Seth Frader-Thompson shares how EnergyHub weathered its tough early years, and what it’s learned about making virtual power plants succeed.
In 2007, Apple released its first iPhone. That same year, Seth Frader-Thompson co-founded EnergyHub, planning to leverage smartphones to help consumers save energy.
But over time, the startup realized there was actually a bigger opportunity: helping utilities centralize and control the growing list of distributed energy resources, like smart thermostats and rooftop solar, that their customers were installing. In fact, EnergyHub was so early to the build-out of virtual power plants and distributed energy resource management systems that Seth has been called the OG of DERMS.
This week on With Great Power, Seth tells Brad Langley what EnergyHub has learned about how virtual power plants mature – and the test they’ve developed to track maturity – as well as how EnergyHub plans to meet its goal of bringing 100 gigawatts of dispatchable flexibility online by 2035.
Credits: Hosted by Brad Langley. Produced by Mary Catherine O’Connor. Edited by Anne Bailey. Original music and engineering by Sean Marquand. Stephen Lacey is executive editor. The GridX production team includes Jenni Barber, Samantha McCabe, and Brad Langley.
Brad Langley: If you watched television during the '90s, you probably remember these commercials.
TV ad: Intel, the computer inside.
Brad Langley: That sound alone became synonymous with computing. Seth Frader-Thompson remembers watching those same ads as a kid, but it wasn't until he earned his master's degree in mechanical engineering that he learned what it's really like inside the futuristic chip fabrication labs in those commercials.
Seth Frader-Thompson: You're wearing all this protective clothing, you're under UV free light, which kind of looks like bug lights, not the sexiest day-to-day work.
Brad Langley: One day was particularly unsexy and a little bit dangerous.
Seth Frader-Thompson: I accidentally stuck my entire arm in a vat of sulfuric acid.
Brad Langley: Fortunately, Seth's arm survived the ordeal, but his ambition to work in semiconductor manufacturing did not.
Seth Frader-Thompson: It wasn't a hard decision to say, "I don't want to do this every day." I had done a little bit of work in grad school and college, just sort of playing with robots. And so I got a job at this really cool company called Honeybee Robotics.
Brad Langley: Honeybee had contracts with NASA and the Department of Defense. So Seth worked on projects related to planetary exploration and even bomb diffusing robots. But after a few years, he was put in charge of sales and business development. For him, not nearly as exciting.
Seth Frader-Thompson: It was really slow and it didn't feel like we had kind of control of our own destiny in the sense that you were just supporting whatever mission NASA or the DOD wanted to go on.
Brad Langley: So Seth decided to take a step back and reassess his career goals.
Seth Frader-Thompson: It felt like, okay, sustainability is coming top of mind. My robotics experience taught me, kind of, two things. One, hardware, software systems where you can control the physical world through software. And two, how to deal with really slow moving customers. And that was actually a pretty good fit for the smart home and utilities.
Brad Langley: It was that epiphany that led Seth to co-found EnergyHub back in 2007. He and his team started building a hardware product that could help customers understand their home energy usage.
Seth Frader-Thompson: We went through the process of building customer engagement tools and we went through the process of working through utilities. And so what emerged was a company that kind of understood all of those things and was able to put them together in a unique way.
Brad Langley: But as smartphones and apps became more popular, Seth realized the better way to help customers use energy more intelligently wasn't through a new device. It was through their utility programs.
Seth Frader-Thompson: I don't know how common it is for a startup to start off thinking that they're going to do a direct to consumer B2C company and end up being very much an enterprise software company, but that's what happened for us.
Brad Langley: Of course, as anyone who's done it knows, running a startup is not easy. Seth says there were times when he wasn't sure they were even going to make it, especially during the great recession and clean tech booms and busts over the past 18 years.
Seth Frader-Thompson: At one point when things were not going that well in terms of us kind of raising more money and growing revenue as fast as we needed to, one of our investors said to me, "Seth, your job is to just not die." And once I sort of internalized, okay, survival is goal number one, then it became pretty clear we've got to focus in a really, really niche way and we just have to make a bet and eventually that bet paid off.
