Catalyst with Shayle Kann - The new wave of DERs

Episode Date: October 2, 2025

Demand response was the original distributed energy resource. In its early days, it was surprisingly manual: a grid operator would call up a large load, like a factory, and request a few hours of reduced demand during peak times. Fast forward to today and DERs look dramatically different. They’re automated, deployed frequently across the country, and include everything from EVs and thermostats to sophisticated management systems at paper mills and data centers.  So how did DERs evolve from phone calls to fully fledged virtual power plants? And what role do they play now as electricity demand surges? In this episode, Shayle talks to Dana Guernsey, co-founder and CEO of DER and VPP developer Voltus. She is also the former director of energy markets at EnerNOC, a pioneer in demand response. Shayle and Dana cover topics like: The changing mix of customers and resources, as well as the evolving use cases Voltus’ new “Bring Your Own Capacity” model, allowing large loads like data centers to fund regional VPPs The barriers that hold DERs back, like access to data The market forces shaping DER adoption, including load growth, declining system costs, and market structures How DERs stack up against conventional power plants in meeting rising demand Resources: Open Circuit: The grid flexibility solutions staring us in the face Catalyst: Is now the time for DERs to scale?   Catalyst: Making DERs work for load growth   Catalyst: PJM and the capacity crunch   Latitude Media: Google expands demand response to target machine learning workloads Credits: Hosted by Shayle Kann. Produced and edited by Daniel Woldorff. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor.  Catalyst is brought to you by EnergyHub. EnergyHub helps utilities build next-generation virtual power plants that unlock reliable flexibility at every level of the grid. See how EnergyHub helps unlock the power of flexibility at scale, and deliver more value through cross-DER dispatch with their leading Edge DERMS platform, by visiting energyhub.com. Catalyst is brought to you by Bloom Energy. AI data centers can’t wait years for grid power—and with Bloom Energy’s fuel cells, they don’t have to. Bloom Energy delivers affordable, always-on, ultra-reliable onsite power, built for chipmakers, hyperscalers, and data center leaders looking to power their operations at AI speed. Learn more by visiting BloomEnergy.com.

Latitude Media covering the new frontiers of the energy transition. I'm Shayle Khan, and this is Catalyst. It's gone from this really kind of only extraordinary moment when the resources used to being super ordinary, in fact, quite dull sometimes. If you think about it that way, I don't even know why you're having me on this pod, if that's the case. Super boring.

Yeah. So boring. But like in all seriousness, that's the evolution that, I've watched. Coming up, the expansion of demand response with Dana Guernsey. When utilities need flexible capacity they can count on, they turn to Energy Hub. Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices to manage 3.4 gigawatts of flexibility built for the moments when utilities can't afford uncertainty.

Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on, coordinating EVs, batteries, thermostats, and more through a single platform. built for utility scale. Predictive, verifiable, and designed to perform when it counts. Learn more at energy hub.com. Trillions of dollars are flowing into clean and critical infrastructure, but those investments aren't driven by technology alone. They're shaped by markets, by policy, by capital, and by the institutions that connect

them. I'm Alfred Johnson, CEO of Crux, and host of a brand new podcast, Critical Capital. Each episode, I talk with people deploying capital, shaping policy and building the clean economy. Tune in as we unpack how progress is actually made. Listen to critical capital on Spotify, Apple, or wherever you get your podcasts. Catalyst is supported by Fish Tank PR, an award-winning PR firm focused on climate and energy tech, renewables, and sustainability. Fish Tank is known for generating prominent and effective media coverage for the brands they work with. If you want a PR partner that's thoughtful, shoots straight, and gets results, you'll like Fish Tank PR. To learn more about

