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“The grid is starting to look a lot like the internet. These IOT devices are distributed, digital, user owned and operated nodes. They can buy from the grid, they can sell from the grid, they can respond dynamically.
These nodes are increasing ten, a hundred, a thousand fold over the next decade, which has really interesting implications for how we'll operate the grid going forward."
—James McGinniss
Welcome to Nexus, a newsletter and podcast for smart people applying smart building technology—hosted by James Dice. If you’re new to Nexus, you might want to start here.
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Episode 128 is a replay of a previous conversation with James McGinniss, CEO of David Energy, a startup, and what I would call, The Grid-Interactive Buildings / Advanced Supervisory Control Space.
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We talked about David Energy's founding story, the future of electricity consumption, and the problems David Energy solves by bridging the behind-the-meter demand-side world with the in-front-of-the-meter supply-side world with their software platform.
Please enjoy Nexus Podcast Episode 128.
🔍 A message from our sponsor, Clockworks Analytics 🔎
The Building Analytics Comparison Guide is used by industry-leading facility teams and service provider organizations to make the jump from building automation system (BAS) alarms to prioritized and proactive maintenance using Fault Detection and Diagnostics (FDD) software. There are actually two kinds of fault detection and diagnostics (FDD) software: those that stop at the first “D” (Detection) and those that go all the way to Diagnostics.
This guide tells the story of the second "D" and why it's so important. Get the guide here.
You can find James on LinkedIn.
Enjoy!
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Music credit: Dream Big by Audiobinger—licensed under an Attribution-NonCommercial-ShareAlike License.
Note: transcript was created using an imperfect machine learning tool and lightly edited by a human (so you can get the gist). Please forgive errors!
[00:00:33] James Dice: I want to remind all of you about the building analytics comparison guide, which was a collaboration between us at nexus labs and the team at clockworks analytics. It's used by industry leading facilities, teams, and service provider organizations to make the jump from building automation system alarms, to prioritize and proactive maintenance using fall detection and diagnostic software.
In the guide, we show how there are actually two kinds of fault detection, diagnostic software, those that [00:01:00] start with the first D detection and those that go all the way to diagnostics. And this guy tells the story of the second D and why it's so important. So get the guide at the link in the show notes.
[00:01:10] James Dice: Episode 64 is a conversation with James McGinnis, CEO of David Energy, a startup and what I would call, The Grid Interactive Buildings / Advanced Supervisory Control Space.
We talked about David Energy's founding story, the future of electricity consumption, and the problems David Energy solves by bridging the behind-the-meter demand-side world with the in front of the meter supply side world with their software platform.
Please enjoy Nexus Podcast Episode 64.
Hello, James. Welcome to the nexus podcast. Can you introduce yourself?
[00:01:43] James McGinniss: Hey James. Thanks for having me. I'm excited to be here. My name is James McGuinness. I'm the CEO and co-founder of David energy, which I'm sure we'll be talking about shortly. So I'll, I'll, I'll save the details.
[00:01:56] James Dice: Nice. Nice. Well, I like to start with what happened before the [00:02:00] current gig.
So what happened before David energy? How'd you get into this industry and maybe start with
[00:02:05] James McGinniss: a little personal background? Sounds great. Yeah, it was sort of an interesting journey, I guess. So I, I did physics and math as an undergrad and was always kind of interested in this intersection of like, I guess climate change and energy using decarbonizing the electricity sector as a, as a lever as far as combating climate change.
And that led me to doing a master's degree in mechanical engine. And when I got down to UT, Texas, UT Austin down in Texas, there was this huge solar and wind boom going on, which I thought was really interesting that in a red state was fast becoming like the renewables Capitol of the world, largely because solar and wind were, were just better than, than the alternatives.
So it really felt like an inflection point. So I started working in local solar plus storage, design and engineering. Considering pursuing a PhD in battery storage, science actually realized that I was not built [00:03:00] for a lab. And so ended up leaving with just my master's, but really that, that sort of whole process got me very interested in.
The energy market aspects of this. I think when you think about smart thermostats and battery storage and backup generators, all these types of assets, rooftop, solar they're so fundamentally different than like a coal plant, 200 miles away from that home. And it's really changing how electricity markets work and in a radical way.
So that sort of exploration led me to starting David energy right at that right out of that master's program. Right.
[00:03:35] James Dice: Okay, cool. And what year did David and energy start?
[00:03:39] James McGinniss: So we incorporated in 2019 it was sort of an interesting story. There was me and another co-founder. We were actually out developing a distributed energy resource projects.
So solar plus storage cogeneration. Backup generators, stuff like that. But we were looking for a technology solution to manage the projects once they were built. And there was this company [00:04:00] out there that we thought was really interesting. So we called them up and this guy, a med showed up and we kind of hit it off immediately.
So we ended up acquiring that business on sort of concurrent with. A fundraise in early 2019. So that was kind of the founding story, I guess, that brought us all together. And we, we sort of went from there, but I would say it's a formerly, we started in 2019, but I've been working on it with one of the co-founders since 2017.
Okay.
[00:04:33] James Dice: And I was reading your background. There was a company called Guadalupe. Can you talk about
that?
[00:04:38] James McGinniss: Yeah. So that was another sort of happy accident actually coming out of a physics major. I realized that I couldn't really do anything with a physics degree besides work on wall street or something, which I wasn't interested in.
So I, I space X denounced, this Hyperloop competition going into my master's program sort of the summer before I got down to Texas. So I just emailed the mechanical engineering graduate [00:05:00] department, like, Hey, is there a team working on this? Does anyone want to want to put one together?
And so that I kind of inadvertently started a team to work on this project and. Had I known what it was going to turn into at that time. I probably wouldn't have done it, but we got kind of sucked into this. We ended up designing like a Hyperloop pod. If you're familiar with the concept to race on a track that space X it built.
And then we had, we decided to build it. So we went out and we raised money and built the pot. And then we, we actually ended up bringing it out to, to Hawthorne SpaceX, to, to actually race it. And we like won an innovation award, which was pretty cool. You know, Steve Davis who's, Elan's like number, number two guy, handing us an award for, for engineering was like, cool.
Pretty. We were like, okay, I think we can, we can do this. Like, work on kind of crazy ideas and projects and stuff like that. So I feel like that was really the background I needed to like start a company, even [00:06:00] though it was a student project. So yeah, it ended up being like a two and a half year project.
I wrote my master's thesis on it and everything like that. So. Sort of actually spend a lot more time on that in, in my, it was, it was kind of that. And then the energy side of things that I was also working on during that, during that period.
[00:06:17] James Dice: Well, I was just going to say, as you were talking, the, it just sounded a lot like starting a company, right?
I mean, Basically created a team raised your hand, said, I'll do this and then went out and raised money and then managed it all. Is it, is it a lot like being,
[00:06:32] James McGinniss: yeah. You know, funny enough, I think that's where I learned like what my skillset was, you know, I don't, I respect engineers too much to call myself one.
You know, I love working with engineers. I thought, like going to an engineering program, I'd all of a sudden become like a tinkerer, which I'm just not, you know, like it was never, it was never in me, but I really love engineering problems and you know, giving engineers like a platform to really do cool work and that involves like [00:07:00] fundraising and storytelling and hiring and all this other stuff that you have to deal with.
So yeah, I think like kind of. During that process. I was actually like, oh, this is, this is sort of where I can add value, I guess. And that married up with what I think was my true love and interest was more of this. So-called like DER's space, like emerging space on the electricity grid. Cool.
[00:07:21] James Dice: And speaking of DRS, you have your own podcast.
You want to talk about that a
[00:07:26] James McGinniss: little bit? I do. Yeah. We're we're called The DER Task Force. It's not us. It's actually references this broader community of DER's enthusiasts. We call ourselves you know, the go-to community for distributed energy enthusiasm. And so sort of naturally progressed out of a happy hour.
We were doing in New York, which started through Twitter actually. And then we're like, there's all these smart people in a room. Why doesn't someone present on some topic every month? So we do these monthly meetups, which we record and put on YouTube. We have like a slack channel now that. People kind of network on or ask questions or [00:08:00] really, if there's the craziest thing you can think of like weird energy question, there's someone on that slack that, that has an answer for it.
And then yeah, and then we, we started recording a podcast just around all these ideas that we're kicking around me. And my two co co-host Coleen and Duncan who are also in the space. So yeah, if you're interested in, in what way. We talk about on the podcast, anyone listening, like definitely just go to dertaskforce.com and that's we think the best way to it's sort of the, the resource we created, the resource we wish existed when we were getting into this space.
So that that's maybe the best way to think about it.
[00:08:35] James Dice: That's a lot like Nexus, that's a lot, a lot of parallels there. Speaking of Twitter. I heard, I don't tweet, I don't, I'm not on Twitter, but I've heard that energy, Twitter is like a real popular thing in the, in the industry and the der world,
[00:08:49] James McGinniss: especially.
Yeah. You know, Twitter can, can be a real successful depending on, on where you're active, but I think energy, Twitter remains this very [00:09:00] beautiful place that I'm very grateful for. I think. Yeah. People have very contentious discussions, but it's always pretty respectful because I think everyone knows we're all trying to work on this big problem together.
But yeah, it's just, it's just amazing how many, like friends I've met through Twitter and, you know, the Dr. Taskforce came out of it and all this other stuff. So, you know, maybe I'm I'm James. I think underscore McGuinness. So DM me if you want references on other good energy accounts to follow.
Cause I'm definitely happy to provide how to dive into the, the weird world of energy, Twitter.
[00:09:35] James Dice: Awesome. Well, as we dive into David energy, let's start with what, what are DER's. And maybe like, how do they how, how is the grid changing and how has, how has it changing because of DER's.
[00:09:46] James McGinniss: Yeah. Yeah. So I know I, I somewhat referenced it, but really it's just this broad category of.
Distributed energy resources, der which you know, it's sort of it's, not the best working term. You know, it works, I [00:10:00] guess it's not the best term, but we all deal with it in the space, but it's basically. on your roof or, or on your property, like if you're a commercial building or sort of on the distribution grid, really.
So like in utility territory, it's not these huge solar farms you'd find, say in upstate New York or west Texas or something like that. So solar battery storage, backup generator. Smart thermostats, even controlling plug loads in homes and stuff like that. Electric vehicles, because you can tell an Evie when to charge or not charge.
That's a very new idea in energy markets actually. So really it's just anything that can interact with an energy market that's on the distribution grid is really, it's a very broad category. Well, what's interesting about them is they're all fundamentally like digitally native. Like these are IOT devices essentially, and that's very new over the last decade on the grid.
We used to have this very centralized architecture where. You build a huge coal plant nuclear plant hydro plant again in upstate [00:11:00] New York or far away from demand centers like New York city. And then we'd ship that power long distances, like a hundred miles, 200 miles down to the end customers and not sort of formed that, those technological constraints.
Right. Led to the grid looking like it is today, but these, the ERs are really fundamentally changing that. And you're re you're literally producing power where you're consuming it in some cases. And that leads to all these great benefits. When I think primarily resilience. So when the grid goes down, you stay alive.
That's, that's what we always beat the resilience drum at you know, in the task force circles, I guess. And then two, you can actually respond dynamically to electricity grid signals. You can store power when power is cheap, and then when it gets expensive, you can then consume it from that battery. This is, has really important implications for operating grid in high renewables environments.
