A $100 million investment in residential demand response is redefining what “infrastructure” can be.
Infrastructure funds typically invest money into tangible things involving steel and concrete. More recently, they have ventured into new items, like distributed batteries in commercial real estate, as with Stem and AMS.
But startup OhmConnect just closed a deal with Sidewalk Infrastructure Partners, a firm backed by Alphabet and the Ontario Teachers Pension Plan, that pledges to temporarily reduce home electricity consumption.
The deal allocated $80 million to provide residents of California with free controllable devices such as smart plugs and smart thermostats. OhmConnect will dispatch the fleet of connected devices to deliver capacity to the grid. The money it makes from doing so — paid by utilities and the wholesale power markets — then gets split between SIP and OhmConnect.
The distributed power plant, offered under the hip and hyphenated moniker Resi-Station, will kick off with OhmConnect's existing base of 150,000 customers in California, amounting to roughly 100 megawatts of flexible load. But the infrastructure funding allows for more rapid growth because it eliminates startup costs for potential participants.
The companies plan to scale to 550 megawatts in the next three years, but OhmConnect CEO Cisco DeVries said he hopes to get as many people as possible signed up by next summer. That way, Resi-Station can help the state avoid a repeat of the power shortages that caused blackouts in August 2020.
“We’re just a peaker power plant, except instead of being a physical thing, we’re a network of homes and their devices,” DeVries told GTM. “This is the cheapest, fastest and most environmentally conscious way to get that supply.”
SIP also invested $20 million in OhmConnect as the largest investor in a Series C raise, which included previous investors as well as Elemental Excelerator. That equity investment supports the company's technological investment and expansion into global markets like Canada and Australia.
Home energy modulation as energy infrastructure
The new model pledges to actualize some of the lofty visions of an electricity network heading toward a more decentralized and digitized state. Rather than build a new gas peaker plant to fire up and meet demand shortfalls, OhmConnect wants to eliminate the need for 550 megawatts of generation by toggling consumer devices like air conditioning, refrigerators and the like. Instead of spending millions of dollars to build a rarely used plant, expanding Resi-Station requires dependable software and a population of participants who trust OhmConnect with some of their devices.
OhmConnect has been dispatching demand reductions for several years now, and its performance helped persuade the California Public Utilities Commission to approve the company as a non-generating participant in the CAISO power market. OhmConnect takes the revenue from its utility contracts and market participation and financially rewards the people who respond to calls to reduce usage.
Companies including Sunrun have pioneered a similar concept, linking up homes with solar and batteries into a virtual power plant that can respond to grid-capacity needs. Batteries yield significantly more controllable capacity but require more upfront capital investment. The demand-response format is open to renters and people who lack the budget or credit score to go solar; 40 percent of OhmConnect participants are in the low- and moderate-income categories, DeVries noted.
Still, the need to pay out of pocket for controllable thermostats, for instance, limited the extent to which people could participate in the network. The SIP funding eliminates that barrier and gives OhmConnect the ability to build out its network in advance of snagging contracts for all that capacity.
“We could grow, and we’d wait for the revenue to catch up, and we’d grow again,” DeVries said. “We needed to be able to grow faster than the revenue.”
The urgency is driven by the desire to minimize the burning of planet-warming fossil fuels, but also by California's recent brush with power shortages during the record heat wave in August. A few hundred megawatts of capacity made the difference between a functional grid and rolling blackouts. The CPUC recently launched a proceeding to consider emergency procurements to avoid a repeat next summer, but the timeline for approval seems to preclude traditional infrastructure investments. Developers will only have a couple of months to get new resources up and running.
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