Fishtankpr.com, visit F-Tankpr.com. That's F-I-S-C-H-Fish-Tankpr.com. I'm Shail Khan. I lead the early-stage venture strategy at energy impact partners. Welcome. So you may have noticed that I'm on a bit of a distributed energy resource kick on this podcast of late. Well, it continues today, and honestly, next week as well. But this week we're talking demand response, which honestly is. what most of these conversations have really been about. Flexibility, VPPs, etc. They're all new spins on or expansions of the OG form of distributed energy resource grid services, which is demand response. Demand response was demand flexibility before it was cool. Let me make another

point here that will maybe feel a little bit like a tangent for a second, but stick with me. For all the talk that I often hear, I'm sure many of you hear from many of my peer venture capitalists about asset light, low capital intensity startups in this space. The reality, in my humble opinion, is that there's actually very little historical evidence that that type of company, that profile of company, can produce really big outcomes, or at least very few of them have. In fact, I think you can count those success stories on one hand, most likely. But one of those success stories, and one that I think has been somewhat forgotten in the annals of history, is Ennerok, which was really the pioneer of demand response and went public in 2007 during the Clean Tech 1.0 wave,

kind of the early days of that wave. Ultimately, Eneroc was acquired by NL, the big Italian energy company, as now known as NLX, which is part of why it's not as well known today to folks who are newer to the sector. But my point is that demand response as a category can, I think, accurately claim to have actually produced a venture-backed IPO, not even a SPAC, which is not true of many other categories that you see in vogue today. So it's interesting from historical context, but it's also very interesting in today's context because a lot of what we are seeing happening in the market right now

with the ability of distributed energy resources to start to provide grid services of one kind or another is born out of basically an evolution of that DR market. Anyway, Dana Guernsey, who is the CEO of Voltus and my guest today, started at Enternak in 2008, I believe, and then ultimately co-founded Volta's in 2016. So she's got almost 18 years in this space, which means that she has all of the right experience,

the right battle scars, and the right current context to help us understand where we are now in this moment. Here's Dana. Dana, welcome. Hey, Shail. Thanks for having me. All right, so I want to start by having you walk me through

your lens of a history on demand response in the U.S. at least, because you've been in it for the majority of, the time that that market has existed, I would say, or at least at any meaningful scale. And it's going through some pretty interesting evolutions right now where they're like macro factors that I think are driving it into a whole new category. But I think a lot of people are waking up to it now. And they're either using that term, demand response, or a variety of other terms, demand flexibility, VPPs, maybe, whatever. Forget the term for a second. You know, paint me the arc of the history of this

market, as you've seen it. Sure. And actually, I'm going to even go back a little prior to my time, not to date myself here too much, but even before we had aggregators, which was really my entry into the space, utilities had interruptible programs. And so the very, very early days of demand response and whatever we want to call it across the course of time began as this kind of blunt, emergency-only tool in those utility interruptible programs. So imagine like making manual. phone calls to very large industrials and then they would curtail their energy used typically during a crisis. And so it was this like almost like fire extinguisher used only in a crisis, a lot of times not used at all. And so that was the very, very beginning. And then my entry into the space came when I joined a company called Enternaw, which was one of the first aggregators. I joined back in 2007-8 time frame. And that was when things started to a space. And that was when things started to evolved. So I would say we went from the 1.0 or the 0.0 when it was the utility programs into

more of a 1.50 or 2.0 where the concept of aggregation became prevailing. The notion that a technology platform could do something started to emerge. And the folks that have been in the industry for a long time, you find a lot of people who used to work at Enternauk or Sea Power. And now, of course, Enternaq is an LX. So that would be a lot of was really where I, quote unquote, cut my teeth, I guess. I was there for a while. And I watched the market evolve and I used to just think, gosh, like, if only more things could be connected, if only more things had an on-off button that could be used with technology. If only pricing signals were more obvious, this stuff would get used more. And so there's a bunch of stuff that

happened along the way, including some pretty wonderful FERC orders that opened up markets. And we can go into any of those if we want to. I'm assuming many listeners are familiar with orders like 719 and 745 that basically started to value the demand side the same way as a typical generation resource. So the signal started to be, yeah, if you could reduce a megawatt of demand, you should be paid the same as a megawad of supply. And more and more aggregator and aggregation models came to be recognized that one plus one can be three sometimes and that the value of a portfolio was there. And so over time, fast forward to today,

I think Shell, my favorite part about our business these days is that at any given moment, we're being dispatched. If I opened up our platform right now, there would be one to 20 different dispatches going on. And so it's gone from this really kind of only extraordinary moment when the resources used to being super ordinary, in fact, quite dull sometimes. If you think about it that way, I don't even know why you're having me on this pod, if that's the case. Super boring.