If you have lots of solar and lots of wind. And less coal and nuclear, which is baseload power. There's more volatile [00:12:00] prices like when the sun's out and the wind's not blowing, you don't have power. So DER's are this really important tool where we can effectively shift user demand through these devices, to when power is most available.
And what that also means today is cheapest. Say in markets like, like Texas this is all kind of culminating at the federal level, actually through I guess a bill or a law, or I'm not a, not a policy person, but a FERC, federal energy regulatory counsel 2222, which is basically mandating that states create more robust mechanisms to integrate these devices into energy markets.
So actually the way I think about it often it sounds kind of like cliche or buzzwordy, but the grid is starting to look a lot like the internet through Through these IOT devices in that they're distributed, they're digital. These are user owned and operated nodes. They can buy from the grid they can sell from the grid, they can respond dynamically.
So if you just think of the grid as a [00:13:00] network with all these end points, We're going, you know, they're increasing 10, a hundred a thousand fold over the next decade, which is really, really has really, really interesting implications for how we're basically in operate the grid going forward. And then also build the underlying infrastructure that, that transfers energy on the grid.
I love that
[00:13:19] James Dice: explanation. Thank you. Okay. So where does David energy come in? Why, why did you, why did you recognize the need that it needed to exist? And what's the sort of founding story, I guess.
[00:13:30] James McGinniss: Yeah. So, I guess, yeah, it just really emerged out of this. Again, going back to grad school, like, okay. I feel like Tesla is going to build cheaper and cheaper batteries.
Like I don't have much to offer there. It felt like the, how to integrate a battery into a broader electricity market was this very unsolved problem and very expansive like space. And so. We basically envisioned the grid becoming more of that two-way network. And that would change how [00:14:00] these old school energy companies called retail energy providers, which we'll get into a commodity players essentially would have to operate.
They'd have to be very tech forward. They'd have to evolve their business model around this, this grid. So we just saw this massive opportunity in the der space in general. So we were very long this idea of a distributed grid and we set out to start developing projects, but as we were doing that, we saw these holes in the space like.
An asset was leveraged once it was built. Like once you build a battery and finance it, like, what do you do with it now? And there's all these problems and not, you know, incomplete solutions for, for what we felt were the modern energy customers, which are going to be the dominant energy customer saying that decade.
Like if there's only a handful of them, now you just look at the rate of adoption out a decade or two decades. And we think everyone will have. One of one of these devices, at least in their home and their building, if not like three or four or five. So, so yeah, it really, I guess, emerged out of a problem that, that we were seeing [00:15:00] we're effectively what we feel like we're doing on the lawn.
It's helping users trade their assets for them. So almost providing like energy market access for users in what is essentially the greatest becoming democratized in a way where you can choose where you get your power from. What assets you want onsite in your home or building, you have all these choices that have never existed before and consumers need a way to navigate that.
So that was kind of a broader idea, which is actually I think we were going to talk about the name as well. You know, is embedded in that but could get into more of the specifics as far as what David and energy actually does today. You know, from. Yeah. So it's David versus
[00:15:41] James Dice: Goliath, right? That why you told me?
[00:15:44] James McGinniss: Yeah. It's I mean, that's the short of it. Yeah. But you know, we, we feel like you know, more importantly that stories about like this idea of individual empowerment and if you're an energy user and you're tired of outages on the grid, you can, you can go buy a generator, you can go buy solar and [00:16:00] storage.
You can, you can prevent that from happening where previously. The the old saying was customers interacted with their utility for two reasons to report an outage or to pay their bill. That was, that was the degree to which customers thought about energy. Right. But now there's all these other options that they can sort of take, take control you know, take, take their power back.
We say not, not to be you know, punny, I guess, but, but it is, it really is true. And, and the name we hope reflects that. Yeah, the way I'm picturing
[00:16:30] James Dice: it and correct me if I'm wrong here, but it's like, almost like smoothing away all the complexity for the end user. That is the utility grid. Right. So. Just, just having a resource that you can bid into those markets, where would a, like an individual or even a small business even begin.
Right. Right. And you can basically make all that go away behind the scenes, you know? Different electric utilities, different states, different regulations, different markets, all that can kind of go away. Is [00:17:00] that, is that how
[00:17:00] James McGinniss: you kind of explain it? Exactly. So really there's three pillars to our business model.
We're a retail energy provider, which we can talk more about. We actually handle, we buy and price the commodity basically. But we can, we can dig a bit more into that. We're also a demand response provider. Are these market programs that pay users to lower demand when the greatest stress basically. And then the third is, is our software platform, which integrates with all of these DER's, whether it's a smart thermostat or a battery or a charger, and basically tells it when to turn on and off based on what's happening in energy markets.
So. You sort of wrapped around that is this very simple user interface that helps customers interact with that data, pay their bills and whatever it may be. So that's really all they see at the end of the day is. User interface and all that complexity behind, like what demand response is, what a retail energy provider does.
We, we try and only give the, [00:18:00] give them the pieces of information that they, that they need to know in order to understand and not overwhelm them with all this complexity, which, which we're basically handling behind you know, behind the scenes, I guess. Absolutely.
[00:18:12] James Dice: Well, so let's dive into it. What, what are retail, electricity providers?
Can you explain what those guys do?
[00:18:19] James McGinniss: Yeah, so basically around 2000 energy markets, liberalized, meaning. Build a generator and just sell that power and to what are called wholesale markets, which are usually regional. So new England is one New York is another PJM is one, which is like the mid Atlantic.
And so generators are bidding their power into the market in real time. Most people don't know that, but electricity is a commodity that's traded in real time. It's actually the most volatile commodity in the world. So it'd be like, if you. Got gas at your gas station tomorrow at $4 a gallon. And then the next day it was like $150 a gallon.
And then the next day, actually an extra electricity [00:19:00] market, sometimes it goes negative. So negative. They pay you to take the gas. So what retail energy providers do is they're on the demand side of the market and they. Basically signed, fixed price contracts for the most part with energy customers. So they promised them a rate for two years usually, or sometimes longer.
And. The customer pays the same rate for that power. So it'd be like, if you agreed with that same gas station, I don't like this. I don't know what I'm going to get. So I'll just, I'll pay you $5 per gallon for the next two years. Okay. And so their bills go up when they use more, but that underlying rate is the same.
So these are like traditional risk management commodity firms. I almost think of them as like health insurance providers. Where it's a fixed price. Product is an insurance product. You're protecting those crazy events on the grid where prices go through the roof and then energy providers are managing all of that risk.
So they're buying power from commodities desks, usually like futures contracts, and they're, they're taking the spread between what they buy wholesale and what they sell retail, [00:20:00] essentially. Okay. And that's, that's an established industry that's existed for. The past 20 years or so like, and, and really kind of matured that neuron and Ron was one of the first ones, actually, although all those crazy stories about them, like trading in California and bankrupting the grid that was a, in the early stages of liberalization, which they took advantage of.
Okay.
[00:20:22] James Dice: And is this only in deregulated states?
[00:20:25] James McGinniss: Yeah. So there's a, I believe basically 20 states at this point. So then in some regulated markets, you can still sell power, like own a generator and sell it, but really there's no action on like the retail side. So they're, they still remain fairly vertically integrated where the utility owns, like the wires, the transmission wires and the generators.
And so that's the one thing I didn't mention. The customer gets billed from the utility for delivery and then their retail energy supplier for the, for the energy supply. Yeah. So it's almost like I also think of them as like Amazon or FedEx [00:21:00] shipping packets of energy on wires or public public roads that are owned by the utility and utility has to, and transfer that power for them.
Hmm. Okay. Got it.
[00:21:10] James Dice: And what, what has, so those companies that have been around for 20 years doing that
[00:21:15] James McGinniss: job.
[00:21:16] James Dice: What, what, what, what are they have been missing? What are they. Keeping up with technology or the why, why do you feel like there's room for innovation in that
[00:21:27] James McGinniss: space? So, you know, I think probably like a lot of the guests that you've you've had on, on the podcast before, there's this whole really deep space of like energy management software building management systems, like all these great interactive buildings and stuff like that, which, which I'm sure we can get into But on the other side of it, the retail energy providers, who would be the ones positioned to use all that data really are not software companies that it's almost like those two groups of people just aren't talking to each other at all.
And then they don't know how [00:22:00] to unify those two things, which is why we've taken this very vertically integrated approach where there's all this rich data coming off of. These new sort of grid, interactive buildings, but the parties that should consume that data are the commodity players. Right? If you just think of, if you're a commodity trader or buyer and you have all this information, you're going to be better at it than, than if not.
So, that's kind of the key insight of David energy is, is we're building this very robust Sort of, we, we feel world-class energy management software while also going through the pains of being a retail energy provider. Yeah. And, and
[00:22:40] James Dice: the way you described how DER's are changing the grid You know, it's almost like there were two totally different universes and now we have one universe and you guys are basically just saying, we're going to sit at the meter and talk in both directions and use the data in both directions, which took next total
[00:22:58] James McGinniss: totals.
Exactly. And yeah, [00:23:00] we we've even built our business model to capitalize on saving money for customers. So we, if we save, we have a shared savings program where again, going back to we trade user's assets for them is we're taking a cut of that upside. So our incentives are aligned with our customers. This is not true.
Traditional retail energy providers. If you do that, some of the things that our software is doing and it benefits, you know, helps them buy the commodity cheaper. They'll just pocket that, right? Like they have no ability to communicate or interact with, with the customer. So what we were seeing is say these Great energy management software platforms that were helping customers save money, which was actually going directly into the pocket of their energy supplier because the supplier had no mechanism of sharing that with the customer and no interest too.
So it actually runs counter to their business model as well. I think a lot of them are afraid of this future of a bi-directional grid. They're so used to just selling power to you and taking a cut on that, that if you start selling [00:24:00] power back into the grid, they're like, well, now I can't sell you anything.
So what do I do here? So it, it really, you know, the der space. It's not only, it's not only that they're not tech forward or know how to build a software platform that engages the customer because they're, you don't have a lot of Google software engineers working at these companies. Those are groups of people that mixed together.
Typically it's also that their underlying business model and a lot of ways the, the, the, the incentives are misaligned with, with their customers.
[00:24:27] James Dice: Can you talk about the, you mentioned earlier how you think in 10 years, I don't know what timeframe you said. Something like 10 years, we're all going to have 1, 2, 3, 4, 5 different DER's you know, behind our meter.
Can you talk a little bit more about like where that, like, where the consumer side of this is going? The consumerization
[00:24:45] James McGinniss: of this is going. Yeah. And I think if you look at. Obviously Tesla, like, or even a company like Sunrun building solar rooftop, solar for customers has become very easy to do, but as the price of [00:25:00] batteries drop, all those systems are going to come with batteries because it just makes sense.
It keeps the solar running when the grid is not available and, and when it can kind of juice the returns to those projects, too, as long as the batteries are cheap enough, then you have this transition from internal combustion engine cars to electric vehicles, which most of us by this point probably accept is.
Rapid right. If you've driven an Evie in a lot of ways, they're just superior to internal combustion engine cars. And I think consumers are gonna adopt that for that reason. Then you've seen like nest and Ecobee, and some of these smart thermostat companies Generac is a backup generator company.