Brad Langley: Today, EnergyHub's core product is a distributed energy resources management system or DERMS. More than 170 utilities use the platform to build and operate virtual power plants. Combined, those VPPs connect more than two and a half million energy resources, including thermostats, batteries, and electric vehicles.
Seth Frader-Thompson: We just have a need for capacity everywhere. That happened before data centers and AI. That was part of the sort of dealing with more and more extreme climate. Virtual power plants generally are the fastest, least expensive and most customer friendly way to deliver capacity to the grid. And basically every day that goes by, the urgency for that is greater.
Brad Langley: This is With Great Power, a show about the people building the future grid today. I'm Brad Langley. Some people say utilities are slow to change, that they don't innovate fast enough. And while it might not always seem like the most cutting edge industry, there are lots of really smart people working really hard to make the grid cleaner, more reliable, and customer centric. Today, my guest is Seth Frader-Thompson, president of EnergyHub. We talk about the state of VPPs today and discuss the company's goal of bringing 100 gigawatts of dispatchable flexibility online by 2035. And Seth told me what EnergyHub has discovered about optimizing EV charge management. But first, we talked about Winterstorm Fern, which hammered some southern states back in January. I wanted to know if Duke, an EnergyHub client, was able to reduce demand during the storm using its VPP.
Seth Frader-Thompson: Yeah, that worked out well. Duke is one of our largest clients and one of the utilities that we think sort of has the biggest appetite to try new things and push the envelope for VPPs. I think during Winterstorm Fern, we delivered something like 180 megawatts in a single day and delivered it at a time when the grid really needed it. So I'm very proud of that result.
Brad Langley: So late last year, I know EnergyHub put out a white paper that advocates for what you call a VPP maturity model. Can you describe that for us?
Seth Frader-Thompson: Yeah. So the VPP maturity model essentially just tries to characterize what the transition is from what we would say is sort of basic demand response into something that ultimately exceeds the capabilities of a traditional power plant. This came out of a thought experiment that someone on our sort of AI algorithms team did. And so in the AI world, you have the Turing test where an AI passes the Turing test if you can't tell that you're talking to an AI, you think you're talking to a person. And so he had this thought experiment, "What if you unplugged a real power plant and replaced it with a virtual power plant and the grid didn't notice?" And so it was one of those ideas that was so elegant that the moment you hear it, you're like, "Oh, that's totally obvious. Why didn't I think of that?" And so we said, "Okay, this is something really, really important here." So we named it after him.
His name is Mathias Huels. So we call it the Huels test and we said, "Okay, the Huels test is a point on this roadmap from basic demand response to a level four VPP that exceeds the capabilities of a traditional power plant." And it becomes essentially, yeah, it becomes a roadmap for advancing the capabilities. The capabilities are integrated capabilities, right? So it's not just something that EnergyHub in its software can do or that one DER manufacturer within their product can do or what the utility can do. It's when you put these systems together, how do you make it all work? We anchor it a bit on the Huels test because the Huels test is sort of the no excuses point, right? You could take the worst pessimist critic of VPPs and you've eliminated every excuse not to use a VPP. But at the same time, we would say that at level one or level two, you are already eliminating or offsetting the need to use traditional power plants, especially peaker plants.
And so in general, the industry is already there. We're just looking for a common framework for moving it forward.
Brad Langley: And sorry, who is Mathias Huels? Is he an EnergyHub employee? Is he somebody in the industry?
Seth Frader-Thompson: So Mathias, former EnergyHub employee on the data science and algorithms team at EnergyHub. Yeah.
Brad Langley: Got it. And you mentioned there are still some skeptics about VPPs. What are some of the objections that you continue to hear about VPPs and how do you address those head on?
Seth Frader-Thompson: Yeah. I mean, the skeptics are all essentially people who think that they have sort of a gotcha question that you haven't thought of. Like, how do I know it's going to be there? Or how do I know that I can depend on customers’ broadband to get to all of these devices? Or what happens if I call it in these specific weather circumstances where it's been hot for this — and the reality is we now have so much data built up from under the current business model, 15 plus years of running this, that we have an answer to all of those questions. And the reliability today of a virtual power plant already dramatically exceeds what you get out of a traditional power plant. There are no maintenance downtimes where someone is replacing a piece of machinery. If someone wants data to say, "Okay, so you have five-nines of successful dispatch, show me that data." We can show that data.
