smart appliances, owners must choose to use them not just for personal comfort and safety, but also to help the broader energy system. Realizing that vision involves surmounting a number of barriers:

• Grid-interactive homes depend on timely and accurate energy data, which is still generally hard or annoying to get from utilities, even though it’s supposed to be easily accessible.
• They also depend on widespread ownership of smart energy devices. Smart thermostats have broad adoption, but electric-vehicle chargers, battery storage, smart water heaters and the like don’t yet have mass uptake. 
• Installing heavy-duty energy appliances requires contractors, and we’re in the midst of a nationwide shortage of trained electrical contractors.
• Typical utility rates don’t offer any reward for shifting energy use. If you pay the same for a kilowatt-hour no matter when you use it, then why bother shifting your consumption?
• Savings customers can get from grid participation are getting washed out by increases in utility bills.

These companies are making grid-interactive homes despite all that

Given all those challenges, a robust future of grid-supporting, all-electric homes is by no means guaranteed. Nevertheless, some pioneers are breaking through the logjam of hurdles and signing up thousands of customers to participate in some form of grid interactivity.

These include a broad array of companies: electric utilities, smart-device manufacturers, solar and storage installers, software startups, electric-vehicle charging companies, even automakers themselves. Here’s a sampling of those that have made grid-interactive homes the core of their business.

Octopus Energy: Sell cheaper power for more flexible homes

Octopus Energy has its tentacles in a lot of pies. The London-based clean-energy company started out as a retailer that wanted to make its customer-service calls actually helpful and nice. It soon evolved from just selling clean electricity to manufacturing its own heat pumps, installing smart EV chargers, and offering solar and batteries. Last November, ahead of a potential winter energy crunch in the U.K., Octopus enlisted 400,000 of its customers in a flexible demand rewards program, almost overnight.

On its first activation, participating households reduced 108 megawatts of demand during an hour of peak consumption. In the U.S., the company sells retail power in Texas, where it rewards customers with lower electricity rates for each energy device the company gets to control. It’s one of the early participants in Texas’ first virtual power plant, which lets households commit their devices to supply the ERCOT wholesale markets.

Sonnen: Turn whole residential communities into power plants

Sonnen has installed 120,000 batteries globally, most of them in Europe, where the company operates them as a decentralized power plant to supply customers with lower-cost electricity. That’s not so easy in the U.S., thanks to the patchwork of differing state energy regulations. Sonnen found a way in by working with homebuilders to outfit whole housing developments with batteries. Now it’s partnering with solar installers in places such as Utah and California to make more money for customers by helping them interact with the grid at the most valuable times. A whopping 88 percent of sonnen batteries in the U.S. are part of a virtual power plant, said sonnen U.S. CEO Blake Richetta — far higher than the industry norm.

OhmConnect: Gamify energy savings with whatever devices you’ve got

California startup OhmConnect has assembled an army of 300,000 grid-interactive homes worldwide, and those customers don’t need to own any fancy clean-energy devices to participate. At its most basic, the company sends a message when the grid needs help, and if a household reduces its consumption during the specified time, OhmConnect pays them for it. Sure, the payments go up if a household has more controllable devices, but OhmConnect gets a lot of mileage out of sending customers smart plugs for major appliances and connecting to their smart thermostats. Incremental progress can add up to meaningful capacity in aggregate, DeVries said. ​“You’ve got to start somewhere that is relatively easy and makes sense to people, and you can build from there.” He also tries to make it fun: OhmConnect frames grid interactivity as a game, and customers get rewarded the more they play.

Strategies for success in making grid-responsive homes

Though these entities vary in terms of the products they offer and the customers they serve, they have arrived at the same core insights on how to successfully market grid interactivity at scale.

One critical lesson: You can’t assume regular people want to nerd out on the intricacies of real-time grid operations, however titillating that may be to industry insiders. 

“If you ask why…customers [would] want to interact with the grid, the answer is they probably don’t,” Kolo quipped.

The people selling grid-interactive homes know why it matters (that whole ​“making a clean energy grid actually possible” thing). Their job is to meet customers where they are and find ways to get them to sign up regardless of their degree of interest or literacy in the broader energy system. Three leading strategies for this are: deliver clear financial rewards; automate and simplify the experience; and make the customer part of a bigger story.

Deliver clear financial rewards

It falls to cleantech businesses to distill the complexity of clean-energy supply and demand into simple financial rewards for their customers.

“It ultimately comes down to, what do [the customers] pay?” said Michael Lee, CEO of Octopus Energy U.S. ​“If you can make that cheaper, they’ll come along on the journey with you.”

Octopus’ Texas retail business starts by offering a normal electricity supply at standard pricing. But if the customer agrees to let Octopus control smart devices, the monthly per-kilowatt-hour rate drops. Throw in a thermostat, energy storage and programmable hot water heater, and suddenly Octopus customers are paying significantly less for electricity than they would from a conventional retailer. Just allowing the company to control when your electric vehicle charges unlocks a 20 percent discount compared to the norm.

The for-profit company isn’t doing this to throw money away. The reduced rates for customers reflect the lower prices Octopus pays to source power at specific times. 

“More controllable load means more cheap, off-peak power for us to buy for you,” Lee said. ​“The lower the cost we create for our customer, the lower the rates for ourselves.”

Notably, it doesn’t always work that way. Regulated utilities get to pass on fuel costs to their customers, rendering most of them structurally indifferent to serving consumer demand with pricey gas- or coal-fired units versus cheap solar. And utility regulation typically rewards companies that build new peak power plants with more profit, rather than pressuring them to shift demand out of peak hours.

