C (3:41)

Thanks Kjell. Thanks for having me. I'm super, super pumped to be here.

B (3:44)

Excited to finally have you on and to talk about permissionless ders. Um, start by telling me what, what are permissionless ders?

C (3:52)

It's funny because I think we coined, I think Duncan coined the term permissionless on our podcast a couple years ago and I've actually started using a different term. Um, but I was strategically probably smart.

B (4:05)

To change the name.

C (4:06)

Yeah, I mean, but I, I think permissionless is for the wonks and what I've been using as plugin is for customers and for sort of consumers. It's more intuitive. But I do think there's also an important distinction between what those two terms mean. So permissionless to me is a very broad category of technologies across segments and verticals and customer sizes that really refers to not needing interconnection agreements. Although I admit that when we came up with was sort of just even something that required less of an interconnection was part of the concept. So really anything that helps you get interconnected to the grid faster and puts less burden on the interconnection process falls into this bucket of permissionless of things that I'm personally excited about. So I think some particular examples of that was it's everything from like Impulse Labs having a battery in a cooktop that's plug in to at the time we were thinking a lot about electric era doing battery enabled DC fast charging where you wouldn't need an interconnection upgrade. You may still even need like a permit or permits in that case to CNI off grid where you may still need permits of some sort, but you don't need an interconnection. Like I think there's companies like Critical Loop out there like now doing stuff like this. Then that's not to mention there's plenty of permits that aren't even interconnection related that you do actually need to be thinking about are rules and regs. And so I think permissionless though in the end of the day speaks to the concept of being able to do things without heavy red tape or regulation. And particularly when it comes to interconnection.

B (5:52)

You're not asking for, you're not submitting an interconnection request. But there is an interconnect there still.

C (5:57)

Yeah, I mean I think that's sort of one of the most powerful concepts in this whole thing actually. Is that the reason it can be cheaper and easier to do and it's so exciting is that the 120 Volt or the 240 Volt outlet is a pre existing bi directional interconnection point on the grid that you can actually push power into and it's safe to do so at the circuit level. And so when you look at traditional installs, we're basically doing an open heart surgery on the panel. You have to do all this work with an electrician to actually tap into the system. But there's already a point sitting there for you that, that interconnects in into the home and the broader grid through that outlet.

B (6:42)

I was trying to think what the extension of that analogy would be. If you're, if normal interconnection is open heart surgery on the panel. Are you like, you're like sticking a lollipop in your mouth or something like that?

C (6:53)

It's like. Well, I haven't even thought of that actually yet. But it's. I don't know, you're just like putting on a T shirt more like it like you're just like you're using, you're just, it's a function that you have available to you, you know. Um, so yeah, okay.

B (7:08)

So there, there's some stuff that's like not so relevant in the US currently, but like balcony solar, this thing that is pretty big in Germany. Not so much here could be considered into this category as well. But I think mostly, correct me if I'm wrong, like mostly we want to talk about is batteries. And, and, and you mentioned a few different, I guess, form factors, right? Like there's the electric era battery integrated into an EV charger or there's the battery that's displacing an interconnection for a load or something like that. But I mean, the category that I know you're spending a lot of time in that I find interesting and want to understand better is the just take a battery and plug it in behind the meter, maybe connected to an appliance inside a load, inside a home or a business or whatever. It might be like a very small home battery. And so in that category there are products available today, right. Like you can, anybody can go buy a bunch of different batteries. So it seems to have emerged as a category. I don't know, it's been around because stuff like ecoflow I think has been around for a while. But like there's a, there's a little bit of a mini explosion here, right?

C (8:17)

100%. And yeah, I think, you know, us wonks love our, our ever multiplying acronyms and definitions and stuff. I think of what you, I think of what you just described as plugin because specifically it's very intuitive. You think about plugging a DER or something with a battery or solar. I actually think balcony solar is part of this and is very relevant in the US today that that is plug in solar or plug in batteries. I just think that makes a lot more sense intuitively and that it's a subcategory of a broader permissionless space that when we think of permissionless, we think of really big stuff too. That's how I think about it. But yeah. So for today, I actually think plugin is the right idea to think about.

B (9:02)

Right. Okay, so let's talk about plugin. But before we get off of the idea of permissionless, the question of permission and of interconnection is actually like a core question as to the value proposition of plugin. So what is the state of affairs if I want to plug one of these little batteries in in my house? Maybe I'm using it as backup for my fridge or whatever it might be. What is the lay of the land in terms of what requirements it needs to meet, what permissions I do need? Is it murky? Is it defined like where are we there?