So as far as the hardware, I think that was the, the last decade what's allowing David energy to exist is the advancements. The consumerization, the product ization of these, these hardware devices, just being very simple and easy to install and interact with for, for customers. So it's, it's sort of that you know, even just the car you drive is going to become a great interactive because it's an [00:26:00] electric vehicle.
So I like to say uh, we've been in sort of the hydrocarbon age, the last a hundred, a hundred, 200, or even longer years, if you think of coal and we're, we're now entering. The age of the electron, which is another lane title to something. But that I think is very deep. Actually, if you just look yeah.
Electricity consumption today. It's, it's 38% of our total energy consumption. But then if you change internal combustion engines to electric vehicles, you now get to 70%. And then if you change residential home heating from boilers to heat pumps, which are electricity consuming, you now get up to 80%.
So I think in our lifetime, We are going to double the amount of electricity consumption, not even thinking about like population growth or anything like that. Right. So really it's not just that these new products are great and accessible and becoming more affordable and better than I think their predecessors in a lot of ways, but it's, it's actually going to fundamentally change how we interact with the electricity grid, which has been [00:27:00] this sort of boring.
You don't think about an industry, but when your car runs on, on power, you're going to start thinking about it a lot more.
[00:27:08] James Dice: Totally. Totally. And then not to mention, like you said earlier, the, the resilience aspect of this, you know, I have friends in Texas, I have friends in California that have felt the very real need for, I think one of my friends said, you know, I'm getting batteries like next week after I talked to him in March, he in Dallas.
So like the, the, the, I think people are starting to realize that they need more resilience, especially as we work from home
[00:27:36] James McGinniss: more and more as well. Yeah, exactly. Yeah. Imagine your work from home future when you know, the power goes out and you don't have any internet or any heat or anything. But even, you know, Ford F-150 is brilliant.
They just came out with the, with the lightning, which backs up your home for three days. I mean, I know you could technically do that with a car, but the, sort of the productization of it has never been there. It's so [00:28:00] easy when, when it's all electricity. And it's, it's, it doesn't smell when you turn it on.
It's not loud, all this stuff, like I think power outages are actually going to become a thing of the past and that's because of der.
[00:28:16] James Dice: Longtime listeners will remember. Brainbox AI from way back on episode eight of the podcast. And that episode we unpacked how brainbox allows you to add AI, specifically reinforcement learning to your existing HVAC control system, turning it into a predictive brain that learns precisely how to use less energy and optimize comfort in all buildings zones at all times.
With brainbox you can reduce your carbon footprint, lower energy bills and increase equipment life. Learn more by checking out the Westcliff shopping center, success story at the link in the show notes.
[00:28:49] James Dice: So let's talk a little bit about going to market today. The, like what does a David energy project look like? Today? And then I want to talk about long-term vision in [00:29:00] a second, but like where are you at, right.
[00:29:02] James McGinniss: Yeah. So I know I've talked about all these exciting technologies and stuff for, for awhile, but we're, we're certainly starting simpler. Most of our existing customers today because of that acquisition actually. And just the way the team came together the product was focused on these large commercial buildings.
So we'd integrate with the BMS we'd integrate with the smart meter. Then we do demand response. We do real-time set point optimization of BMS systems, basically. So. We adjust fan speeds, chiller temperatures, stuff like that in real time, based on what's happening in electricity markets often for as short as 30 minutes to up to four hours on the most stress days of the year.
Provides often 10% or more savings for a large commercial building. However, as we've gotten set up as a retail energy supplier, we're now a bit less focused on that large commercial segment. We still do it for sure. I'd say it's like 20% of our focus, maybe 30%, [00:30:00] because these are large sophisticated customers.
They may say I want your software in them as an energy supplier. They're, they're likely to kind of unbundle that, but in the small commercial sector, It really only makes sense if you're offering the bundle. I think a big, what I'm learning is we, and we talked about this before the podcast is in some markets it's five to 10% of these small commercial customers have smart thermostats.
They've been around for over a decade now. And it's really a function of a business model that works and a compelling value proposition to those customers. I think they want it. I think they want market access, but they're sort of unsophisticated. They don't think about it as much. So we have spent a lot of time.
Focusing more on this small commercial segment, quick serve restaurants, gym chains retail, storefront, small office spaces, high schools, stuff like that. Some of it's still BMS work, but a lot of times we're just going and popping out the dumb thermostat and installing a smart one. And then we control it and just doing that can provide them [00:31:00] with 10% or more savings on their electricity bill.
It's it's really kind of amazing. So. Smart thermostats and BMS have come up the adoption curve. I think they're mature technologies at this point. And it's just all about adoption. I mean deployment essentially. Yeah. Whereas you look at electric vehicles, batteries, generators, these other resources. There may be where if nest was started in 2008, a lot of these companies got started in like 2015 or something like that.
So we're still about five years behind on, on the, on the. Maturation cycle, I guess, of those technologies. And so we're positioned to capitalize on them as, as, as we go, but we're really focused on basically controlling like HVAC load right now. So it's pretty simple at the end of the day in our, in our, in our minds, but that's sort of the first wave of, of customers that will.
Yeah, and I like,
[00:31:52] James Dice: there's a couple of directions. I want to go here. But I like the, the fact that you came from performance optimization [00:32:00] and then got into the retail, cause like the fact that it's bundled, I like, because you can focus on traditional, you know, energy conservation measures that are no brainers.
Right. And you can monetize the grid. Flexibility. If you just come at that and. You know, I'm just going to provide grid flexibility. I'm just going to monetize that then like you're, you're then expecting the customer, then go out and procure something else for the energy efficiency piece. Can you talk a little bit about the
[00:32:30] James McGinniss: bundles aspect there?
Exactly. So when we. Acting as developers trying to get these projects built, we realized, okay, we need to hire a demand response company. We need to hire an energy management software company for the BMS. And then we need to hire a software company for the battery. Those weren't the same companies. Even though they interact like in a very real way.
And then we need a retail energy supplier and like a project financier. To get one of these things done. If you're a large commercial customer, that's why everything's getting done. There is because they're sophisticated [00:33:00] enough to deal with 3, 4, 5 different counterparties. But when you go to this mass market, it's like, you got to just give this one simple bundled offering.
And we, you know, we see really interesting things still like, they have a top of the line BMS, they just installed solar. There's this sophisticated customers. They can come and we're watching our product every day. And we're just saying. Hey, your, your peak demand charges are happening at seven in the morning.
Cause you're ramping everything up in your building at 7:00 AM. Your solar's kicking on at seven 30. No one's arriving at your building. Like you don't need it to be this school at, at seven in the morning. So if you just start this at 8:00 AM instead of 7:00 AM, you're going to save 30% on your, on your demand charges, you know, a month of per month.
So we've seen really drastic. Reductions in demand charges from our software platform. Just not only doing that real time, it's set point optimization like, oh, you know, there's a spike. For some reason, we sort of intervene, but [00:34:00] also in just that base building operations as well, which I'm sure you know, you and your audience know a lot about, but I think.
What we bring to the table. There is when you start to get many of these devices interacting with each other, we're one of the few companies out there that will actually aggregate those data silos. So we're taking the solar data, we're taking the BMS data, the smart meter data, and then the charter data, whatever else is there.
And watching all of it operate in unison where you know, maybe traditionally that hasn't really been the case because someone's only focused on making the building itself more efficient and not just the whole picture.
[00:34:35] James Dice: Yeah, totally. So, I mean, that's one of the things that I've written, I've done quite a few podcasts on this topic, like trying to decide whether to dive into or not.
We might as well. What have you noticed that like, beyond what you just said noticed about the opportunity there? Because I would agree. I don't see. And I had someone telling me that there are last week. Someone tell me that from PNNL that there were zero companies doing this, but I don't believe that I believe [00:35:00] it's just not scaled up yet.
What do you think like the keys are to providing that sort of holistic optimization? Supervisory control of all the different loads for this efficiency and for the, the grid flexibility aspect. Like, what do you think is the key to like being that software layer that does that.
[00:35:23] James McGinniss: Right. So obviously, you know, biased here, but our thesis is vertical integration.
So we're the demand response provider and the energy supplier. So, basically there's savings you can have on your utility bill, like from the utility, those delivery, charters, their savings you can have and how the retail energy provider is paying the market. Through things like cap tags, which are super wonky, but we, we could get into, and then there's a actual sort of extra.
Outside of the bill payments from demand response programs and the demand response providers and the, which are [00:36:00] focused on grid. Flexibility are typically not the same as the energy suppliers. So there's this like competing incentive problem there. So what we said is that I remember reading in my master's program that like there's 16 different services that a battery can provide to a.
To the grid. So you can't have one party managing three of them, another managing the other three and another it's one asset. Electricity is a commodity. At the end of the day, you need to manage the commodity and you need to control that whole stack Because we're not, we're incentivized to save our customers there's as much money as possible.
We don't have a competing interest between any one of those value streams. Right. And that's what we're essentially offering is not a power contract. We're offering service to the customer and other retail energy suppliers do not think like that. We understand, okay. If we save 5% consumption, For you, we're going to sell you 5% less power.
Like that's actually going to affect our margin in a way. But we also think that you're going to stay with us, maybe 2, 3, 4 terms [00:37:00] longer than your average energy supplier. So, looking at the total life cycle of a customer, how they, how they interact with you taking a more service forward approach as a vertically integrated player.
I think that's been. You know, there's all these competing incentives essentially. And the way we feel like we're solving that is, is through that, that bundle, which we've we've been referencing. So I think at least we, we, we hope or expect that we, we may be able to break out in this space because that's, that's, what's been missing is just thinking about the customer first and their asset and what it, what it wants, what you should do with it, like start from there and work your way outwards, which is exactly what we did.
I was a solar and storage guy. And I learned what a retail energy provider was. I didn't come from the retail space. So I think we started with this very sort of, customer empathy or empathy for what that asset needs and wants. And then, and then built outwards.
[00:37:55] James Dice: Yeah. I also like that you're approaching it from, I think I said this earlier, the [00:38:00] you're coming from doing supervisory control already.
Right. And so there's a lot of lessons that I'm sure you've learned there are inherent to the sort of smart buildings industry that make that a really difficult thing to do. And so. I, I just, my general thesis matches yours. If you start there and go towards grid, flexibility or grid services, it's a way better than starting in the opposite direction.
It's also what I really like about, so LBNL and DOE just released the gab roadmap grid, interactive efficient building roadmap, and they're really pushing for this more comprehensive holistic. Software layer. Right. And they're, they're drawing a real delineation in that document versus that, and all of the different devices, which can provide grid services on their own.
But they're basically saying that like, yeah, that's great. But when there's 10 of them behind the meter, we need software. That's orchestrating this in real time and, and sort of [00:39:00] optimizing on all the different outcomes that could be had in
[00:39:03] James McGinniss: any one moment.
Yeah. So that's, I mean, the, the way we actually ultimately look at it, which maybe would have been helpful to, to, to mention this earlier, but we're out buying energy supply when prices are going on. We can lower demand by controlling these assets. And there's, there's an arbitrage, there's a trade. You can make there to provide a lot of value and it makes us way better at managing risk, especially when we have a network of these assets that we can lean on.
Like we'll be able to fundamentally underwrite risk differently than, than other energy providers. So we want to get our hands on every single device that can control demand possible from this commodities perspective. Right? So it's not just us thinking. About what's best for the building. Like we are certainly thinking about our business model as well, but I guess it's to say that we don't discriminate between one technology or the other, we just view because we're coming from this commodity position supply and demand [00:40:00] balancing, and the more demand that we can control the better.