That's so boring. But like in all seriousness, that's the evolution that I've watched. And so I posted on LinkedIn a couple months back or a month back that, hey, you know, by the way, one thing you might not know about our business is we're dispatched every day, 365 of the last 365. 65 days. And I got this really overwhelming response of, wow, I didn't really know that. And maybe that's the wake-up call that you're talking about. But I'd love to unpack with you the reasons why that's true, because it's a number of things. It's new use cases. It's market maturity. It's technology maturity. It's rising electricity prices. It's declining cost of the DERs themselves. It's like all of those things. But the market's having a real moment now. And so that evolution has been very

really cool to watch. It's been really cool to be part of. And I'm really grateful that more people are coming into the space and realizing that maybe we're at another inflection point now. Yeah. So I think of there being, you can tell me there might be more than this, but there are like three or four vectors through which the market has broadened over time since those early days of Enternak or even before the aggregators, right? It started off as being a pull switch in case emergency situation that was called upon almost never. So now being called upon often in many different contexts. That's one. Two is, you said, you know, anywhere with an on-off switch. But actually that was like, that's been a shift, right? Because initially, as you said, it wasn't even, I guess it was

an on-off switch, but a super manual. It was like utility calls large industrial plant manager, large plant, and plant manager says, okay, and like goes over to I imagine some, some, switch in their factory and pulls the dial and turns the thing down to it being much more automated now. The third is the resources themselves, so the demand side resources themselves, which as you said started with just like a small number of large industrials manufacturing facilities and now is much broader. And sort of relatedly, the resources that are at those sites. So it's, you know, it's not just straight demand reduction now. Maybe it's dispatching storage or whatever.

So there's at least multiple, and in each of those ways, like it started from this kernel of a very, very specific thing and it's become this much broader thing. I guess I want to ask on those last two in particular, how have you seen the evolution of who participates in these programs

on the demand side? What did it used to look like and what does it look like today? Okay, so to reframe, I think, where you just asked me, there's both more stuff, so to your point, there's more things with the on-off button,

and importantly, we should say that are connected to the internet, right? Right. Automatic on off buttons. Yeah, so there's just more stuff. There's more technology-enabled stuff and stuff's a very technical term. There's more things to do with that stuff.

In other words, there are more use cases. So we've graduated from capacity emergency only to the vast majority of use cases, sometimes being economic or balancing of renewables and ancillaries and local congestion management and things like that. We even have carbon-based use cases. and then there's more need for the stuff because of what pricing is doing today and the fact that we've entered a new paradigm where we are in a load growth environment. But to expand your question, I think you were asking,

you were asking about the customers themselves and why they care more? And I've heard you talk about, well, it's no longer a vitamin, it's a painkiller. So maybe this. Yeah. That too, but actually before that, who are the customers that participate? I mean, I think that, the expansion from its, you know, Jill Schmoe running a factory to, like, a pretty wide array today is interesting. So, like, if I were to look at the Voltus platform today and the customer set on the platform, like, how would you, how would that pie be split? It'd be, so to give you a sense, there'd be over 50 different verticals just within commercial and industrial, and then there'd also be residential.

So going maybe smallest to largest, you'd see everything from. an electric vehicle and a home to a smart thermostat, to mom and pop kind of retail shops, big box stores, any kind of commercial load, school districts, wastewater treatment plants, on up through larger industrials, maybe first larger real estate building, commercial real estate is huge in particular in areas like New York, on up through industrials and on and on steel manufacturing facilities, massive loads. Those are, as a sidebar, the original large loads in my mind were like the paper mills and the steel mills. And then there was crypto.