C (9:39)

It is murky. I think what really matters is the thing we focus on a lot is safety. So there are plenty of UL certified products that, that adhere to the NEC saying you can plug this in in the following manner and it's safe to do so. And so there may be jurisdictional like AHAs or DOBs or fire departments that have an opinion on what should go in a given location, how big of a battery or something like that. But at the sort of electrical code level, this is already allowed under the current guidance and there are many products that support that. So from that lens you could say in most places you can go out and buy these things and, and plug them in and whatever state you're in. A lot of the attention that's happened recently around regulations is specifically there's bills now introduced in, I think it's up to 30 or sorry, 24 states with maybe 30 soon introducing bills where you can actually export to the grid through these devices. And so we think of that as an extremely important distinction where a lot of that regulation that's being passed is focused on really what is an interconnection agreement, what permission do I need from there for the utility? Whereas I understand the utilities concern is hey, if you just start exporting and the grid goes down and our line workers out there, they don't actually know a line is, is energized. And we don't like people just exporting without us knowing what's going on or how, how much power that may be. And so a lot of these rules that are, that are being introduced in past are focusing on anything up to typically 1.2kW is you can export that amount from a meter from a home. And it's really even narrowly focused on consumer applications that actually does tie back to the NEC in some ways because it gets into, okay, if we're going to make these commercially available and you're allowed to export them, how big of a system do we want to be creating and allowed under or being UL certified? Because it gets into what actually at the circuit level, like a 20amp circuit, what can that handle? And so there's actually somewhat of an alignment between those two concepts happening, but we view them as actually very clearly distinct. You could have 20 kilowatts of behind the meter capacity and your peak load is 50 kilowatts and you're never exporting. And then that's an interesting question. Do you need an interconnection agreement for that? It's all happening via the plug with UL certified products that the NEC stands on how you're, you're deploying it based on like panel and circuit sizing and stuff. So I just think about it that like when people say backfeeding they typically mean into the grid. But I think under current NEC and UL you could actually go buy some of these systems today and use them at, at home. And that's a, that's, that's an interesting sort of debate going on right now because some utility people even say even if it's not exporting. There should be a permit and you know, or permission. And that, that is still, you are still interconnecting into the system by doing that.

B (12:48)

Right? Okay. So it's, it is murky as you said, but seems like in some cases there's stuff you can do now, in other cases there's stuff that might be coming that you can do, like exporting to the grid under certain conditions if some of these bills pass. Let's talk about why. Like what's interesting about this, how much of the value proposition for putting a battery in a home or a business that's very small, if it's say it's sub 1.2kW is the value proposition resiliency? Are you plugging it into a load and saying this is backup for this particular appliance or are you thinking of it as this is savings on your electric bill or is it some combination of the two?

C (13:28)

I think what's really excited about Permissionless and Plugin is that it is about affordability. That's what we saw, sort of why it got adopted so quickly in Germany. It's not about resilience. That said, I do think in these early applications and this actually gets back to what's allowed. What certainly does seem to be allowed no matter what is if you just plug a battery into a wall and then a device into that battery, you're not pushing power back into the circuit at all. You're just removing loads from the grid. That doesn't seem to need an interconnection agreement or is allowed, you know, as long as that product is certified. So I do think a big focus right now is on the appliance level and given that there's a resilience angle to it. So some of the companies out there are talking about resilience and self reliance and it's. That's important. You can put a battery connected your fridge at home and it'll back that up. However, I think the big story and the really exciting one is what this really does to what we think about install and the costs of the cost and accessibility of these systems. It's going to drive them much, much lower than we've seen in the past. And that means that for the first time maybe our industry can really focus on affordability being the be all and end all in ders and not resilience. Because I think over the last decade it's been a lot of resilience because it's a premium product. But permissionless speaks to no, these are super cheap, they're easy. And it's all about cost savings.

B (14:57)

And they're super cheap and easy because in part you don't need. There's no design, there's no engineer, there's no electrician, there's no. And so presumably you get. But it is smaller, so you get less economies of scale. Like how much cheaper do you think it can be relative to a powerwall or something like that? Like a larger home battery.

