We've received a lot of terrific feedback and responses from our podcast interview with James Dice, host of the Nexus Podcast . The name of the episode is "Demand Flexibility in the Long Tail of Small Buildings," and it's chock-full of useful information for real estate property managers, engineers, energy managers, technology vendors, building operators, and real estate investors.
Since it's such great info, we've transcribed the entire interview for those who prefer to read useful info. Of course, if you are a video watcher or podcast listener, here are the podcast versions on (Apple | Spotify | Other apps), and here's the video version:
...And without further ado, here's the transcript! Enjoy!
James Dice: Hello, friends, and welcome to the Nexus Podcast. I'm your host, James Dice. Each week, I fire questions at the leaders of the smart buildings industry to try to figure out where we're headed and how we can get there faster, without all the marketing fluff. I'm pushing my learning to the limit, and I'm so glad to have you here following along.
James Dice: This episode is a conversation with John Powers and Deepa Lounsbury of Extensible Energy. We talked about the history of demand response solutions and how that demand response piece is transitioning to a new term, load flexibility, and where we are on that spectrum today. As John said, we're seeing more change in the last 24 months than we saw in the last 24 years. Then we took a bit of a deep dive into DemandEx, Extensible Energy’s product, and how it's especially suited for the small [00:01:00] buildings market below a hundred thousand square feet in area — which is about 98% of the buildings in the US, but it's mostly untapped today from a technology standpoint. So, without further ado, please enjoy the Nexus with Extensible Energy.
All right. Hello, John and Deepa. Welcome to the show. Let's start with you, John. Can you introduce yourself, please?
John Powers: Thanks for having us. I'm really happy to be here. I'm John Powers, I'm the co-founder and CEO of Extensible Energy. I’ve been an energy nerd all my life. I’ve been in energy for more than 30 years, about half that time as a consultant, half that time as a software entrepreneur. I've worked in demand response and energy efficiency and renewables for pretty much that whole time. And I'd say the thing that excites me most about talking about what we're doing now is that the industry has changed more in the last 24 months than it has in the last 24 [00:02:00] years. It's a slow-moving industry, but things are really starting to happen, and it's an exciting time to be talking about load flexibility and the rest. Looking forward to it.
James Dice: We’re going to dig into your company, Extensible Energy. Let's go over to you Deepa, first, can you introduce yourself?
Deepa Lounsbury: Thanks James. I really appreciate being on your podcast. I've learned a lot from past episodes and appreciate how you're bringing the whole industry together. My role here at Extensible Energy is I'm the Director of Product Management. I started here about three and a half years ago.
Before that, I started off my career in traditional finance as an investment banker. And then 15 years ago, I started off on the investment side of climate technologies. I worked at a small venture capital firm called Angelina Group investing in [00:03:00] all the different technologies that were really supposed to save the planet.
And from that moment I really got hooked on the industry because I got to explore biofuels, recycling technologies, solar, wind, and realized that there is enough here to keep me very intellectually stimulated for the rest of my life, with another billion people. And then I went to Thailand, had a short stint there, brought back a Thai dog who’s sitting right next to me right now.
And, during my time as a venture capitalist, I realized that it seemed like all the entrepreneurs were having the fun in terms of actually commercializing the technologies. So, I wanted to be on the product innovation technology commercialization side of things. I got my master's degree in energy resources from Berkeley, got to [00:04:00] fill in some of the technical gaps that I felt like I had, and then started at Enphase working on a residential energy storage product. I also worked at GE on their distributed energy platform. I spent a little bit of time on the grant-making side of things, funding early-stage clean technology entrepreneurs.
And now I'm here helping make load flexibility the big thing that it should be.
James Dice: All right. My friend has a Japanese cat, he's in the air force, went to Japan and came back with a cat, and this cat is the coolest cat. I tell my cat that she wants to be like Kay Bob when she grows up. She's an American cat, not that cool Thai dog.
John, I'd love to go back to you. 30 years in the industry, it sounds like on the utility side, mostly, but also the building side as well. And now, Extensible Energy [00:05:00] sits in between those two. Can you talk a little bit more about the things that you've done in the industry before founding Extensible Energy?