And now we're seeing the, there was always data centers of the quote unquote traditional sort and then cloud compute. And now we're seeing the AI data centers kind of at the top. So that's the, it really runs the gamut. And in many ways, that's the strength of the portfolio. You can take things that maybe have operating parameters and constraints and pair them with other things or other customers that have similar but different constraints. And now you can respond to what the grid needs by tetracing these things altogether. Maybe staying within the CNI world for a minute because I know this will be different for

residential. Talk a little bit about the resources. Like what is being dispatched, generally speaking? Yeah. So it's still a lot of load control on top of things that are now what we would call behind the mean or assets. So let's just talk load control for a second. The first thing we'll often do when we talk to a customer is,

take a look at their electricity bill with them and run through it and make sure that we're understanding how much energy are they using? What are their demand charges, which are sometimes a shockingly high portion of the bill? And so anything that's drawing energy is eligible to be something that can use less energy. And the more that things are connected to things like building management systems, the easier and more technology-enabled this becomes. So there's still a lot of take the commercial condition space, just load control as a DER itself as part of the VPP, and now we're starting to throw around the acronyms. But I fall into the all-inclusive category.

And so there's a lot of that. And then there's behind the meter assets. And that can be a generator behind the meter. It can be battery storage. Increasingly, battery energy storage systems are one of our top growing verticals. and that just relates to the basics of the cost curve coming down. So that's everything. It really runs the gamut.

Can you talk a little bit about geographies today? Like where it's sort of national to an extent now, and thanks in part to those FERC orders that you described that happened a few years ago. But is there significant concentration in some regions over others? Is there a significant pricing differential in terms of the value capture in some regions over others? Or is it all pretty uniform?

Let me answer volume first, and we'll come back to pricing because they're slightly different answers. We very intentionally built the company thinking that we wanted to be in every wholesale market in every territory eligible across North America. So that is true today. We have some markets that have emerged as just larger than others, but it's by and large owing to the size of those markets. So you'll have your PJMs and Urquhart and New York and SPP being bigger than, for example,

the Canadian markets. But that's because of percent penetration against the peak load, not because that we've really seen that one market is where we're going to concentrate. And that's a business choice for us. There's other aggregators you'd ask that say they're heavy in one market or another. But because of the second part of your question, pricing, pricing can get a little crazy out there. Anyone who's watched the PJM auction for years knows that, well, one year you think it's happening, and then the next year it's this, and it goes back and forth. and you might find a trend line over time, but if you're trying to run a business,

it's really, really, really hard. And so the best way is to adopt more of a portfolio. So we have a portfolio of portfolios, and that's how we've built the business is approaching it through the lens of the actual risk management of the fact that we are exposed to the pricing and that things can change. And long ago, I gave up the game of trying to predict

where auctions would land. It's just not. Instead, we have a saying internally that we just would like to be happy with our participation in all outcomes. So whether it's up, down, left, right, certain things are outside or control, but the way we manage it is being everywhere. So we're everywhere, Shale. Yeah, you're everywhere.

Point taken. Is this a market, this is going to vary by Region 2, but is this the type of thing where you earn most of your money on a few days out of the year? I mean, maybe this is yet true in Urquot, not true in somewhere else. But like, to what extent is this a you need to be there to dispatch on the, you? hottest days or the peakiest load days versus a you're like the cash flow is steady daily over the course of the year or seasonal or something like what does the profile look like okay so brace yourself i'm going to answer with a lot of it depends so it depends i'm braced it's it depends it depends so

i'd say over time the trend is that this stuff is getting smoother for a couple of reasons one like this notion that like the summer hottest peakiest day is like the end all be all that that that's gone that was 1.0. So we have winter peaks, we have shoulder issues because of outages and things like that. And so just even like across the year seasonally, we are seeing a spreading, a smushing out of the value. And so when you're talking capacity or even reserves, and let's put energy aside for a second. When you're talking capacity or reserves, both of which are more or less call options on energy, you're getting paid for being there during the time of need and the option. Right, and that's like an annual auction, right?