C (15:19)

Yeah. So I mean an easy rule of thumb is that soft costs are typically 50% or more of a residential install. Permissionless can effectively put that to0 because two of the big components, there are three of the big components are permitting, labor and CAC. And so think about a buy online motion where a consumer is just going to Amazon and buying one of these and plugging them in themselves. That totally removes CAC and soft costs. And then also based on all the regulation that's being worked on now is the permitting side of things, you know, can go away as well. So half of the cost in a residential install you could think of as basically being gone. So obviously they're smaller systems. You could say maybe there's marginally more expensive, just the size of the unit. Maybe there's some efficiencies say in like a powerwall or how you set up the inverter there versus like an all in one system. But I think the what, what matters there is that that's a marginal difference and the real plummeting costs are still in the hardware side of things. So solar and storage continue to get cheaper. If that were to continue to be the case, these soft costs aren't going anywhere in traditional installs. And so if you're going to remove that, it basically means that in permissionless, your floor, your floor is like all the way down to just the hardware costs. And I find that incredibly exciting.

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B (18:07)

Yeah, it is super interesting. The limitation is scale. Unless the regulations turn out to be, you can do as much of it as you want to do. You know, let's just say you're capped at 1.2 kilowatts per house. There's only so much savings. So. So, okay. The point that you're making, maybe just stepping back for a second, is that, and I think people don't always appreciate this, folks who are buying home batteries now, right. They're generally doing it for one of two reasons. One reason is if they're in like California and you have a net meter, if you have solar and you have net metering rules that make it super uneconomic to have solar unless you can discharge it into the house or discharge it into the grid at different times a day when solar is not generating. And so it's economically beneficial to you to have storage in addition to solar. But the other reason, outside of that specific context, say you don't have solar, you're not in a California type net metering thing. It's basically entirely a resiliency value proposition. Because the economics, if you're just trying to save money on your bill of having a battery, aren't a residential scale, are not that great yet you don't save that much on a demand charge. Right. But is that true with the permissionless ones? Because yes, you get a cheaper battery, but you can only shave a tiny bit of the peak because the battery is small. Right.

C (19:26)

Well, what's interesting though is that this gets into the market opportunities that it's opening up and small is relative to the load you're placing on. When you, when you say it like that, 1.2 kilowatts and a kilowatt battery may be a decent amount of the load. And if you're a single single bedroom apartment renter, like this is the balcony solar stuff. Right?

B (19:48)

Right.

C (19:48)

And for, for them it's extremely economical and really is that's just opening up a TAM that no one's really. I know people do multifamily installs, but like the idea of just a tenant buying one of these and having access now is, is totally, is like, I think just like radically new. And people are still underappreciating this point. And this is where looking to Germany is, is very interesting because this was, you know, Covid, Ukraine war stuff going on. Energy prices were going through the roof in Germany which led to a lot of the acceleration in these systems because people were putting their hands up and saying, I'm paying 40, 50 cents a kilowatt hour, I'm just going to go buy my own solar, plug it in. And all that's doing is offsetting the 40 cents they would have had to pay. Right. And so you don't even need complicated, you know, you know, Veter or even net metering. Like a lot of this. Again, people are thinking about this from an exporting to the grid, but there's a lot of damage these things can do to your bill in a good way behind the meter that you don't even need to be compensated that much for, for the exports. And that's the action that we saw in Germany and really remarkable there is in the last four years or so they've seen 4 million of these systems adopted. So 4 million in homes or apartments or ever you think about it. Whereas that's about the same size as the traditional single family installs, which did see a lot of growth in the last year, but those have been around for, for decades. Right. And so I think that comparison is really remarkable. But just the idea that in a handful of years people just started buying these systems and it's over a gigawatt now and basically installed capacity and deploying that in four years through these systems is remarkable. So, but I want to make sure.

B (21:33)

That we're clear on that. That's basically all about, that's the balcony solar stuff, right? That's solar, not storage.

C (21:38)

That's balcony solar. Some of those are starting to come with storage. Right, right.

B (21:42)

Whereas what we're talking about here, you made the point, maybe it does include the balcony solar concept as well. But I think just as often it's just the battery here.

C (21:50)

Right. And so yeah, that does get into to your point on demand charges or demand response programs. But to that end, you know, some of the work we've seen in New York City, you know, it's about $50 per month per kilowatt shaved, which to a small business actually can mean a lot, especially if they own 10 locations or so. And if you're doing a couple kilowatts then that can be pretty meaningful or you look at some other work Like Standard Potential has done this with H VAC units in apartments, just sort of disintermediating the window unit that you can enroll those in demand response programs even without demand charge management. And so we in a commercial application are stacking the full value that everyone usually thinks of, of like delivery charges, demand response, energy values, et cetera. But in, in commercial you're exposed to demand charges for example, whereas you're not in an apartment. Basically.

B (22:52)

Are these typically multi hour duration systems? Are they like one hour? Like does it matter if it's 1.2 kilowatts, how many kilowatt hours is it?