So we'll do refrigeration controls. If they're in your building, we'll do smart thermostats. We'll do it. Just, it just doesn't matter to us because ultimately. It's about how we deal and interact with, with the commodity. And, and I think that's honestly, what, what people forget in the space sometimes is that, again, as, as we've said, like electricity is a commodity at the end of the day, so that the consumer of that data, the one that's going to be most useful for is the one taking the risk on the commodity side of things.
[00:40:31] James Dice: Interesting.
So you mentioned how you're kind of going to market today. You know, you started in big buildings now getting into smaller ones. What's like the longterm vision here. Is there like a spectrum where this plays across the entire commercial buildings industry and kind of a smoother, it's not just like two categories.
Where do you see this going?
[00:40:51] James McGinniss: Long-term yeah, so I mean, we, and energy providers are like this. They don't really discriminate on segment because to us, again, [00:41:00] controlling a device. And backing the commodity behind it. The math, the product internally is all the same. So we don't care if that's a smart, tiny, smart thermostat in a home versus like a giant battery in an industrial facility.
We just want access to as many of these end points as possible. So we're starting in the segments where we can see that hockey stick growth as a venture backed business. Wherever we can, like the CNI battery space is moving quite slowly right now. So we're spending less time focusing on that.
Although we do have some projects in work where we're doing it. So I guess it's just to say, you know, and we're rolling out residential early next year in, in New York and Texas are in intend to so. Really, we expect it to cover all segments because we want access to all of these devices.
Like we are building towards that, that longterm vision of all customer segments will have these devices in their building set, you know, over time. Got it. And so I think the last piece [00:42:00] of it is that. Yeah, we, we actually work with probably listeners to your podcast, like controls, integrators, developers energy efficiency, people our kind of controls platform behind a lot of these smart building devices or assets that are being built, can enhance ROI of these projects and stuff.
What I wish we could do more of is more of that efficiency piece or development piece. Like we're not. Saying, Hey, you should install solar or Hey, you know, do a lighting led retrofit. we do try and hand that off to partners today, but within those segments, I do feel like if we're kind of managing the energy of all these customers over time, hopefully there's a way to implement you know, get, get going on on some of that, like development or financing or stuff like that over time, whether it's through partnerships or, or us doing it.
But we do want to. Work with more companies in the space that are, that are doing that. Cause we're, we have no plans. Like it's not in the next few, even up to five years or whatever, but I'd say that's the one piece that we haven't gone over [00:43:00] that within those segments, we'd love to be able to offer. Yeah.
So you're
[00:43:05] James Dice: basically bringing the customer and pulling in different partners to provide whatever they need on their journey
[00:43:11] James McGinniss: at that time. Yeah, it's kind of like, if we're already doing your smart thermostat and they're like, Hey, what can I do with solar? We'll we have companies will call to come in and do that.
And we help facilitate it. But I think there's a more seamless experience you could probably create there over, over time. Totally.
[00:43:28] James Dice: So speaking of smart thermostats, can you talk about how the program. You're working on now in New York works. And the way that I got excited about it is before we hit record, you were talking about how it's actually a better business model than someone going in and selling a thermostat based off of the ROI of the savings you could get.
Can you talk a little
[00:43:48] James McGinniss: bit, about that? Right. So. Basically what we're doing is we sell a lot through energy brokers actually. And then we also do direct and we work with channel partners as well, but [00:44:00] to the customer, we're basically offering a market rate for power. So if you line up all the other big energy suppliers, we're, we're pretty close our price with them, essentially just the underlying commodity.
And then we say, But wait, there's
more like the, we, we can do more than that. We, we give we go out and we install a smart thermostat. We exchange it out for that, for the, for the dumb thermostat, I guess you could say. And then we enroll them in a demand response program and start doing demand, charge management, all like.
The real-time set point optimization that we're familiar with from the big buildings that we've been working on the big BMS systems we're bringing to that, that mass market. And so we don't charge for the smart thermostat or the software we're monetizing through that energy supply contract. And then the savings that we generate, we're sharing back with our customer.
So they're that rate that they're getting initially say it's $75. A megawatt hour may come down to 65 over time, like, well, below market, because of the [00:45:00] rebates that we're offering them from performance, essentially. So I think, you know, to your question around business model, in order to capture the value that we're generating, you do have to be a supplier and a demand response provider.
So if you were just convincing a customer to pay for a smart thermostat and saying, Hey, you're going to save money in the future. So you should pay me now for that integration and you get your. For the integration work essentially for the labor or whatever, you know, whatever you're doing. We don't make customers pay upfront at all.
So I think for our channel partners, that's like, what we tell them too is we can help get deals closed. In a way we're financing these assets off, off balance sheet in a way which makes it way easier for the customer to say yes. So I think that, you know that because we make money as an energy supplier and demand response provider, we're able to extract a lot more value from the same cost to customer acquisition or the same the same relationship with the customer that, that just the company only doing one or the [00:46:00] other, what would be.
Yeah, and
[00:46:03] James Dice: this is right in line with had Matt golden on the podcast. I don't know if you know Matt,
[00:46:06] James McGinniss: he talks, I know Matt, very smart guy,
[00:46:09] James Dice: super smart guy, just new ways to sort of monetize old stuff that a lot of the times is already doing. It's just monetizing it in a different way. Is, is vital to getting some of the adoption that we need in these technologies.
Well, I'd love to take this to just like one final thing to talk about is you mentioned the different, all the different providers to, to do what you guys are doing.
A customer would have to go to a bunch of different providers today. Right. Can you talk about those different categories and like what you guys have learned by engaging with them and then sort of, I don't know for placing them as the right word, but building stack and those categories.
[00:46:48] James McGinniss: Yeah. Well, obviously within energy management software of big buildings, there's a whole different array of what that actually means.
It could be more [00:47:00] at the like back office kind of operational management level. It could be like base building system into the weeds of facilities rooms you know, and looking at like fault-finding and stuff like that. We're, we're not really doing any of that. It's more. Really just that, that real-time set point optimization.
So I think within energy management software, There's groups out there doing great things that we're not doing, and we're not trying to compete with basically, but it's more on that grid. Interactive side of things. Yeah. You'll have one again, one company doing the BMS, another company doing the battery and then the solar company, like say solar edge, they'll have their platform for you can view your solar data and then you'll have a demand response provider.
Which there's a bunch of companies out there that do just that. And then you'll have a retail energy supplier that does that. Oh, and now these days you're also going to get Evie chargers the Evie charging software. Right. So, it gets, it really adds up quickly, we think. [00:48:00] And
You know, so we're, we're only, we are kind of focused on this narrow problem, I guess, which is that great interactivity. But even within that, there there's just this sort of massive companies offering, offering different solutions. So we've had, we've had customers say when Nan star platform, they go, we just canceled three other services.
Because we only have data coming from each of these data silos. Right. And so I think that's, that's really what we're we're after ultimately is just making, making the customer's lives easier and aggregating that all into, into one place makes total sense.
[00:48:36] James Dice: Cool. So what I'd like to do is end these recently episodes with two truths and a lie.
Are you, are you getting.
[00:48:44] James McGinniss: I'm game. I can't remember the last time I played this. So, I, I hope I do it well, or right, but yeah.
[00:48:51] James Dice: Okay. And I have to mention that I think I have a hundred percent record on this so far, so I wish you well, Okay. I think we're like eight [00:49:00] episodes in something like that.
And I have guessed a lot every time. So good luck. Let's let's hear it.
[00:49:06] James McGinniss: Yeah. I'm going to give you, I'm going to give you a tough one then. So my first battery install was actually a Sonin and not a Tesla. When I was actually working as an engineer. That's my nickname. That my friends call me is Bo not related to James whatsoever.
Okay. And I I'm an amateur DJ.
[00:49:27] James Dice: That is, that is a tough set of set of ones. So you said Sonen versus Tesla.
[00:49:32] James McGinniss: That sounds true to me,
[00:49:34] James Dice: All right. I'm
[00:49:35] James McGinniss: going to say Bose, the lie now I got you. It's funny enough. I've never installed a battery. Wow. I got you. There. I, it was a trick question.
[00:49:48] James Dice: That's how you have to do it. People don't understand. You have to, you have to say something that's just totally off the wall. I love that.
[00:49:55] James McGinniss: Yeah. Yeah, you have
[00:49:57] James Dice: to, you have to bake in an either or, [00:50:00] but it wasn't the either, or that was even the thing.
It was the fact that you hadn't installed it at all. That's
[00:50:05] James McGinniss: right. It was, it was very deceptive.
[00:50:07] James Dice: Cool. All right. Well, this has been fun. I learned a lot. I wish you guys the best of luck as you're. Scaling things
[00:50:15] James McGinniss: up here. I am surprised you didn't choose amateur DJ by the way. Sorry to like it's I thought that was going to be
[00:50:24] James Dice: the lie you chose.
I'd love to hear more about that actually. What kind of music do you DJ?
[00:50:28] James McGinniss: Yeah, I mean, I guess mainly like disco stuff, like as, as a base, but a wide variety of, you know, hip hop. Like pop and house and stuff like that. I guess we it's actually funny. My, my friends and I we, we would go to parties in college and we were like, we hate, we just hate the, this bad music.
Like, why are we doing this? We should do something about it. So I actually like learned like proper, like mixing vinyl and stuff like that. Like not, not, not purists or anything, but we're like, well, if we're going to do it, let's, let's do it. [00:51:00] And so we. Just started playing music for friends. So it's not like we can like go and do weddings, but I do friends weddings, like they'll, they'll, they'll be like, Hey, will you, will you do like the after party or something?
I'm like, sure. Like, that's, it's really fun actually, but
[00:51:15] James Dice: I know what you mean. I went to a wedding, so it was before COVID two years ago. And you wouldn't believe like the difference between a great DJ and just like someone you hire. From the wedding industry is, is
[00:51:29] James McGinniss: so vast. It's it's massive. Yeah. I mean, especially cause like I know what my friends like, or they'll tell me like what they want and if you just have someone you're paying like two grand or something to like do their stuff, it can be, it can be pretty hit or miss.
Yeah, totally.
[00:51:47] James Dice: That's fascinating. Well, thanks for ending my record. I needed a step down on my my large head.
[00:51:56] James McGinniss: I'm I'm honored to that. I, that I was able to break the record.[00:52:00] what about you? Can we do one with you? Is that a, have you ever done one?
[00:52:04] James Dice: I did the first time and then I started doing them again and I was like, I can't do this forever.
Okay. Okay.
[00:52:10] James McGinniss: Fine. I'm not very, not very Creative there, I guess not original. So we'll, we'll we'll won't make you do it
[00:52:17] James Dice: sounds good. All right. Well, thanks. Thanks again. And we'll talk
[00:52:21] James McGinniss: to you soon. Thanks James.
“The grid is starting to look a lot like the internet. These IOT devices are distributed, digital, user owned and operated nodes. They can buy from the grid, they can sell from the grid, they can respond dynamically.
These nodes are increasing ten, a hundred, a thousand fold over the next decade, which has really interesting implications for how we'll operate the grid going forward."