Annual, by annual, they're seasonal. Even talking reserves, if you just let's go to operating reserves for a second. That's daily. It's a day ahead or a real-time market in some markets. But you're still, and so there's an hourly price associated with providing reserves to a market. That is pretty spread out. little bit abs and flows here and there. Reserve markets actually can sometimes be higher in those shoulder seasons because of shortages of other resources.

So that spreads it out. And then when you're talking about the energy payments themselves, we have a lot of customers who respond economically. And so it's only when pricing goes above X that they want to curtail because that's their threshold. That's their what we call strike price. And so for those, that's like you're clipping the peaks of pricing. So you've got to look at, like, yes, if you're going to have a heat wave in the summer, there's going to be a lot of money made there, if you have a polar vortex in the winter. But as a general trend, as a general observation, these things are getting spread out. Now, layer on top of that, we're also seeing more of the, what we would call quote unquote, traditional capacity programs being dispatched regularly.

I lost count. It used to be that that would be crazy to not know how many times PJM dispatched ELRP this summer or, New York dispatched their SCR, special case resources capacity program. But it's again and again and again and again. And so the payments associated with those, the exercising of the capacity, those also become a little more spread out. So that's the trend. And like, that's part of why I come back to like, I love that we're being dispatched all the time for a number of reasons.

One, it spreads out the payments, which is good. But two, like, think about exercising. This is a muscle that now becomes well. used, well exercised. You want to keep it that way because at the end of the day, the thing that's most important is that we deliver. So as an industry showing that not only does this stuff exist, not only can we build it, but when you call on it, it will show up. It's so incredibly important to us. We have these North Star principles internally, and one of them is just deliver on our commitments to grid operators. It's very basic. And so the more we get used,

the more of a well-oiled machine it can be. Virtual power plants are becoming a reliable way for utilities to manage capacity, but enrolling devices is just the start. What really matters is confidence, knowing those resources will perform when dispatched, and being able to prove it from the control room to the living room. Energy Hub's platform handles the full picture, from near-real-time forecasting, locational dispatch, and the kind of rigorous verification that holds up when regular regulators, grid operators, or leadership ask, did it deliver?

Easy enrollment creates momentum, proven performance builds trust. That's why more than 170 utilities rely on Energy Hub to manage over 2.5 million devices delivering 3.4 gigawatts of flexible capacity. See what that looks like at energy hub.com. We're living through a profound economic shift, and energy sits at the center of all of it. Trillions of dollars are flowing into power plants, transmission lines, battery factories, data centers, but the future of energy isn't shaped by technology alone. It's shaped by markets, by policy, by capital, and by the institutions that connect them.

I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy. Join me for my brand new show, Critical Capital, Capital, as I talk with people deploying capital, shaping policy and building projects. Together, we unpack how risk is priced, how incentives are structured, and how progress is actually made. Listen to Critical Capital Capital on Spotify, Apple, or wherever you get your podcasts. Are you tired of overpaying for big-name PR firms, but not really knowing what they're delivering? Is your comms team wasting time reviewing lengthy messaging briefs and decks, instead of engaging journalists or producing content? Are you wondering why your competitors are getting press and you aren't?

Fish Tank PR is an award-winning climate and energy tech, renewables, and sustainability-focused PR firm dedicated to elevating the work of both early stage and established companies. Whether you need to position yourself as a thought leader in between project announcements or translate complex ideas and technologies into tangible, compelling stories that resonate with the media, Fitchtankpr.com. Check out fish tankpr.com. That's FISCH fish tankpr.com. You talked about PJM dispatching. I'm curious, I guess there's a broader question here, but it's sort of PJM specific. So PJM and the capacity auction that everybody started talking about a few months. months ago, you know, prices spiked again, total demand response or load side participation in that market, I think, was relatively flat, year over year anyway. I guess my question is, at the high level, like, what is the rate limiter on the growth of whatever modern version of demand response there is? Is it, I think what changed in PJM in part was like the rules

