Voltus is a relative newcomer to the U.S. demand response industry. It has roughly 1.7 gigawatts of load under management, putting it behind top contenders like Enel X at 4.3 GW and CPower at more than 4 GW. And that’s not to mention the far greater portion of nationwide demand response capacity that’s controlled not by independent demand response aggregators like these but rather by utilities.
Still, this upstart contender is aggressively pursuing opportunities to tap the grid value of distributed energy resources including behind-the-meter batteries, electric vehicle chargers and digitally controllable loads — and not just with new technology, but also via regulatory challenges to the industry status quo.
On Thursday, Voltus announced a $31 million Series C round to expand its stake in a market that’s expected to provide hundreds of gigawatts of capacity for grid services in the next half-decade. The new round, led by Activate Capital and including existing investors NGP Energy Technology Partners III, Prelude Ventures and Ajax Strategies, brings the Boston- and San Francisco-based company’s total funding to $65 million, including a $10 million round in 2017 and $25 million in October.
Voltus CEO Gregg Dixon, a former executive at EnerNOC (now Enel X), said in a prepared statement that the new funding will “help monetize additional megawatts of [distributed energy resources] in wholesale markets through product partnerships in sectors with long-term electrification potential, including electric vehicles, microgrids, smart thermostats and solar-plus-storage.”
These fast-growing sectors are also key targets for Voltus' competitors. The field of competition stretches from the wholesale markets of the country’s regional transmission organizations and independent system operators, to the opportunities to serve retail programs of utilities within and outside these wholesale market regions.
Multiple studies have shown a much greater potential for tapping air conditioners, water heaters, refrigerators and other flexible behind-the-meter loads to help reduce grid peaks. Meanwhile, the proliferation of on-site generators and solar and battery-backed microgrids to back up commercial and industrial sites, and of behind-the-meter batteries and EV chargers at homes and businesses, are expanding the roster of resources available to grid operators and utilities.
“If you look at Texas alone, you could make an argument that all of the blackouts could have been prevented with the full capability of DERs,” Dixon said in a March interview.
California’s solar power-influenced summer grid challenges are another indication of the value of DERs “as a backstop and balancing resource to get to a fully renewable clean energy transition,” he said.
Voltus is among a group of demand response providers including CPower, Enel X, Leap, OhmConnect and Google’s Nest that have been petitioning California regulators to expand the role for behind-the-meter resources to help manage what could be a challenging summer for the grid this year.
Expanding access to distributed energy resources on technology and regulatory fronts
The path to tapping DERs as grid assets is complicated by overlapping technical, jurisdictional and economic barriers, however.
On the regulatory front, the Federal Energy Regulatory Commission’s Order 2222 issued last year mandates the creation of a path to allow DER aggregations to compete in U.S. wholesale markets that provide electricity to roughly two-thirds of the country.
But previous orders from FERC to expand the role of demand response and energy storage in those markets have had to overcome legal challenges mounted by merchant generator groups, utilities and state regulators. These groups have argued that the orders overextend federal authority over states’ regulatory autonomy.
Voltus has already challenged another FERC order that allows states to opt out of wholesale demand response participation. In March, FERC initiated an inquiry to examine whether it needs to reexamine this opt-out provision included in FERC Order 719 in light of changes since it was instituted in 2008.
FERC’s decision on this front could be particularly valuable for demand response providers in the 15-state territory of the Midcontinent Independent System Operator, since 12 of those states have adopted this opt-out route. That’s left utilities in charge of the vast majority of the total demand response market in the grid operator's territory, the second largest among the country’s interstate grid operators behind mid-Atlantic grid operator PJM.
In the same March decision, FERC clarified that Order 2222 does not allow states to bar demand response assets that are aggregated with other DERs from participating in wholesale markets under that opt-out provision.
That decision “certainly moves the ball where we would love it to go,” said Jon Wellinghoff, who served as FERC chairman from 2009 to 2013 and joined Voltus as its chief regulatory officer in March. “The data is out there that fully supports that demand response can participate fully in all markets and should not be prohibited to do so.”
Amid these regulatory decisions, the plans for Order 2222 compliance being developed by independent system operators and regional transmission organizations are under scrutiny from utilities and state regulators concerned that large DER aggregations that prompt surging wholesale markets could cause disruptions to the distribution grids that connect DERs to the transmission grid. Other groups are concerned that the money DERs can earn from state- and utility-level programs could give them an unfair competitive advantage in wholesale markets.
Wellinghoff, who spearheaded several orders expanding demand response’s role in wholesale markets in his time at FERC, said that coordination between distribution utilities and wholesale markets “is not an intractable problem, particularly in this day of digital communications.”
“The [regional transmission organizations] must communicate with the distribution utilities to ensure there’s adequate understanding of these aggregations,” Wellinghoff said. “[But] ultimately the distribution utilities have to get out of the way.”
Another technical challenge is gaining visibility, control, and measurement and verification of aggregations of hundreds or thousands of independent DERs. Voltus says its VoltApp platform, launched in March, can assess and meter these resources' wholesale market value in an auditable fashion. This kind of fine-grained visibility into the minute-by-minute activities of behind-the-meter loads, generators and energy storage systems is an important step in verifying their grid value.
Raj Atluru, the co-founder and managing director at Activate Capital who has joined Voltus’ board of directors, calls VoltApp a “superior technology platform” and regards it as a key point of competitive differentiation for the company as it goes after a DER market that could amount to “to hundreds of thousands of megawatts of potential opportunity.”
There's no lack of competition on this front. Companies including Enel X, EnergyHub, Kiwi Power, Centrica's REstore and Generac-owned Enbala are among the many with technology that is designed to engage with DERs in a comprehensive way. As state and federal policies push utilities and grid operators to decarbonize the grid by replacing fossil-fired power plants with wind and solar power, the need for technology and business models to allow demand to react flexibly to balance an increasingly intermittent renewable energy supply will only grow.
(Article image courtesy of Federico Boccaci)
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