Turning hundreds of McDonald's into a power grid

Budderfly starts by making thousands of buildings more energy efficient. The endgame? Give that wasted energy back, and create power where there could otherwise be shortages. Plus: VPPs, explained!

This week on Everybody in the Pool

Quick context reminder: The US power grid has an uphill climb to meet exploding demand for electricity over the next several years. Most of this is because of data centers and manufacturing, some of it is from home electrification, electric vehicles, and just all of us plugging in more devices and gadgets all the time.

The challenge, of course, is to meet that demand without raising electricity rates — which means, ideally, not building a ton of new infrastructure, which we talked about recently with Quinn Nakamura of PG&E, and to avoid having to bring or keep more dirty power online, like coal and even natural gas, in order to get there. And meanwhile, the march to meeting demand is impeded by long interconnection queues to hook up new renewable energy sources, the need for grid innovation, and politics.

Ok, with that out of the way, let’s get back to solutions! A profoundly under-appreciated grid asset is the the energy we never have to generate in the first place. In this week’s episode of Everybody in the Pool, I talked with Al Subbloie, CEO of Budderfly, an “energy as a service” company that goes after the 25–35% of energy we routinely waste in buildings. Here’s how it works: Budderfly takes over as the customer of record for a business’s utility bill, invests its own money upfront to upgrade everything behind the meter, and then gets paid back over time out of the energy savings. The customer gets immediate budget relief and a newly upgraded site. Budderfly gets predictable cash flows. The model lowers demand to the grid, and smart, connected buildings that can predictably control their own usage.

And eventually, all that efficiency can start to look like power generation. The electricity you’re not using is an asset, and your thousands of sites become one big virtual power plant (scroll down a little for an explainer on virtual power plants, because this has and will be coming up a lot).

Listen to the episode here or wherever you get your podcasts! Next week, I’ll be talking with Enphase, best known for home batteries and EV chargers and the like, about how its network of batteries is also distributed energy storage that can be contributing to the grid, as well. The future is interestingly decentralized, if we can get the policy, the business models, and the incentives aligned.

Explainer: What is a virtual power plant?

The key to harnessing distributed energy resources is something called a virtual power plant (VPP). This is a network of many smaller energy resources, harnessed together with software, that can be coordinated to behave like a power plant when the grid needs help. Those resources can include batteries, smart thermostats, HVAC systems, water heaters, refrigeration systems, EV chargers, actual EVs (once we get bidirectional charging!), or onsite solar. The software is the orchestra conductor that directs these disparate devices to ramp up or down, shift demand to a different time, or inject stored energy back onto the grid.

Where VPPs currently exist, they mostly help deal with energy spikes — peak demand, when lots of things turn on at once, which is expensive and difficult for the grid to serve. So on a hot August afternoon, a VPP might free up meaningful capacity by slightly adjusting thermostats across many buildings, staggering equipment start times, or discharging batteries for an hour. That means utilities don’t have to fire up peaker plants, which generate expensive electricity in a pinch, often using fossil fuels and sometimes (gasp) even coal. The hope and the goal, now that battery technology is more advanced and more affordable, is to use grid-scale batteries to totally replace peaker plants where possible, and augment all of that with the batteries installed in homes and businesses.

So that gets to the dream vision for VPPs, which is that you take these thousands of home batteries, solar panels, smart thermostats, and EVs, bundle them together through software, and dispatch them as a single resource, like one big power plant made up of a swarm of little ones that already exist, instead of building a new natural gas plant or a nuclear reactor or what-have-you.

This is a developing trend, and in practice, most of the country doesn’t allow this yet. In 2020, the Federal Energy Regulatory Commission (FERC) issued Order 2222, which told regional grid operators to open their wholesale markets to aggregated distributed energy resources. But it’s been very slow going as grid operators struggle with technology and some states just flat-out refuse to allow it. But it’s moving.

Texas, America’s funny little deregulated hotbed for energy innovation, actually launched a pilot in 2023 wherein utilities are incentivizing customers to install solar and batteries and then feed that power back to the grid in exchange for a credit on their bills — aka, the dream. Google and NRG are partnering on a VPP in Texas that could harness up to 1GW of energy from homes with smart thermostats from Nest and Vivint. Dozens of states are trying VPP programs in one way or another, and from what I’ve been told, Northeastern states are moving quickly in this direction.

To sum up why, here’s a good set of numbers from a piece in Utility Dive (yes, I signed up for all the newsletters):

Utilities, regulators and policymakers view expanded virtual power plant capacity as an expeditious, cost-effective solution for load growth and grid congestion.

Increasing VPP capacity to 80 GW to 160 GW by 2030 could save about $10 billion annually in grid costs, the U.S. Department of Energy said last September. Separate studies by Brattle Group found VPPs could enable up to $35 billion in avoided nationwide utility capacity investment over 10 years and up to $755 million in annual avoided power system costs by 2035 in California alone.

Recommended reading

This week, the Department of Energy announced $1.9 billion in funding for what it calls “urgently needed” grid upgrades, with applications due by May 20, 2026. Sounds great, right? They get it! Nope. This is actually much smaller than previous DOE grid investments. The Biden-era GRIP (Grid Resilience and Innovation Partnerships) Program authorized $10.5 billion over five years, and deployed $7.6 billion between 2023 and 2024. This new program, called SPARK, replaces the third round of GRIP funding that had been planned, and knocks about a billion dollars off the amount that had been in the pipeline.

Also worth noting: GRIP was just one piece of the Bipartisan Infrastructure Law's grid spending, which also included a $2.5 billion Transmission Facilitation Program and up to $3 billion in Smart Grid Grants. And if you're wondering if we need grid upgrades to support our magical VPP future, in addition to the regulatory changes, well. Yes. Yes, we do.

As the administration appears to be actually cutting funding for grid upgrades, it has thankfully gone 0 for 5 in attempts to kill wind projects that are expected to bring multiple gigawatts of clean energy onto the grid.

Yay?