around capacity accreditation. You could probably tell me all the details there. But is the rate limiter like achieving sufficient value from the grid operator? Is the rate limiter finding enough of the right customers on the demand side? Or what stops this from 10xing tomorrow? It's all the above. It's all the above. So some of it is, yes, the higher the pricing goes, the greater the adjustable market, because now things pencil out for nearly 100% of things, right? There's also just time. So how quickly, I get asked this all the time. Like, well, if you just had endless resources, how quickly could you do things? But there's still just a limiting factor of the time to just go out and do it. There's the rules. You alluded to the ELCC and all the accreditation changes. And so there was a lot behind the

scenes more than meets the eye around, well, more total megawatts showed up. But because of the way they counted it, fine. I can't really speak for others. I mean, we grew year over. year. So one of our takeaways was, okay, well, that's great. Like, we have more space now, and so we're going to go out and have more to offer customers. And the last thing is, I do think people don't always keep in mind that it's not like one, it's not a one bite at the apple moment. So PJM has the forward auction, which is one way to procure capacity. And then they have their incremental auctions. So as you approach the delivery year, what will happen to pricing and are people kind of, you know, I don't want to use the word withholding.

That's a bad word in the industry, but are people kind of just waiting to see and then go into the incremental auction? And this will come up as we get to the bring-your-own capacity concept, but there are other ways to procure capacity. And so I wouldn't also over-rotate on that one signal that DR was flat year-to-year for one auction because of all this other stuff in the mix.

I think in general, the sentiment in the market is one of huge optimism and excitement. I just came from some time at Climate Week last week where folks who are adjacent to the industry asked me like, ooh, how was that? Is everyone okay? It's like everyone's great. Everyone's great.

There's a ton of optimism. Like I said, the market's having its moment and people are just excited to get to work. Now, are there things we could do? Yes, if I had like a magic wand, I would have better data access. and some basic stuff that I think is within our power to enable even more growth in the sector. Better data access on the customer side, like load data, better access on the utility side to know when it's going to be dispatched.

What's the data that would unlock something for you? Yeah, so when we think about like the residential portfolio, for example, so CNI, we go and we install, either there's a way to tap in through APIs and get customer data through something the customer already has. leveraging our API platform, or we go and we install what we lovingly call our Voltlet device, which sits on top of the utility meter and streams real-time data to our platform. But data is very important. When I think about the growth of our residential portfolio and what's, I think you use the term rate limiting there, it's the lack of access to, and I'm going to air quotes here for the listeners, smart meters, right? So we deployed all these smart meters, we rate-based them.

And then it's like, well, can we please use the data from them? But no, in a shocking amount of territories, it's actually quite hard to gain access to that, even if you are the consumer. And so there's some basic stuff around data access and unlocking some of the smaller assets that now pencil out. So it's now really worth it for smaller assets because of where pricing is. And so how do we make that happen? What's the rate limiters? There are still some regulatory tweaks, if you will, that I would like to see. So we've talked about this or versions of this a little bit before on the pod,

but you made an announcement just this week of a new product, basically, this bringing your own capacity product. They're offering, which is suited, I think, to any large load, but presumably predominantly aimed at data centers where the problem is the most acute. Why don't you start by just describing what it is? and then I have a bunch of thoughts and questions about it. Sure. So, yeah, so we've been really excited about this.