Sonnen, too, runs a battery-assisted retail electricity business, but it got started in Germany. In the U.S., it’s adapted its approach to make grid interactivity a key part of the business model for installing rooftop solar as generous solar policies fall away.

The ​“crown jewel of our U.S. operations,” said Richetta, is the Wattsmart program in Utah, a state that phased out net metering to compensate new rooftop solar customers for exporting power to the grid. But by adding a sonnen battery and responding to the needs of the grid, customers can unlock thousands of dollars in rewards from utility Rocky Mountain Power.

“It’s true self-reliance,” said Zach Randall, VP of sales at ES Solar, which installed nearly 2,000 sonnen battery units for the grid program last year. ​“You don’t need to rely on an export rate for solar to make sense.”

In California, sonnen has supplied batteries to some 400 homes in partnership with Baker Electric Home Energy. That state is about to slash the compensation it used to give solar customers for exporting power to the grid, a move that many solar installers have said spells doom for the industry. Sonnen takes a different tack: The company says it can insulate customers from any negative impacts of the new net-metering regime by more intelligently responding to price signals in the market and by earning revenue for grid services.

Whether it’s lowering the overall price of electricity, paying customers to participate or using grid flexibility to make rooftop solar pencil out economically, these companies offer customers tangible financial rewards for helping the grid.

Automate and simplify the customer experience

The financial compensation detailed above can bring customers in the door. But given the uncertainty around how many people are actually motivated to participate in the broader grid, making that participation as easy and frictionless as possible is a no-regrets strategy.

There are very ​“few wonks like me [who] will download their data and do analysis on it,” Huck Capital’s Kolo said. ​“This is why automation is important — ​‘set it and forget it’ options with the ability to override [load-reduction events] without penalties.”

That last part is significant: If customers are offering up control of their home devices, they need assurance that they can retake the steering wheel if needed. Saving money through smart EV charging sounds great — provided that you always have enough charge when you need to drive.

Kolo also contends that this suite of home energy opportunities ​“needs to exist in one app, one portal, one umbrella brand” to avoid confusing customers with too many unconnected services.

Remember Octopus Energy and the 20 percent discount for letting the company toggle when your EV charges? Octopus also got a license to sell and lease electric vehicles in the state of Texas. That means customers who want an EV can get one, lock in cheaper electric rates and pay their car lease, all on a single bill. It’s one way to reduce the friction of adopting a new type of car and registering it for demand flexibility programs (old-school utility Duke Energy is trying a similar concept for its North Carolina customers).

“You have to have automation, plus rate design, plus customer-centricity,” Lee said.

Make the customer part of a bigger story

Lastly, some companies have found that assuming customers have no interest in the energy system may be giving them short shrift. For a growing number of potential grid-flexibility participants, a well-crafted appeal to join a broader clean-energy movement can be effective.

The problem with relying solely on financial rewards as an incentive is that any one interaction with the grid can be so tiny as to look ridiculous on its own. If you bought yourself a Tesla, why bother delaying your charging schedule to earn just a few cents?

“If you talk about an individual dispatch, I think you’re going in the completely wrong direction,” sonnen’s Richetta said. His company pitches California customers on the potential for hundreds of dollars of annual grid-services revenue and pays customers on a monthly basis. Individual homes have earned as much as $70 in a month, he noted.

Getting customers on board requires telling an emotionally compelling story, he added. ​“If you present in an overly technical, wonky, grid-nerd way, consumers are going to be like, ​‘Huh?’” Richetta said.

The Baker Electric Home Energy solar sales team, for instance, appeals to prospective customers by painting a picture of a future state that a grid-interactive home helps to bring about. ​“How would you like to help stabilize all of California’s grid? If there were a million virtual power plant batteries in California, no more Flex Alerts,” Richetta said, referring to the last-ditch emergency notification via which California officials beg homes to reduce electricity consumption because the state doesn’t have enough power to go around.

The question of how nerdy to go remains open to debate. James McGinniss, founder of distributed energy retailer David Energy, agreed that it will take time for the average person to get their head around the mechanics of a decentralized grid. But he cautioned against overlooking the ​“under-explored” category of ​“energy-aware people.”

“There’s a very rapidly growing group of people who are out there buying EVs, buying solar, buying batteries, for reasons other than virtual power plant participation, but who would think it’s cool,” he explained. ​“They’re more than a normie, and they’re not quite an energy nerd, and they’re like, ​‘What’s next?’”

ES Solar’s Zach Randall acknowledged that in his home base of Utah, pitching grid services to homeowners is today a ​“more technical sell” than the old net-metered rooftop solar product used to be. Some customers worry the utility will drain their batteries; the company’s 150 salespeople explain that the utility actually just uses them for short bursts of power to correct the frequency of the grid. But instead of referring to this using the industry-insider term ​“frequency regulation,” they liken it to ​“a defibrillator to stabilize the grid.” And they’re finding that people appreciate the opportunity to make their community’s grid stronger and cleaner.

“We’ve had our best years since” the net-metering phaseout began, said Randall. ​“People are doing it for true self-reliance, literally owning their own power plant, and being a bigger part of the solution for the future.”

Canary Media’s Home of the Future series is supported by Sense.

Consumers need better tools to make their homes more efficient and to foster electrification. Sense technology is built on a simple, proven premise: Customers need real-time information to engage. With the first-of-its-kind Sense app, consumers can see exactly where and how to save energy in their homes. Sense works for utilities, for consumers and for the grid. Leading meter manufacturers are partnering with Sense to create consumer-ready smart meters that take home-energy management to the next level. Learn more.