—James McGinniss
Welcome to Nexus, a newsletter and podcast for smart people applying smart building technology—hosted by James Dice. If you’re new to Nexus, you might want to start here.
The Nexus podcast (Apple | Spotify | YouTube | Other apps) is our chance to explore and learn with the brightest in our industry—together. The project is directly funded by listeners like you who have joined the Nexus Pro membership community.
You can join Nexus Pro to get a weekly-ish deep dive, access to the Nexus Vendor Landscape, and invites to exclusive events with a community of smart buildings nerds.
Episode 128 is a replay of a previous conversation with James McGinniss, CEO of David Energy, a startup, and what I would call, The Grid-Interactive Buildings / Advanced Supervisory Control Space.
We talked about David Energy's founding story, the future of electricity consumption, and the problems David Energy solves by bridging the behind-the-meter demand-side world with the in-front-of-the-meter supply-side world with their software platform.
Please enjoy Nexus Podcast Episode 128.
🔍 A message from our sponsor, Clockworks Analytics 🔎
The Building Analytics Comparison Guide is used by industry-leading facility teams and service provider organizations to make the jump from building automation system (BAS) alarms to prioritized and proactive maintenance using Fault Detection and Diagnostics (FDD) software. There are actually two kinds of fault detection and diagnostics (FDD) software: those that stop at the first “D” (Detection) and those that go all the way to Diagnostics.
This guide tells the story of the second "D" and why it's so important. Get the guide here.
You can find James on LinkedIn.
Enjoy!
🧠 A message from our sponsor, BrainBox AI 🧠
Transform your existing HVAC system into a predictive brain that learns precisely how to use less energy to optimize comfort in all building zones, at all times. With BrainBox AI you can reduce your carbon footprint, lower energy bills, and increase equipment life.
Learn more by checking out this success story: Westcliff shopping centre made more efficient with AI for HVAC.
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Music credit: Dream Big by Audiobinger—licensed under an Attribution-NonCommercial-ShareAlike License.
Note: transcript was created using an imperfect machine learning tool and lightly edited by a human (so you can get the gist). Please forgive errors!
[00:00:33] James Dice: I want to remind all of you about the building analytics comparison guide, which was a collaboration between us at nexus labs and the team at clockworks analytics. It's used by industry leading facilities, teams, and service provider organizations to make the jump from building automation system alarms, to prioritize and proactive maintenance using fall detection and diagnostic software.
In the guide, we show how there are actually two kinds of fault detection, diagnostic software, those that [00:01:00] start with the first D detection and those that go all the way to diagnostics. And this guy tells the story of the second D and why it's so important. So get the guide at the link in the show notes.
[00:01:10] James Dice: Episode 64 is a conversation with James McGinnis, CEO of David Energy, a startup and what I would call, The Grid Interactive Buildings / Advanced Supervisory Control Space.
We talked about David Energy's founding story, the future of electricity consumption, and the problems David Energy solves by bridging the behind-the-meter demand-side world with the in front of the meter supply side world with their software platform.
Please enjoy Nexus Podcast Episode 64.
Hello, James. Welcome to the nexus podcast. Can you introduce yourself?
[00:01:43] James McGinniss: Hey James. Thanks for having me. I'm excited to be here. My name is James McGuinness. I'm the CEO and co-founder of David energy, which I'm sure we'll be talking about shortly. So I'll, I'll, I'll save the details.
[00:01:56] James Dice: Nice. Nice. Well, I like to start with what happened before the [00:02:00] current gig.
So what happened before David energy? How'd you get into this industry and maybe start with
[00:02:05] James McGinniss: a little personal background? Sounds great. Yeah, it was sort of an interesting journey, I guess. So I, I did physics and math as an undergrad and was always kind of interested in this intersection of like, I guess climate change and energy using decarbonizing the electricity sector as a, as a lever as far as combating climate change.
And that led me to doing a master's degree in mechanical engine. And when I got down to UT, Texas, UT Austin down in Texas, there was this huge solar and wind boom going on, which I thought was really interesting that in a red state was fast becoming like the renewables Capitol of the world, largely because solar and wind were, were just better than, than the alternatives.
So it really felt like an inflection point. So I started working in local solar plus storage, design and engineering. Considering pursuing a PhD in battery storage, science actually realized that I was not built [00:03:00] for a lab. And so ended up leaving with just my master's, but really that, that sort of whole process got me very interested in.
The energy market aspects of this. I think when you think about smart thermostats and battery storage and backup generators, all these types of assets, rooftop, solar they're so fundamentally different than like a coal plant, 200 miles away from that home. And it's really changing how electricity markets work and in a radical way.
So that sort of exploration led me to starting David energy right at that right out of that master's program. Right.
[00:03:35] James Dice: Okay, cool. And what year did David and energy start?
[00:03:39] James McGinniss: So we incorporated in 2019 it was sort of an interesting story. There was me and another co-founder. We were actually out developing a distributed energy resource projects.
So solar plus storage cogeneration. Backup generators, stuff like that. But we were looking for a technology solution to manage the projects once they were built. And there was this company [00:04:00] out there that we thought was really interesting. So we called them up and this guy, a med showed up and we kind of hit it off immediately.
So we ended up acquiring that business on sort of concurrent with. A fundraise in early 2019. So that was kind of the founding story, I guess, that brought us all together. And we, we sort of went from there, but I would say it's a formerly, we started in 2019, but I've been working on it with one of the co-founders since 2017.
Okay.
[00:04:33] James Dice: And I was reading your background. There was a company called Guadalupe. Can you talk about
that?
[00:04:38] James McGinniss: Yeah. So that was another sort of happy accident actually coming out of a physics major. I realized that I couldn't really do anything with a physics degree besides work on wall street or something, which I wasn't interested in.
So I, I space X denounced, this Hyperloop competition going into my master's program sort of the summer before I got down to Texas. So I just emailed the mechanical engineering graduate [00:05:00] department, like, Hey, is there a team working on this? Does anyone want to want to put one together?
And so that I kind of inadvertently started a team to work on this project and. Had I known what it was going to turn into at that time. I probably wouldn't have done it, but we got kind of sucked into this. We ended up designing like a Hyperloop pod. If you're familiar with the concept to race on a track that space X it built.
And then we had, we decided to build it. So we went out and we raised money and built the pot. And then we, we actually ended up bringing it out to, to Hawthorne SpaceX, to, to actually race it. And we like won an innovation award, which was pretty cool. You know, Steve Davis who's, Elan's like number, number two guy, handing us an award for, for engineering was like, cool.
Pretty. We were like, okay, I think we can, we can do this. Like, work on kind of crazy ideas and projects and stuff like that. So I feel like that was really the background I needed to like start a company, even [00:06:00] though it was a student project. So yeah, it ended up being like a two and a half year project.
I wrote my master's thesis on it and everything like that. So. Sort of actually spend a lot more time on that in, in my, it was, it was kind of that. And then the energy side of things that I was also working on during that, during that period.
[00:06:17] James Dice: Well, I was just going to say, as you were talking, the, it just sounded a lot like starting a company, right?
I mean, Basically created a team raised your hand, said, I'll do this and then went out and raised money and then managed it all. Is it, is it a lot like being,
[00:06:32] James McGinniss: yeah. You know, funny enough, I think that's where I learned like what my skillset was, you know, I don't, I respect engineers too much to call myself one.
You know, I love working with engineers. I thought, like going to an engineering program, I'd all of a sudden become like a tinkerer, which I'm just not, you know, like it was never, it was never in me, but I really love engineering problems and you know, giving engineers like a platform to really do cool work and that involves like [00:07:00] fundraising and storytelling and hiring and all this other stuff that you have to deal with.
So yeah, I think like kind of. During that process. I was actually like, oh, this is, this is sort of where I can add value, I guess. And that married up with what I think was my true love and interest was more of this. So-called like DER's space, like emerging space on the electricity grid. Cool.
[00:07:21] James Dice: And speaking of DRS, you have your own podcast.
You want to talk about that a
[00:07:26] James McGinniss: little bit? I do. Yeah. We're we're called The DER Task Force. It's not us. It's actually references this broader community of DER's enthusiasts. We call ourselves you know, the go-to community for distributed energy enthusiasm. And so sort of naturally progressed out of a happy hour.
We were doing in New York, which started through Twitter actually. And then we're like, there's all these smart people in a room. Why doesn't someone present on some topic every month? So we do these monthly meetups, which we record and put on YouTube. We have like a slack channel now that. People kind of network on or ask questions or [00:08:00] really, if there's the craziest thing you can think of like weird energy question, there's someone on that slack that, that has an answer for it.
And then yeah, and then we, we started recording a podcast just around all these ideas that we're kicking around me. And my two co co-host Coleen and Duncan who are also in the space. So yeah, if you're interested in, in what way. We talk about on the podcast, anyone listening, like definitely just go to dertaskforce.com and that's we think the best way to it's sort of the, the resource we created, the resource we wish existed when we were getting into this space.
So that that's maybe the best way to think about it.
[00:08:35] James Dice: That's a lot like Nexus, that's a lot, a lot of parallels there. Speaking of Twitter. I heard, I don't tweet, I don't, I'm not on Twitter, but I've heard that energy, Twitter is like a real popular thing in the, in the industry and the der world,
[00:08:49] James McGinniss: especially.
Yeah. You know, Twitter can, can be a real successful depending on, on where you're active, but I think energy, Twitter remains this very [00:09:00] beautiful place that I'm very grateful for. I think. Yeah. People have very contentious discussions, but it's always pretty respectful because I think everyone knows we're all trying to work on this big problem together.
But yeah, it's just, it's just amazing how many, like friends I've met through Twitter and, you know, the Dr. Taskforce came out of it and all this other stuff. So, you know, maybe I'm I'm James. I think underscore McGuinness. So DM me if you want references on other good energy accounts to follow.
Cause I'm definitely happy to provide how to dive into the, the weird world of energy, Twitter.
[00:09:35] James Dice: Awesome. Well, as we dive into David energy, let's start with what, what are DER's. And maybe like, how do they how, how is the grid changing and how has, how has it changing because of DER's.
[00:09:46] James McGinniss: Yeah. Yeah. So I know I, I somewhat referenced it, but really it's just this broad category of.
Distributed energy resources, der which you know, it's sort of it's, not the best working term. You know, it works, I [00:10:00] guess it's not the best term, but we all deal with it in the space, but it's basically. on your roof or, or on your property, like if you're a commercial building or sort of on the distribution grid, really.
So like in utility territory, it's not these huge solar farms you'd find, say in upstate New York or west Texas or something like that. So solar battery storage, backup generator. Smart thermostats, even controlling plug loads in homes and stuff like that. Electric vehicles, because you can tell an Evie when to charge or not charge.
That's a very new idea in energy markets actually. So really it's just anything that can interact with an energy market that's on the distribution grid is really, it's a very broad category. Well, what's interesting about them is they're all fundamentally like digitally native. Like these are IOT devices essentially, and that's very new over the last decade on the grid.
We used to have this very centralized architecture where. You build a huge coal plant nuclear plant hydro plant again in upstate [00:11:00] New York or far away from demand centers like New York city. And then we'd ship that power long distances, like a hundred miles, 200 miles down to the end customers and not sort of formed that, those technological constraints.
Right. Led to the grid looking like it is today, but these, the ERs are really fundamentally changing that. And you're re you're literally producing power where you're consuming it in some cases. And that leads to all these great benefits. When I think primarily resilience. So when the grid goes down, you stay alive.