John Powers: Sure. Before founding Extensible, my first job out of college was in the rates department of an electric utility, Portland General Electric up in Portland, Oregon. So, I learned how utilities make rates. I'm an economist by training. I understand utility pricing and electricity pricing.
Electricity’s funny stuff. It's hard to price because it’s virtually impossible to store. It's not like wheat or other things. I know a lot about wholesale and retail utility electricity pricing. I went to Quantum Consulting, which was a startup consulting company, helped grow that from three people up to 150 working on load research, DSM program evaluation, demand side management, program evaluation, demand response [00:06:00] programs — and always in the background, we had a little bit of software going on at that time, too. And we saw some real opportunities for the software. So, I led a spin-out from Quantum to a company called Energy Interactive, where I was the CEO and co-founder of a software business that helped utilities to engage with their customers, put some of the first really interesting online applications behind utility websites so they could engage with their customers better: residential, commercial, industrial, the whole nine yards. We sold that company on favorable terms to ABB. So, I worked for ABB for a few years as their director of retail software.
And then I figured out that I'm not really a large European conglomerate kind of guy, and started to get the itch again to do my own thing. And here we are. So, that's a [00:07:00] perhaps incomplete but pretty representative sample of where I've been over the years.
James Dice: Let's bring this full circle, then. When did you start Extensible Energy, and why?
John Powers: I started Extensible Energy as just a one-person LLC for me to do some consulting with my old utility contacts. But in 2016, we got a grant from the US Department of Energy to work on a software problem that I'd been interested in for a long time. We got what's called a Department of Energy Small Business Innovation Research grant, SBIR grant, and that started us down the software path again. And they give you the money in two tranches. They give you a grant to do a proof of concept, which was basically nothing more than a simulation model of what we wanted to do. And then they gave us a lot more money to [00:08:00] go build a working prototype and get it working in a real building.
And that's the core technology that became DemandEx, which is the product we're commercializing now.
James Dice: And when was this?
John Powers: That was late 2016. We've been working on this for about five years, and the core technology has been vetted by the US Department of Energy and a bunch of other folks as a big innovation in how buildings are controlled and how it can help to integrate more renewables into buildings and into the grid.
James Dice: Cool. And Deepa, you joined a little bit after that?
Deepa Lounsbury: Yeah, just three and a half years ago.
James Dice: And I came across you guys when I was at NREL. I've been intrigued by the idea, and obviously on the podcast, we've been exploring this topic of load flexibility for a lot of 2021.
This podcast will go [00:09:00] live in 2022, but last year we did several episodes that we'll put in the show notes around demand flexibility that this is going to build on. I'd love to look at this. I don't think I've done this from a historical perspective yet.
So, John, I'm probably looking to you here, but you've done all this in demand management, and from my perception, when I started out in energy management, there were demand management programs: the ability to get a signal from a utility and curtail something. And sometimes that was automated, sometimes it wasn't. But that sort of paradigm has now shifted into load flexibility. Could you talk about what that means and why that has happened?
John Powers: Yeah, for sure. The initial demand response products or programs of 30 years ago, or more, were really designed as a way to help utilities not have to build more and more capacity for [00:10:00] the very, very highest peak of the year. So, you would get these programs where customers were paid to curtail their load three or four times a year on the hottest day of the year, and that would help the utility not have to build a new peaker plant that was turned off most of the time and in rate base all the time. So those programs were extremely manual. They featured mostly industrial customers, although there were some that reached down into residential and commercial. They were mostly industrial, mostly manual, mostly you’d pick up the phone, call the shift manager and say, “Could you send the next shift home at the rock crusher or other big industrial facility? We'll pay you for all that electricity you're not going to use.” And that was demand response.
As time has progressed, there has been a lot more automation. You could now [00:11:00] have millions of residential customers participate in what is essentially that same program three or four times a year. Could we please shut off or reduce the usage of your air conditioner? Could we please raise the temperature in your house just a few degrees so that we can avoid building another power plant, three or four times a year?