Brad Langley: I know that EnergyHub currently manages about 3.4 gigawatts of dispatchable flexibility and you've set a very ambitious goal of achieving 100 gigawatts by 2035. So, under a decade from now, how did you arrive at that goal and what are the key milestones you need to hit in order to reach it?
Seth Frader-Thompson: Yeah. So three and a half gigawatts of dispatchable flexibility. The actual power under management is probably 10 gigawatts plus, but the size of the aggregate VPP is three and a half gigawatts. So how did we get to a hundred gigawatts? Kind of bottoms up and top down. So top down, we looked at what's the size of the overall energy system in the US on the grid. It's I think 1,100 gigawatts, roughly a total generation capacity. You say, all right, imagine that that's growing quickly and it's decarbonizing. How much flexibility would you need to firm all the renewables that are there? We came up with this number saying probably about 500 or so gigawatts of total flexibility. And then we said, okay, what's a reasonable amount for EnergyHub to try to set a goal for managing? And we said, how about 20% of that? So that led us to 100 gigawatts.
In the bottoms up analysis, we looked at if you're a utility serving, say, a million homes and you think about DER adoption over the next 10 years, lots of people buying batteries and EVs in addition to the thermostats they've already got, new categories of devices emerging. If you just imagine that buildup and then you imagine kind of our learning rate of getting customers to sign up for these programs, if you multiply that by the size of the country, do you end up with a number that is compatible with a hundred gigawatt goal? And we said, yeah, we do. And so when the top down and the bottom up met, we said, okay, this seems like the right goal.
Brad Langley: And are there evolutions to your guys' product offering or technology that need to happen to help achieve that goal or is it really just doing more of what you're successfully doing today?
Seth Frader-Thompson: It's a bit of both. We are investing heavily in things like multi DER dispatch and load shaping. So if you're a utility operator today and you have a big thermostat resource, you've got a big battery resource, you're probably thinking about those individually and there's a heavy amount of kind of context that the operator needs to have to think about, okay, how do I kind of operationalize this in certain ways? And so what we're trying to do is abstract that for the operator and just say, "You have 250 megawatts available. How much do you need? In what shape over what timeframe?" And the system will just sort of produce that in the background. So that's something we've been investing in for a few years and we've demonstrated successfully over the last two or three years. A lot of the advancement going forward is in kind of bringing together systems like ours that exist slightly outside the utility and marrying them to systems that exist inside the utility.
So for example, today you can log into EnergyHub's platform and you can say, "All right, I have a particular substation that's overloaded or that I have a forecast for overloading and I want to dispatch that and relieve that congestion today." You can do that manually, but if you're a utility with tens of thousands of feeders in your territory, you're not going to be making those decisions manually at scale. You need automation. And so a lot of what we're building now is bringing together the systems that would allow that to automate in the background for the operator. And that ends up being kind of like a... That becomes a very, very big complex topic.
Brad Langley: I saw that you recently did a study with the Brattle Group on localized grid services. Can you talk through what you guys were trying to analyze and some of the outcomes or key takeaways from that work?
Seth Frader-Thompson: Yeah, that research is really interesting because I think it kind of gets to two things. One, the potential of what you can do with electric vehicles and two, what kind of a level four VPP under our VPP maturity framework looks like. So essentially, we recruited a bunch of customers who had electric vehicles. The basic customer experience is you say, "Yeah, I'm happy to charge flexibly. I'm going to plug my car in when I come home from work and as long as it's ready by the next morning, I don't really care what you do." And so we used a bunch of algorithmic control to move that charging around. And the results are, we essentially move 95 plus percent of the charging out of the peak period, so the peak reduction is enormous. Something like a two- to three-X increase in transformer hosting capacity, your feeder hosting capacity doubles.
You have the ability in total to defer distribution upgrades by up to 10 years. And so what is exciting about that is it allows us to just squeeze more out of the existing distribution grid. And I think for a lot of utilities where affordability is kind of front and center, just being able to go to your customers, to your regulators and say, "We are able to support the transition to electric transportation without having to spend millions of dollars or billions of dollars on the distribution grid” is a huge, huge win.