That's, that's what we always beat the resilience drum at you know, in the task force circles, I guess. And then two, you can actually respond dynamically to electricity grid signals. You can store power when power is cheap, and then when it gets expensive, you can then consume it from that battery. This is, has really important implications for operating grid in high renewables environments.
If you have lots of solar and lots of wind. And less coal and nuclear, which is baseload power. There's more volatile [00:12:00] prices like when the sun's out and the wind's not blowing, you don't have power. So DER's are this really important tool where we can effectively shift user demand through these devices, to when power is most available.
And what that also means today is cheapest. Say in markets like, like Texas this is all kind of culminating at the federal level, actually through I guess a bill or a law, or I'm not a, not a policy person, but a FERC, federal energy regulatory counsel 2222, which is basically mandating that states create more robust mechanisms to integrate these devices into energy markets.
So actually the way I think about it often it sounds kind of like cliche or buzzwordy, but the grid is starting to look a lot like the internet through Through these IOT devices in that they're distributed, they're digital. These are user owned and operated nodes. They can buy from the grid they can sell from the grid, they can respond dynamically.
So if you just think of the grid as a [00:13:00] network with all these end points, We're going, you know, they're increasing 10, a hundred a thousand fold over the next decade, which is really, really has really, really interesting implications for how we're basically in operate the grid going forward. And then also build the underlying infrastructure that, that transfers energy on the grid.
I love that
[00:13:19] James Dice: explanation. Thank you. Okay. So where does David energy come in? Why, why did you, why did you recognize the need that it needed to exist? And what's the sort of founding story, I guess.
[00:13:30] James McGinniss: Yeah. So, I guess, yeah, it just really emerged out of this. Again, going back to grad school, like, okay. I feel like Tesla is going to build cheaper and cheaper batteries.
Like I don't have much to offer there. It felt like the, how to integrate a battery into a broader electricity market was this very unsolved problem and very expansive like space. And so. We basically envisioned the grid becoming more of that two-way network. And that would change how [00:14:00] these old school energy companies called retail energy providers, which we'll get into a commodity players essentially would have to operate.
They'd have to be very tech forward. They'd have to evolve their business model around this, this grid. So we just saw this massive opportunity in the der space in general. So we were very long this idea of a distributed grid and we set out to start developing projects, but as we were doing that, we saw these holes in the space like.
An asset was leveraged once it was built. Like once you build a battery and finance it, like, what do you do with it now? And there's all these problems and not, you know, incomplete solutions for, for what we felt were the modern energy customers, which are going to be the dominant energy customer saying that decade.
Like if there's only a handful of them, now you just look at the rate of adoption out a decade or two decades. And we think everyone will have. One of one of these devices, at least in their home and their building, if not like three or four or five. So, so yeah, it really, I guess, emerged out of a problem that, that we were seeing [00:15:00] we're effectively what we feel like we're doing on the lawn.
It's helping users trade their assets for them. So almost providing like energy market access for users in what is essentially the greatest becoming democratized in a way where you can choose where you get your power from. What assets you want onsite in your home or building, you have all these choices that have never existed before and consumers need a way to navigate that.
So that was kind of a broader idea, which is actually I think we were going to talk about the name as well. You know, is embedded in that but could get into more of the specifics as far as what David and energy actually does today. You know, from. Yeah. So it's David versus
[00:15:41] James Dice: Goliath, right? That why you told me?
[00:15:44] James McGinniss: Yeah. It's I mean, that's the short of it. Yeah. But you know, we, we feel like you know, more importantly that stories about like this idea of individual empowerment and if you're an energy user and you're tired of outages on the grid, you can, you can go buy a generator, you can go buy solar and [00:16:00] storage.
You can, you can prevent that from happening where previously. The the old saying was customers interacted with their utility for two reasons to report an outage or to pay their bill. That was, that was the degree to which customers thought about energy. Right. But now there's all these other options that they can sort of take, take control you know, take, take their power back.
We say not, not to be you know, punny, I guess, but, but it is, it really is true. And, and the name we hope reflects that. Yeah, the way I'm picturing
[00:16:30] James Dice: it and correct me if I'm wrong here, but it's like, almost like smoothing away all the complexity for the end user. That is the utility grid. Right. So. Just, just having a resource that you can bid into those markets, where would a, like an individual or even a small business even begin.
Right. Right. And you can basically make all that go away behind the scenes, you know? Different electric utilities, different states, different regulations, different markets, all that can kind of go away. Is [00:17:00] that, is that how
[00:17:00] James McGinniss: you kind of explain it? Exactly. So really there's three pillars to our business model.
We're a retail energy provider, which we can talk more about. We actually handle, we buy and price the commodity basically. But we can, we can dig a bit more into that. We're also a demand response provider. Are these market programs that pay users to lower demand when the greatest stress basically. And then the third is, is our software platform, which integrates with all of these DER's, whether it's a smart thermostat or a battery or a charger, and basically tells it when to turn on and off based on what's happening in energy markets.
So. You sort of wrapped around that is this very simple user interface that helps customers interact with that data, pay their bills and whatever it may be. So that's really all they see at the end of the day is. User interface and all that complexity behind, like what demand response is, what a retail energy provider does.
We, we try and only give the, [00:18:00] give them the pieces of information that they, that they need to know in order to understand and not overwhelm them with all this complexity, which, which we're basically handling behind you know, behind the scenes, I guess. Absolutely.
[00:18:12] James Dice: Well, so let's dive into it. What, what are retail, electricity providers?
Can you explain what those guys do?
[00:18:19] James McGinniss: Yeah, so basically around 2000 energy markets, liberalized, meaning. Build a generator and just sell that power and to what are called wholesale markets, which are usually regional. So new England is one New York is another PJM is one, which is like the mid Atlantic.
And so generators are bidding their power into the market in real time. Most people don't know that, but electricity is a commodity that's traded in real time. It's actually the most volatile commodity in the world. So it'd be like, if you. Got gas at your gas station tomorrow at $4 a gallon. And then the next day it was like $150 a gallon.
And then the next day, actually an extra electricity [00:19:00] market, sometimes it goes negative. So negative. They pay you to take the gas. So what retail energy providers do is they're on the demand side of the market and they. Basically signed, fixed price contracts for the most part with energy customers. So they promised them a rate for two years usually, or sometimes longer.
And. The customer pays the same rate for that power. So it'd be like, if you agreed with that same gas station, I don't like this. I don't know what I'm going to get. So I'll just, I'll pay you $5 per gallon for the next two years. Okay. And so their bills go up when they use more, but that underlying rate is the same.
So these are like traditional risk management commodity firms. I almost think of them as like health insurance providers. Where it's a fixed price. Product is an insurance product. You're protecting those crazy events on the grid where prices go through the roof and then energy providers are managing all of that risk.
So they're buying power from commodities desks, usually like futures contracts, and they're, they're taking the spread between what they buy wholesale and what they sell retail, [00:20:00] essentially. Okay. And that's, that's an established industry that's existed for. The past 20 years or so like, and, and really kind of matured that neuron and Ron was one of the first ones, actually, although all those crazy stories about them, like trading in California and bankrupting the grid that was a, in the early stages of liberalization, which they took advantage of.
Okay.
[00:20:22] James Dice: And is this only in deregulated states?
[00:20:25] James McGinniss: Yeah. So there's a, I believe basically 20 states at this point. So then in some regulated markets, you can still sell power, like own a generator and sell it, but really there's no action on like the retail side. So they're, they still remain fairly vertically integrated where the utility owns, like the wires, the transmission wires and the generators.
And so that's the one thing I didn't mention. The customer gets billed from the utility for delivery and then their retail energy supplier for the, for the energy supply. Yeah. So it's almost like I also think of them as like Amazon or FedEx [00:21:00] shipping packets of energy on wires or public public roads that are owned by the utility and utility has to, and transfer that power for them.
Hmm. Okay. Got it.
[00:21:10] James Dice: And what, what has, so those companies that have been around for 20 years doing that
[00:21:15] James McGinniss: job.
[00:21:16] James Dice: What, what, what, what are they have been missing? What are they. Keeping up with technology or the why, why do you feel like there's room for innovation in that
[00:21:27] James McGinniss: space? So, you know, I think probably like a lot of the guests that you've you've had on, on the podcast before, there's this whole really deep space of like energy management software building management systems, like all these great interactive buildings and stuff like that, which, which I'm sure we can get into But on the other side of it, the retail energy providers, who would be the ones positioned to use all that data really are not software companies that it's almost like those two groups of people just aren't talking to each other at all.
And then they don't know how [00:22:00] to unify those two things, which is why we've taken this very vertically integrated approach where there's all this rich data coming off of. These new sort of grid, interactive buildings, but the parties that should consume that data are the commodity players. Right? If you just think of, if you're a commodity trader or buyer and you have all this information, you're going to be better at it than, than if not.
So, that's kind of the key insight of David energy is, is we're building this very robust Sort of, we, we feel world-class energy management software while also going through the pains of being a retail energy provider. Yeah. And, and
[00:22:40] James Dice: the way you described how DER's are changing the grid You know, it's almost like there were two totally different universes and now we have one universe and you guys are basically just saying, we're going to sit at the meter and talk in both directions and use the data in both directions, which took next total
[00:22:58] James McGinniss: totals.
Exactly. And yeah, [00:23:00] we we've even built our business model to capitalize on saving money for customers. So we, if we save, we have a shared savings program where again, going back to we trade user's assets for them is we're taking a cut of that upside. So our incentives are aligned with our customers. This is not true.
Traditional retail energy providers. If you do that, some of the things that our software is doing and it benefits, you know, helps them buy the commodity cheaper. They'll just pocket that, right? Like they have no ability to communicate or interact with, with the customer. So what we were seeing is say these Great energy management software platforms that were helping customers save money, which was actually going directly into the pocket of their energy supplier because the supplier had no mechanism of sharing that with the customer and no interest too.
So it actually runs counter to their business model as well. I think a lot of them are afraid of this future of a bi-directional grid. They're so used to just selling power to you and taking a cut on that, that if you start selling [00:24:00] power back into the grid, they're like, well, now I can't sell you anything.
So what do I do here? So it, it really, you know, the der space. It's not only, it's not only that they're not tech forward or know how to build a software platform that engages the customer because they're, you don't have a lot of Google software engineers working at these companies. Those are groups of people that mixed together.
Typically it's also that their underlying business model and a lot of ways the, the, the, the incentives are misaligned with, with their customers.
[00:24:27] James Dice: Can you talk about the, you mentioned earlier how you think in 10 years, I don't know what timeframe you said. Something like 10 years, we're all going to have 1, 2, 3, 4, 5 different DER's you know, behind our meter.
Can you talk a little bit more about like where that, like, where the consumer side of this is going? The consumerization
[00:24:45] James McGinniss: of this is going. Yeah. And I think if you look at. Obviously Tesla, like, or even a company like Sunrun building solar rooftop, solar for customers has become very easy to do, but as the price of [00:25:00] batteries drop, all those systems are going to come with batteries because it just makes sense.
It keeps the solar running when the grid is not available and, and when it can kind of juice the returns to those projects, too, as long as the batteries are cheap enough, then you have this transition from internal combustion engine cars to electric vehicles, which most of us by this point probably accept is.