C (23:01)

They're often sized like basically one to one. But that doesn't mean you're using the full 1.2 kilowatt, especially if you're plugging into an appliance. Like the appliance may be 400 watts or something. So that's basically a three hour battery. But the other thing I'd say is like in Texas for example, demand charges are volumetric and a lot of people add batteries to their solar systems in the traditional way to avoid consumption because they're getting billed for delivery. And so if you do have solar in storage to, together you can avoid delivery charges. Storage alone isn't going to do that. But there are things you can get out of storage alone, even in residential and even more so in commercial.

B (23:38)

I'm just doing rough unit economic math in my head on the New York example that you gave. And it actually sounds really good, right? Because you're saying 50 bucks a month in savings, so that's 600 bucks a year in savings to the customer. And these are, let's say it's a 1 kilowatt hour system, you know, install cost of a, of a residential battery, normal typical residential battery might be what, 800 bucks a kilowatt hour or something like that. Today people think they can get it down below that, but say it was half that, that'd be 400 bucks a kilowatt hour. So you're paying $400 for the thing pays itself back in less than a year basically on just that. Like that rough math that's actually pretty compelling.

C (24:19)

And what we've seen is in the commercial application installed costs of like less than 10% of system costs and it's closer to zero because all those, those soft costs are gone. But yeah, so I think whether it's a, it's a battery, it's solar plus storage, it's solar alone and these plug in applications that it is about affordability. And if we can learn from Germany. The more that we see bills go up in the US Regardless of what the rules out there are, people are going to go on Amazon, they're going to start buying the stuff and they're going to start plugging it in. And so I think this is coming one way or another. And it's really exciting because it is like a bottoms up economically driven motion that I think we'll see.

B (25:01)

How do you solve for cac? Because it strikes me that, I mean one of, as you said, one of the big components of the cost of a traditional system is customer acquisition cost. You don't get to spread that customer acquisition cost across as large a system. So the only way it feels to me to make this work is if customer acquisition cost is effectively zero. So like if there's a yes, the customer proactively goes online and buys the thing sales motion, then that does mean customer acquisition cost is effectively zero. But you are offering a somewhat complicated value proposition with energy bill savings and all that kind of stuff. So like how do you, how do you sell this without blowing out the cost because of the, because of that soft cost, right?

C (25:45)

Well, that's definitely right. Obviously there is, there's an online, you know, digital channel CAC and stuff like that. I do think it's very different for say a third party wanting to offer this to customers and use it for as a VPP or stuff like that versus say an OEM that's just like listing it on a website that is maybe much more actively bought by the consumer. So I think more about the, the latter case where, yeah, if someone's just going and buying, you know, it's, it's just think about that compared to door knocking, right, which is still like a big, it's exponentially cheaper. And so if not zero, I still think it's going to be a very small part of the overall costs for the customer.

B (26:35)

You mentioned demand response participation. That one's interesting because I think generally for demand response programs, correct me if I'm wrong, you need minimum scale to participate. And so like a 1. Can a 1 kilowatt load reduction participate on its own in a demand response program? Is that an economic thing to do or do you need to amass a sufficient density and capacity to be able to then bid into the program?

C (26:59)

It can be both where like an aggregator needs this minimum threshold, say of like 100 kilowatts, but then at the device level, like perhaps meter enrolled, it's a minimum of 100 watts or 10 watts or something like that it's different based on every jurisdiction. Like, what I just mentioned is more, I think, how Con Ed thinks about it. In Niso, there may be like a 10 kilowatt per meter per device rule. Other places like Massachusetts will have it by actually just the device itself. You enroll directly. It's not even done through the meter. And so they all differ. But from a technical lens, you can go as small as you want. Right. It's not hard to validate that these things are actually doing what we think they're doing. So really, any blocker there would just be sort of how the rules and regs are set up for a given program, and all of those vary. But what we've seen is like, there's plenty where, yes, things this small can participate in. In. In this stuff.

B (28:06)

I know you're doing this at businesses too, right? So it's not just a consumer thing, which. And you made the point of like $50 a month savings at a business is. Is relevant. So this is sort of small commercial also is relevant here as well. At the micro level, at the macro level, the question is, can you get. Because these things are small, can you get enough of them deployed that it starts to matter? Can we get to hundreds of megawatts, gigawatts of this stuff? And like, what does that have to look like?