We've been talking about it to many folks for a while, but we kind of officially launched the product today. We had everything all buttoned up. And what it is said most simply is we are offering a way that increases time to power for large loads. And yes, in this case, we're really thinking about data centers, but nothing says it couldn't be other large loads by allowing them to pay for and fund

and bring their own capacity to this. table. How? Okay. So that's the next question. I took the words out of your mouth. But basically, the markets already have very mature, well-defined rules for what it means to be capacity. What is capacity in PJM? It's not the same as what is capacity in MISO or SPP or you name it. So we have an accreditation process and we have a way to evolve that over time. And at the end of the day if the problem is generation capacity. Let's define the problem. Let's say the problem is generation capacity. We don't have enough of it. Okay, great. Well, so let's build it and let's allow the markets to govern how we're building it and how we're operating it and what it means to be capacity to meet

the needs of that market reliably. And let's let the load pay for it. So that's what it is. It's kind of taking like what would traditionally be a bilateral agreement where load serving entities for a long time have purchased out of market. They've run procurements for capacity out of market and reduced what they need to go and buy in market. This is a, is trilateral a word? But it's allowing the funding to come from the load itself. And so you're offloading the burden, the financial burden of the load coming to that area, but you're also offloading the risk, because I hear a lot, well, like, what if it doesn't get built? Or, you know, so the concerns are, if we don't have enough capacity, what if it doesn't get built, and why should rate payers pay for the large

load coming to town? And so this allows, it's a win-win in my mind, because it allows the large load to come to town. The utility wants that, and it gives the utility the capacity that it needs, accredited by the market it's sitting in. Let's for a moment put on holds vertically integrated utilities. And it's putting the funding on the part of the hyperscaler or data center developer. At the same time, it's providing a signal to, in this case, VPP developers or Voltus, to build exactly in the area of the problem. And so that's why I love it. It's really an innovation on top of the markets today, which, the markets today which work for many, many things, but are struggling to accomplish all of these things all at once with the new large loads everywhere.

So, like, versions of this, the bringing-your-un capacity thing have happened with data centers before, right? I think, but it tends to be grid scale generation, right? So you'll have a data center, and this has been going on for years. Data center will go, there isn't sufficient generating capacity. The data center will, or the operator, hyperscale, or whatever, will pay for new generation to get built, not necessarily on site. I think what's distinct in what we're starting to see now, what you're pursuing is a version wherein that's not like it's unlikely to be, at least in your program, a single CCT natural gas plant that is that new capacity. It may instead actually be an aggregation of a bunch of demand-side resources in that region, right? And that's

what's sort of distinct here from what we've seen historically. That's what's distinct. That's what's distinct. And so that would be bring your own new power plant. And that would that would be subscribing to the notion that if you're going to be bringing a new 24-7 load, that somehow you need to like build new 24-7 generation exactly on that land parcel. So the other thing I'm trying to do is a little bit like broaden our minds on the term co-location. So sometimes it might be that you need to build exactly on that land parcel because you need a substation upgrade or something like very physical. Put that aside for one minute because increasingly what I see is that it's more, the constraint is a little broader than that geographically. So let's define the

constraint. Let's just say it's at the balancing authority. So that's your constraint. So that's where you want to co-locate. So this notion of like on-site versus off-site can be a little bit more flexible if you're willing to take into account the fact that as long as you're co-locating at the constraint, that's solving the problem. And now you have more tools in your toolkit, inclusive of VPPs, inclusive of deploying more storage in that entire area where you need it. And that's like the Spark Fund model of what they're trying to do, right? So these concepts are all things that I think we're all talking about and we're all loosely agreeing that we need to solve these problems and we're loosely agreeing that the burden and

the risk should lie on the large load coming to town. And like what we're struggling with is how. And so rather than point fingers and say like, oh, well, it's, you know, this, this, that, or the other entity's fault. Like, I just wanted to, we wanted to introduce another solution that works today. And so that's why we finalized the product and launched it and our psych to be talking about it. How does it actually work mechanically, right? Like, data center, operator, developer, going into a particular region, talking to the utility,

trying to figure out what capacity there is there. At what point do you bring in the bring your own capacity concept? And then is it a, okay, we Voltus say, you need 100 megawatts of additional capacity in order to set your data center at the size that you want in this location. Utility or load serving entity, you tell me the aperture that matters, is it the balancing authority, is the deliverability window smaller than that? And we Voltus will go originate 100 megawatts of capacity from a variety of types of resources in the region, or is it some other process? The earlier, the better. So the sooner you can get in on the planning process, the better. You want to be past the point of understanding what the problem is.