Rapid right. If you've driven an Evie in a lot of ways, they're just superior to internal combustion engine cars. And I think consumers are gonna adopt that for that reason. Then you've seen like nest and Ecobee, and some of these smart thermostat companies Generac is a backup generator company.
So as far as the hardware, I think that was the, the last decade what's allowing David energy to exist is the advancements. The consumerization, the product ization of these, these hardware devices, just being very simple and easy to install and interact with for, for customers. So it's, it's sort of that you know, even just the car you drive is going to become a great interactive because it's an [00:26:00] electric vehicle.
So I like to say uh, we've been in sort of the hydrocarbon age, the last a hundred, a hundred, 200, or even longer years, if you think of coal and we're, we're now entering. The age of the electron, which is another lane title to something. But that I think is very deep. Actually, if you just look yeah.
Electricity consumption today. It's, it's 38% of our total energy consumption. But then if you change internal combustion engines to electric vehicles, you now get to 70%. And then if you change residential home heating from boilers to heat pumps, which are electricity consuming, you now get up to 80%.
So I think in our lifetime, We are going to double the amount of electricity consumption, not even thinking about like population growth or anything like that. Right. So really it's not just that these new products are great and accessible and becoming more affordable and better than I think their predecessors in a lot of ways, but it's, it's actually going to fundamentally change how we interact with the electricity grid, which has been [00:27:00] this sort of boring.
You don't think about an industry, but when your car runs on, on power, you're going to start thinking about it a lot more.
[00:27:08] James Dice: Totally. Totally. And then not to mention, like you said earlier, the, the resilience aspect of this, you know, I have friends in Texas, I have friends in California that have felt the very real need for, I think one of my friends said, you know, I'm getting batteries like next week after I talked to him in March, he in Dallas.
So like the, the, the, I think people are starting to realize that they need more resilience, especially as we work from home
[00:27:36] James McGinniss: more and more as well. Yeah, exactly. Yeah. Imagine your work from home future when you know, the power goes out and you don't have any internet or any heat or anything. But even, you know, Ford F-150 is brilliant.
They just came out with the, with the lightning, which backs up your home for three days. I mean, I know you could technically do that with a car, but the, sort of the productization of it has never been there. It's so [00:28:00] easy when, when it's all electricity. And it's, it's, it doesn't smell when you turn it on.
It's not loud, all this stuff, like I think power outages are actually going to become a thing of the past and that's because of der.
[00:28:16] James Dice: Longtime listeners will remember. Brainbox AI from way back on episode eight of the podcast. And that episode we unpacked how brainbox allows you to add AI, specifically reinforcement learning to your existing HVAC control system, turning it into a predictive brain that learns precisely how to use less energy and optimize comfort in all buildings zones at all times.
With brainbox you can reduce your carbon footprint, lower energy bills and increase equipment life. Learn more by checking out the Westcliff shopping center, success story at the link in the show notes.
[00:28:49] James Dice: So let's talk a little bit about going to market today. The, like what does a David energy project look like? Today? And then I want to talk about long-term vision in [00:29:00] a second, but like where are you at, right.
[00:29:02] James McGinniss: Yeah. So I know I've talked about all these exciting technologies and stuff for, for awhile, but we're, we're certainly starting simpler. Most of our existing customers today because of that acquisition actually. And just the way the team came together the product was focused on these large commercial buildings.
So we'd integrate with the BMS we'd integrate with the smart meter. Then we do demand response. We do real-time set point optimization of BMS systems, basically. So. We adjust fan speeds, chiller temperatures, stuff like that in real time, based on what's happening in electricity markets often for as short as 30 minutes to up to four hours on the most stress days of the year.
Provides often 10% or more savings for a large commercial building. However, as we've gotten set up as a retail energy supplier, we're now a bit less focused on that large commercial segment. We still do it for sure. I'd say it's like 20% of our focus, maybe 30%, [00:30:00] because these are large sophisticated customers.
They may say I want your software in them as an energy supplier. They're, they're likely to kind of unbundle that, but in the small commercial sector, It really only makes sense if you're offering the bundle. I think a big, what I'm learning is we, and we talked about this before the podcast is in some markets it's five to 10% of these small commercial customers have smart thermostats.
They've been around for over a decade now. And it's really a function of a business model that works and a compelling value proposition to those customers. I think they want it. I think they want market access, but they're sort of unsophisticated. They don't think about it as much. So we have spent a lot of time.
Focusing more on this small commercial segment, quick serve restaurants, gym chains retail, storefront, small office spaces, high schools, stuff like that. Some of it's still BMS work, but a lot of times we're just going and popping out the dumb thermostat and installing a smart one. And then we control it and just doing that can provide them [00:31:00] with 10% or more savings on their electricity bill.
It's it's really kind of amazing. So. Smart thermostats and BMS have come up the adoption curve. I think they're mature technologies at this point. And it's just all about adoption. I mean deployment essentially. Yeah. Whereas you look at electric vehicles, batteries, generators, these other resources. There may be where if nest was started in 2008, a lot of these companies got started in like 2015 or something like that.
So we're still about five years behind on, on the, on the. Maturation cycle, I guess, of those technologies. And so we're positioned to capitalize on them as, as, as we go, but we're really focused on basically controlling like HVAC load right now. So it's pretty simple at the end of the day in our, in our, in our minds, but that's sort of the first wave of, of customers that will.
Yeah, and I like,
[00:31:52] James Dice: there's a couple of directions. I want to go here. But I like the, the fact that you came from performance optimization [00:32:00] and then got into the retail, cause like the fact that it's bundled, I like, because you can focus on traditional, you know, energy conservation measures that are no brainers.
Right. And you can monetize the grid. Flexibility. If you just come at that and. You know, I'm just going to provide grid flexibility. I'm just going to monetize that then like you're, you're then expecting the customer, then go out and procure something else for the energy efficiency piece. Can you talk a little bit about the
[00:32:30] James McGinniss: bundles aspect there?
Exactly. So when we. Acting as developers trying to get these projects built, we realized, okay, we need to hire a demand response company. We need to hire an energy management software company for the BMS. And then we need to hire a software company for the battery. Those weren't the same companies. Even though they interact like in a very real way.
And then we need a retail energy supplier and like a project financier. To get one of these things done. If you're a large commercial customer, that's why everything's getting done. There is because they're sophisticated [00:33:00] enough to deal with 3, 4, 5 different counterparties. But when you go to this mass market, it's like, you got to just give this one simple bundled offering.
And we, you know, we see really interesting things still like, they have a top of the line BMS, they just installed solar. There's this sophisticated customers. They can come and we're watching our product every day. And we're just saying. Hey, your, your peak demand charges are happening at seven in the morning.
Cause you're ramping everything up in your building at 7:00 AM. Your solar's kicking on at seven 30. No one's arriving at your building. Like you don't need it to be this school at, at seven in the morning. So if you just start this at 8:00 AM instead of 7:00 AM, you're going to save 30% on your, on your demand charges, you know, a month of per month.
So we've seen really drastic. Reductions in demand charges from our software platform. Just not only doing that real time, it's set point optimization like, oh, you know, there's a spike. For some reason, we sort of intervene, but [00:34:00] also in just that base building operations as well, which I'm sure you know, you and your audience know a lot about, but I think.
What we bring to the table. There is when you start to get many of these devices interacting with each other, we're one of the few companies out there that will actually aggregate those data silos. So we're taking the solar data, we're taking the BMS data, the smart meter data, and then the charter data, whatever else is there.
And watching all of it operate in unison where you know, maybe traditionally that hasn't really been the case because someone's only focused on making the building itself more efficient and not just the whole picture.
[00:34:35] James Dice: Yeah, totally. So, I mean, that's one of the things that I've written, I've done quite a few podcasts on this topic, like trying to decide whether to dive into or not.
We might as well. What have you noticed that like, beyond what you just said noticed about the opportunity there? Because I would agree. I don't see. And I had someone telling me that there are last week. Someone tell me that from PNNL that there were zero companies doing this, but I don't believe that I believe [00:35:00] it's just not scaled up yet.
What do you think like the keys are to providing that sort of holistic optimization? Supervisory control of all the different loads for this efficiency and for the, the grid flexibility aspect. Like, what do you think is the key to like being that software layer that does that.
[00:35:23] James McGinniss: Right. So obviously, you know, biased here, but our thesis is vertical integration.
So we're the demand response provider and the energy supplier. So, basically there's savings you can have on your utility bill, like from the utility, those delivery, charters, their savings you can have and how the retail energy provider is paying the market. Through things like cap tags, which are super wonky, but we, we could get into, and then there's a actual sort of extra.
Outside of the bill payments from demand response programs and the demand response providers and the, which are [00:36:00] focused on grid. Flexibility are typically not the same as the energy suppliers. So there's this like competing incentive problem there. So what we said is that I remember reading in my master's program that like there's 16 different services that a battery can provide to a.
To the grid. So you can't have one party managing three of them, another managing the other three and another it's one asset. Electricity is a commodity. At the end of the day, you need to manage the commodity and you need to control that whole stack Because we're not, we're incentivized to save our customers there's as much money as possible.
We don't have a competing interest between any one of those value streams. Right. And that's what we're essentially offering is not a power contract. We're offering service to the customer and other retail energy suppliers do not think like that. We understand, okay. If we save 5% consumption, For you, we're going to sell you 5% less power.
Like that's actually going to affect our margin in a way. But we also think that you're going to stay with us, maybe 2, 3, 4 terms [00:37:00] longer than your average energy supplier. So, looking at the total life cycle of a customer, how they, how they interact with you taking a more service forward approach as a vertically integrated player.
I think that's been. You know, there's all these competing incentives essentially. And the way we feel like we're solving that is, is through that, that bundle, which we've we've been referencing. So I think at least we, we, we hope or expect that we, we may be able to break out in this space because that's, that's, what's been missing is just thinking about the customer first and their asset and what it, what it wants, what you should do with it, like start from there and work your way outwards, which is exactly what we did.
I was a solar and storage guy. And I learned what a retail energy provider was. I didn't come from the retail space. So I think we started with this very sort of, customer empathy or empathy for what that asset needs and wants. And then, and then built outwards.
[00:37:55] James Dice: Yeah. I also like that you're approaching it from, I think I said this earlier, the [00:38:00] you're coming from doing supervisory control already.
Right. And so there's a lot of lessons that I'm sure you've learned there are inherent to the sort of smart buildings industry that make that a really difficult thing to do. And so. I, I just, my general thesis matches yours. If you start there and go towards grid, flexibility or grid services, it's a way better than starting in the opposite direction.
It's also what I really like about, so LBNL and DOE just released the gab roadmap grid, interactive efficient building roadmap, and they're really pushing for this more comprehensive holistic. Software layer. Right. And they're, they're drawing a real delineation in that document versus that, and all of the different devices, which can provide grid services on their own.
But they're basically saying that like, yeah, that's great. But when there's 10 of them behind the meter, we need software. That's orchestrating this in real time and, and sort of [00:39:00] optimizing on all the different outcomes that could be had in
[00:39:03] James McGinniss: any one moment.
Yeah. So that's, I mean, the, the way we actually ultimately look at it, which maybe would have been helpful to, to, to mention this earlier, but we're out buying energy supply when prices are going on. We can lower demand by controlling these assets. And there's, there's an arbitrage, there's a trade. You can make there to provide a lot of value and it makes us way better at managing risk, especially when we have a network of these assets that we can lean on.