C (28:35)

Yes, 100%. And yeah, I heard you. Is the time now for Der's episode with Andy? I think recently I listened to and you made this great point where you're like, it's all about removing friction, basically, right? And if you think about affordability and scale, it ties back to friction. How much friction is there in the buying motion, the deployment, the installs, et cetera. And again, if you look to Germany, like doing a gigawatt in a handful of years in what is a much smaller country than ours, it wouldn't shock me to see tens of gigawatts deployed in the next five to 10 years in the US where that's actually making a meaningful dent not just in the whole Der space, but in the gap, the capacity shortfall that we're seeing with load growth in the US and so when I think of how these things act in the aggregate, I think in tens of gigawatts would not shock me in the near future.

B (29:35)

Well, I mean, just as the thought exercises, it's like an interesting question, right? So everybody in Dr. World right now is like chasing this data center needs to come online. Utility needs more capacity in order to bring the data center online. Can you construct this kind of third three party deal wherein somebody deploys a bunch of DERs in one construct or another. There are various versions of this and it counts as sufficient aggregated capacity to accelerate the interconnect. Right. Everybody's chasing some version of that thing to do that here. The minimum scale from a data center perspective is probably 100 megawatts or something like that. So you would have to deploy that at 100,000 premises. Right. To, to get enough capacity or probably more because you're not going to get full ELCC credit or whatever. So hundreds of thousands, which sounds crazy, but at the same time, I don't know if you're in New York and you can do it in every, every unit and apartment building or something like that, like it starts to add up. So it's interesting to think about.

C (30:47)

Yeah. And I mean I think that example is interesting. You know, my hope would be also the data centers building a lot of on site capacity as well. And it's not fully burdened by say residential systems, but yeah, you just think about a lot of the big grids out there. We're talking 30 to 70, 80, 90 gigawatt peaks, maybe more if you're in PJM. And you know, either, either way you're getting into like double digit percentages of capacity potential, you know, from, from these resources off of what the, like the current, the current peaks that we're, we're seeing. It's not like it's just to say it's not some afterthought where it's like.001% of the total peak load on that grid. I think we could see like 10% or more, which is wild to think about in these small systems. The other thing I would say is like in, in the commercial application we see paths to do powerwall size or multiple powerwalls. Right. And so when you just narrow this to apartments and these smaller residential applications, it's a little narrowing compared to what plugin can do in general. You could see five 10, 20kW systems just deployed through outlets to some degree. And again a lot of that is based on regulations, etc. But I don't think the story of them is only like these hyper, hyper small in apartment applications.

B (32:23)

From a product perspective, are these just like pretty commoditized, like it's just a small battery? Is there much to it? Is there any magic, are there improvements that could or should be made apart from just like driving down cell costs?

C (32:36)

100%? I think we're just seeing the early beginnings of form Factors. I think there's going to be a lot of innovation in form factors around batteries. You can think of that as a battery in a cooktop or you can think of that as the battery how it actually is designed for a plug in application which is actually extremely nascent as well. Actually a lot of the early plug in stuff was using what is normally for like camping setups for, for a consumer application because that was what was available as like a fully mobile plug based battery. You look at some of the work happening now, it gets into like 120 volt outlets versus 240 volt. What is the right actual like shape of these? Are you trying to place them on a fridge? Are you hanging them on a wall? Are you tucking them in a corner? How big should that battery be for a home or a business? Also just the idea of it being an infrastructure grade asset. So I think one of the interesting things, for example Pela, which I'm sure you know about, is focused on, is like we're not going to build some camping battery that doesn't have the greatest API or reliability. Like we're going to build these things to be networked at scale where you may be running hundreds of megawatts or gigawatt size VPP with just all these little plug in batteries everywhere. And so, so pretty much aside from the camping battery stuff, a lot of the companies I've mentioned have all been started in the last five years. And so I think we're, it's incredibly nascent from a product standpoint and there's already some early interesting form factors being developed. But I think there's the, the list of things that could happen is, is endless. Like if I think there's even a company doing like a battery and a heat pump or something.

B (34:34)

I mean it's the biggest, like you said.

C (34:37)

That's right. That's right. Yeah, it is. Yeah. So yeah, I just think the, there's, there's going to be a lot of innovation and form factors over time and what we're seeing is already pretty interesting.

B (34:46)

Yeah. All right, well that was all the time we had. Now super interesting to watch how this is going to play out. I think it's like an underappreciated category. At least in the US You've made repeatedly the point that it is well appreciated in Germany. But appreciate your time. Thanks for helping me walk through it.

C (35:03)

Thank you, Shel.

B (35:05)

James McGinnis is the founder and CEO of David Energy. This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today's topics. Latitude is supported by Prelude Ventures. This episode was produced by Max Savage Levinson. Mixing and theme song by Sean Marquand. Stephen Lacy is our executive editor. I'm Shayl Khan and this is Catalyst.