Brad Langley: Yep. Last year, you all acquired Resideo Grid Services, which sells DER management services. What was the strategy behind that acquisition and how does it set EnergyHub up to grow and expand?
Seth Frader-Thompson: Yeah. I mean, we knew the RGS guys from years ago and we sort of developed what is now the bring your own thermostat, bring your own device model sort of side by side with them. We had a very early partnership more than 10 years ago. We respected their work and over time it just felt like, okay, this industry needs everybody to go much, much faster. And right now we're duplicating efforts. Just the table stakes of running a DERMS platform are very high. So they're off, they've got 40 people just making sure the basics work. We've got all our people. Why don't we just combine forces and go faster? And as we kind of dug into it, it felt like, all right, we've been working on the same mission, we're solving the same technical problems, we have the same aspirations, we get along, like, let's do this.
Brad Langley: And does that speak to a broader need for consolidation of the space to move faster? I mean, there's so many vendors in the VPP space, outside the VPP space that it can maybe cause confusion at times. Do you think consolidation is necessary for speed and just any kind of broad thoughts on the need for consolidation in this industry?
Seth Frader-Thompson: Yeah, I don't think the industry needs tons more consolidation. I do think there will be some more. I think though, in addition to that consolidation, you're also getting a bit of like a striation, the development of a bit of a stack of companies that are in the space. And so if I think about the way we work with companies like Voltus or CPower, we're hired by the utility to be this platform that brings all the VPP stuff together into one place for the operators, for the planners. Those aggregators are out there signing up customers, enabling their factories or their buildings or their whatever. If they can just plug resources into our platform and cause the programs to grow quickly, that is a great sort of division of labor that allows us to go faster. And I don't think that necessarily needs to be more consolidation because they're already specialized in what they're doing. We're specialized in what we're doing.
Brad Langley: We call this show With Great Power, which is a nod to the energy industry. It's also a famous Spider-Man quote, "With great power comes great responsibility." So Seth, what superpower do you bring to the energy transition?
Seth Frader-Thompson: I think that the superpower that is EnergyHub's kind of essence is this feeling that a rising tide lifts all boats and we can sort of be that rising tide, at least within our kind of pond or lake, that we have unique insight and capability at the intersection of customers, utilities, and DER vendors.
Brad Langley: So what about you personally, Seth? Not to embarrass you or put you on the spot, but I know at an industry conference late last year, you were called the OG of DERs. So you must have a superpower yourself.
Seth Frader-Thompson: I don't know. I think that there's an Onion headline I think about all the time that was really funny when I was working in aerospace that was like “Suborbital propulsion engineer, not exactly a rocket scientist,” or something like that. And it's so nerdy and embarrassing to say that. But this is not rocket science, it is system integration. And I was never really an aerospace engineer. I was proximate to aerospace engineering, but I built a respect for a lot of the value you bring to technology is just putting things together. And so the basic essence of being able to put the things together successfully is to understand them well enough that you can understand how they're going to come together. And I think I just know enough about enough things that I can understand how those things might come together.
Brad Langley: Excellent. All right, Seth. Well, thank you so much for your time. I really enjoyed our conversation.
Seth Frader-Thompson: Thanks, Brad. You too.
Brad Langley: Seth Frader-Thompson is the president of EnergyHub. With Great Power is produced by GridX in partnership with Latitude Studios. Delivering on our clean energy future is complex. GridX exists to simplify the journey. GridX is the enterprise rate platform that modern utilities rely on to usher in our clean energy future. We design and implement emerging rate structures and we increase consumer investment in clean energy, all while managing the complex billing needs of a distributed grid.
Mary Catherine O'Connor produced the show. Anne Bailey is our senior editor. Stephen Lacey is our executive editor. Sean Marquand composed the original theme song and mixed the show. The GridX production team includes Jenni Barber, Samantha McCabe, and me, Brad Langley. If this show is providing value for you and we really hope it is, we'd love it if you could help us spread the word. You can rate or review us on Apple and Spotify, or you can share a link with a friend, colleague, or the energy nerd in your life.
As always, thanks for listening. I'm Brad Langley.