So to your point, like, let's just say for sake of an example today, the problem is some zone. PJM, ISO. So let's just pick PJM. So the problem is in some zone. And we're talking to a data center who wants to develop something in zone A. Well, the utility there says, well, I just don't have enough capacity in this zone. And the alternative is that they have to go buy it in the auction and it's going to be very expensive for everybody. Okay, great.

Well, what if we built an incremental VPP in that territory and transferred the PJM accredited market U-CAP megawatts? So that was a mouthful. But like after all the accreditation stuff, after the who's it what's it's of what type of resource it is, out pops a U-Cab megawatt. And it's called something different in every territory, but that's like the unit here. And so we go and we build those units and then we transfer it to the utility. And there's no financial transaction there. The financial transaction is that the data center is paying for it. So the utility gets the capacity.

The data center funds it. We go out and we build it. And incidentally, longer term price signals are great for building out VPPs, just like any other resource. If you can have a five to 10 year price signal, you can do a lot with that. You can start financing more energy storage. There's just a lot of creative things you can do with that signal.

And then the utility also gets to say yes to that load being cited in their state or in their region. Is the expectation that your answer to this is going to be, it depends. I know. You don't even need to have me on this.

I know. If I think about a resource stack, right, of like what the data center operator can do to generate sufficient capacity to get their thing built. Should VPPs be lower cost to them than new generation? In principle, I would think so, but there's a customer acquisition of cost associated with it. I mean, there's infrastructure there that's not obvious, so I'm curious how it ends up stacking up for them.

And do you think of this as being a product as attractive largely because it is cheaper, than whatever alternative they would have to get that capacity in that region? Or is it faster? Can you actually build it where realistically you're not going to build any new generation?

What's the thing that makes this slot cleanly into the resource stack? Yeah. So it is faster. It should be more affordable. So the way we would price it is always looking at the alternative and being cheaper than that. It is cleaner.

And at the end of the day, if you follow the money, the money goes back to the consumers and ratepayers themselves by participating in this program. So not only are they not there to go out, not only are they not like kind of receiving it on their bill, but they're also optionally participating in something that then pays them. So the whole experience gets better if you are the consumer or the rate pair. But it absolutely should be more affordable if the alternative is going out and building a new natural gas power plant. For one, not only are you going to like open up the.

catalog and see that it's back ordered until 2020 or sorry not 2020 20 20 30 whatever uh which is a problem uh you know like that's on hold for many years but they're expensive and so it should be more affordable quicker which is what everybody wants right now and it's more sustainable kind of better for the community so it's just checking all those boxes it is more complicated to talk about so so i think that that's part that that's the big challenge here. It's more complicated to talk about. It's more complicated to say, hey, like, why would we solve, even if you could, I don't think we should solve what's fundamentally a utilization problem by just adding more steel, more steel. I really think it's critical that we start thinking about,

like, there are existing resources on this grid already that we should be using. And this goes back to the Tyler Norris paper and all the great work out of Duke. It's the same thing as it was years and years and years ago when to come full circle, I was first starting at Enternaw, which is we had these charts that showed, well, yeah, like 10, 20% of the capacity is built for less than 1% of the time. That just doesn't make sense. So from a macro market design society point of view, even if you could open the catalog and buy those power plants tomorrow, I still think that this would be a better outcome. All right, Dana, this was a lot of fun. Thank you for finally coming on.

Of course. Thank you for having me. Dana Guernsey is the co-founder and CEO of Voltus. This show is a production of Latitude Media. You can head over to Latitudemedia.com for links to today's topics. Latitude is supported by Prelude Ventures. This episode was produced by Daniel Waldorf, mixing and theme song by Sean Marquand. Stephen Lacey is our executive editor. I'm Shail Khan, and this is Catalyst.