Like we'll be able to fundamentally underwrite risk differently than, than other energy providers. So we want to get our hands on every single device that can control demand possible from this commodities perspective. Right? So it's not just us thinking. About what's best for the building. Like we are certainly thinking about our business model as well, but I guess it's to say that we don't discriminate between one technology or the other, we just view because we're coming from this commodity position supply and demand [00:40:00] balancing, and the more demand that we can control the better.
So we'll do refrigeration controls. If they're in your building, we'll do smart thermostats. We'll do it. Just, it just doesn't matter to us because ultimately. It's about how we deal and interact with, with the commodity. And, and I think that's honestly, what, what people forget in the space sometimes is that, again, as, as we've said, like electricity is a commodity at the end of the day, so that the consumer of that data, the one that's going to be most useful for is the one taking the risk on the commodity side of things.
[00:40:31] James Dice: Interesting.
So you mentioned how you're kind of going to market today. You know, you started in big buildings now getting into smaller ones. What's like the longterm vision here. Is there like a spectrum where this plays across the entire commercial buildings industry and kind of a smoother, it's not just like two categories.
Where do you see this going?
[00:40:51] James McGinniss: Long-term yeah, so I mean, we, and energy providers are like this. They don't really discriminate on segment because to us, again, [00:41:00] controlling a device. And backing the commodity behind it. The math, the product internally is all the same. So we don't care if that's a smart, tiny, smart thermostat in a home versus like a giant battery in an industrial facility.
We just want access to as many of these end points as possible. So we're starting in the segments where we can see that hockey stick growth as a venture backed business. Wherever we can, like the CNI battery space is moving quite slowly right now. So we're spending less time focusing on that.
Although we do have some projects in work where we're doing it. So I guess it's just to say, you know, and we're rolling out residential early next year in, in New York and Texas are in intend to so. Really, we expect it to cover all segments because we want access to all of these devices.
Like we are building towards that, that longterm vision of all customer segments will have these devices in their building set, you know, over time. Got it. And so I think the last piece [00:42:00] of it is that. Yeah, we, we actually work with probably listeners to your podcast, like controls, integrators, developers energy efficiency, people our kind of controls platform behind a lot of these smart building devices or assets that are being built, can enhance ROI of these projects and stuff.
What I wish we could do more of is more of that efficiency piece or development piece. Like we're not. Saying, Hey, you should install solar or Hey, you know, do a lighting led retrofit. we do try and hand that off to partners today, but within those segments, I do feel like if we're kind of managing the energy of all these customers over time, hopefully there's a way to implement you know, get, get going on on some of that, like development or financing or stuff like that over time, whether it's through partnerships or, or us doing it.
But we do want to. Work with more companies in the space that are, that are doing that. Cause we're, we have no plans. Like it's not in the next few, even up to five years or whatever, but I'd say that's the one piece that we haven't gone over [00:43:00] that within those segments, we'd love to be able to offer. Yeah.
So you're
[00:43:05] James Dice: basically bringing the customer and pulling in different partners to provide whatever they need on their journey
[00:43:11] James McGinniss: at that time. Yeah, it's kind of like, if we're already doing your smart thermostat and they're like, Hey, what can I do with solar? We'll we have companies will call to come in and do that.
And we help facilitate it. But I think there's a more seamless experience you could probably create there over, over time. Totally.
[00:43:28] James Dice: So speaking of smart thermostats, can you talk about how the program. You're working on now in New York works. And the way that I got excited about it is before we hit record, you were talking about how it's actually a better business model than someone going in and selling a thermostat based off of the ROI of the savings you could get.
Can you talk a little
[00:43:48] James McGinniss: bit, about that? Right. So. Basically what we're doing is we sell a lot through energy brokers actually. And then we also do direct and we work with channel partners as well, but [00:44:00] to the customer, we're basically offering a market rate for power. So if you line up all the other big energy suppliers, we're, we're pretty close our price with them, essentially just the underlying commodity.
And then we say, But wait, there's
more like the, we, we can do more than that. We, we give we go out and we install a smart thermostat. We exchange it out for that, for the, for the dumb thermostat, I guess you could say. And then we enroll them in a demand response program and start doing demand, charge management, all like.
The real-time set point optimization that we're familiar with from the big buildings that we've been working on the big BMS systems we're bringing to that, that mass market. And so we don't charge for the smart thermostat or the software we're monetizing through that energy supply contract. And then the savings that we generate, we're sharing back with our customer.
So they're that rate that they're getting initially say it's $75. A megawatt hour may come down to 65 over time, like, well, below market, because of the [00:45:00] rebates that we're offering them from performance, essentially. So I think, you know, to your question around business model, in order to capture the value that we're generating, you do have to be a supplier and a demand response provider.
So if you were just convincing a customer to pay for a smart thermostat and saying, Hey, you're going to save money in the future. So you should pay me now for that integration and you get your. For the integration work essentially for the labor or whatever, you know, whatever you're doing. We don't make customers pay upfront at all.
So I think for our channel partners, that's like, what we tell them too is we can help get deals closed. In a way we're financing these assets off, off balance sheet in a way which makes it way easier for the customer to say yes. So I think that, you know that because we make money as an energy supplier and demand response provider, we're able to extract a lot more value from the same cost to customer acquisition or the same the same relationship with the customer that, that just the company only doing one or the [00:46:00] other, what would be.
Yeah, and
[00:46:03] James Dice: this is right in line with had Matt golden on the podcast. I don't know if you know Matt,
[00:46:06] James McGinniss: he talks, I know Matt, very smart guy,
[00:46:09] James Dice: super smart guy, just new ways to sort of monetize old stuff that a lot of the times is already doing. It's just monetizing it in a different way. Is, is vital to getting some of the adoption that we need in these technologies.
Well, I'd love to take this to just like one final thing to talk about is you mentioned the different, all the different providers to, to do what you guys are doing.
A customer would have to go to a bunch of different providers today. Right. Can you talk about those different categories and like what you guys have learned by engaging with them and then sort of, I don't know for placing them as the right word, but building stack and those categories.
[00:46:48] James McGinniss: Yeah. Well, obviously within energy management software of big buildings, there's a whole different array of what that actually means.
It could be more [00:47:00] at the like back office kind of operational management level. It could be like base building system into the weeds of facilities rooms you know, and looking at like fault-finding and stuff like that. We're, we're not really doing any of that. It's more. Really just that, that real-time set point optimization.
So I think within energy management software, There's groups out there doing great things that we're not doing, and we're not trying to compete with basically, but it's more on that grid. Interactive side of things. Yeah. You'll have one again, one company doing the BMS, another company doing the battery and then the solar company, like say solar edge, they'll have their platform for you can view your solar data and then you'll have a demand response provider.
Which there's a bunch of companies out there that do just that. And then you'll have a retail energy supplier that does that. Oh, and now these days you're also going to get Evie chargers the Evie charging software. Right. So, it gets, it really adds up quickly, we think. [00:48:00] And
You know, so we're, we're only, we are kind of focused on this narrow problem, I guess, which is that great interactivity. But even within that, there there's just this sort of massive companies offering, offering different solutions. So we've had, we've had customers say when Nan star platform, they go, we just canceled three other services.
Because we only have data coming from each of these data silos. Right. And so I think that's, that's really what we're we're after ultimately is just making, making the customer's lives easier and aggregating that all into, into one place makes total sense.
[00:48:36] James Dice: Cool. So what I'd like to do is end these recently episodes with two truths and a lie.
Are you, are you getting.
[00:48:44] James McGinniss: I'm game. I can't remember the last time I played this. So, I, I hope I do it well, or right, but yeah.
[00:48:51] James Dice: Okay. And I have to mention that I think I have a hundred percent record on this so far, so I wish you well, Okay. I think we're like eight [00:49:00] episodes in something like that.
And I have guessed a lot every time. So good luck. Let's let's hear it.
[00:49:06] James McGinniss: Yeah. I'm going to give you, I'm going to give you a tough one then. So my first battery install was actually a Sonin and not a Tesla. When I was actually working as an engineer. That's my nickname. That my friends call me is Bo not related to James whatsoever.
Okay. And I I'm an amateur DJ.
[00:49:27] James Dice: That is, that is a tough set of set of ones. So you said Sonen versus Tesla.
[00:49:32] James McGinniss: That sounds true to me,
[00:49:34] James Dice: All right. I'm
[00:49:35] James McGinniss: going to say Bose, the lie now I got you. It's funny enough. I've never installed a battery. Wow. I got you. There. I, it was a trick question.
[00:49:48] James Dice: That's how you have to do it. People don't understand. You have to, you have to say something that's just totally off the wall. I love that.
[00:49:55] James McGinniss: Yeah. Yeah, you have
[00:49:57] James Dice: to, you have to bake in an either or, [00:50:00] but it wasn't the either, or that was even the thing.
It was the fact that you hadn't installed it at all. That's
[00:50:05] James McGinniss: right. It was, it was very deceptive.
[00:50:07] James Dice: Cool. All right. Well, this has been fun. I learned a lot. I wish you guys the best of luck as you're. Scaling things
[00:50:15] James McGinniss: up here. I am surprised you didn't choose amateur DJ by the way. Sorry to like it's I thought that was going to be
[00:50:24] James Dice: the lie you chose.
I'd love to hear more about that actually. What kind of music do you DJ?
[00:50:28] James McGinniss: Yeah, I mean, I guess mainly like disco stuff, like as, as a base, but a wide variety of, you know, hip hop. Like pop and house and stuff like that. I guess we it's actually funny. My, my friends and I we, we would go to parties in college and we were like, we hate, we just hate the, this bad music.
Like, why are we doing this? We should do something about it. So I actually like learned like proper, like mixing vinyl and stuff like that. Like not, not, not purists or anything, but we're like, well, if we're going to do it, let's, let's do it. [00:51:00] And so we. Just started playing music for friends. So it's not like we can like go and do weddings, but I do friends weddings, like they'll, they'll, they'll be like, Hey, will you, will you do like the after party or something?
I'm like, sure. Like, that's, it's really fun actually, but
[00:51:15] James Dice: I know what you mean. I went to a wedding, so it was before COVID two years ago. And you wouldn't believe like the difference between a great DJ and just like someone you hire. From the wedding industry is, is
[00:51:29] James McGinniss: so vast. It's it's massive. Yeah. I mean, especially cause like I know what my friends like, or they'll tell me like what they want and if you just have someone you're paying like two grand or something to like do their stuff, it can be, it can be pretty hit or miss.
Yeah, totally.
[00:51:47] James Dice: That's fascinating. Well, thanks for ending my record. I needed a step down on my my large head.
[00:51:56] James McGinniss: I'm I'm honored to that. I, that I was able to break the record.[00:52:00] what about you? Can we do one with you? Is that a, have you ever done one?
[00:52:04] James Dice: I did the first time and then I started doing them again and I was like, I can't do this forever.
Okay. Okay.
[00:52:10] James McGinniss: Fine. I'm not very, not very Creative there, I guess not original. So we'll, we'll we'll won't make you do it
[00:52:17] James Dice: sounds good. All right. Well, thanks. Thanks again. And we'll talk
[00:52:21] James McGinniss: to you soon. Thanks James.
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