So yes, the progress towards automation has continued, but the innovation in what the application is really used for is only happening now, which is once you get a building under better control, you can respond to anything. It can be a local signal or a grid signal, and now buildings and the grid are moving towards being one truly connected electrical grid system, so that at any minute of the day your building, your house, your industrial facility, any kind of facility can look at the price signals coming from the grid or the control signals coming from the [00:12:00] grid and make changes to how your equipment is behaving, and you'd never even know it. You can just put that all in the background and the grid adjusts to its needs seamlessly. That's the path we're on. That's where I want to end up, a truly multi-way interactive grid instead of this one-way command and control grid.
James Dice: Totally. And where are we at? If we look at the United States, for instance, this is a probably impossible question to answer, but maybe you can summarize: What are the current trends here? Where are we at today on that transition to a fully flexible grid?
John Powers: This is why I said what I did at the beginning: In the last 24 months, things have changed more than the last 24 years. Up until a couple of years ago, I'd have said we were somewhere between stage one and stage two of that [00:13:00] development. Either guys being called on the phone to shut off rock crushers, or maybe in some places, some automated control thermostats a few times a year. But over the last 24 months, the whole energy community, and increasingly the building community, is waking up to the idea that to accommodate all the wind and solar that we have already committed to on the grid, the load side, the demand side of the grid has to become much more flexible.
The combination of driving need on the renewables side and big technological trends, IOT frameworks, cloud computing, cheaper sensors and networks, all these things are pointing in the direction of it's getting easier and easier to make buildings react in ways that are favorable to the grid. There's a long way to go, but we [00:14:00] have just started down the exciting third-phase path.
Deepa Lounsbury: I might add that I feel like there's old school versus new school demand response, or demand-side flexibility. Old school is as John described, pick up the phone, maybe they'll respond, maybe not. Don't ask too much. New school is really integrating buildings into what the grid really needs, dynamic signals, and more real-time stuff. And in parallel, related to new school, old school versus new school decarbonization as well. You had Cara Carmichael talk about 24/7 zero-carbon building, matching the building with the renewable energy on the grid. All of these things are absolutely connected, and the more intermittent renewables we get on the grid, the more responsive our [00:15:00] buildings and our demand side need to be to that.
James Dice: If we frame this around why should building owners care, first they're going to be able to monetize that flexibility. It's not just, let's altruistically help the grid out, right?
John Powers: Yes, that's exactly right. Because you can monetize now against demand charges, time-of-use rates, any of the fixed tariffs that are out there today. That's not demand response. This is irrespective of what the utility or grid operator is asking.
There's a published book that says what your price of using too much power at any one moment is; that's a demand charge. You and I pay for kilowatt hours at home. But a commercial building pays up to half of its total electricity bill based on the highest 15 minutes of use during the entire [00:16:00] month. That's called a demand charge. And that's kind of a tax on bad controls, is how we see it. If you're not aware of what your usage is minute by minute, you can't control your 15-minute demand for the month. So that's where the initial monetization for everybody, but certainly for us, is coming from, is the ability to control demand charges —because once you get a building under better control, you can respond to signals that are more sophisticated, like real-time pricing or other grid signals. But right now, we're definitely saving our customers a bunch of money just off of demand charge management.
James Dice: And the ability to monetize is only going to get better as it moves from demand management to flexibility? Is that how to think about it?
John Powers: You can think about it one of two ways. It's going to be [00:17:00] more expensive to ignore this problem as …
James Dice: The tax is going to be more …
John Powers: Right. The utilities and the grid that we are building now is going to have greater-time differentiated pricing than it does now. There's going to be more difference between the times that are cheapest and the times that are most expensive than is true today. We already have that in wholesale electricity markets.
And one of the projects I'm really, really excited to be working on is this thing called the California Load Flexibility Research and Deployment Hub — which is such a mouthful that they just came up with calflexhub.org, and that's how they talk about it now — they're going to be bringing real-time price signals from the wholesale market into the retail market, with a whole series of technology improvements and [00:18:00] then demonstration projects to actually push this out into the market.
And this isn't a 2030 project. This is happening this year and next and the year after. So, this stuff is coming at customers much faster than they think. And that's the tip of the iceberg, because yes, you'll be having your tariffs or the rates you're paying change quickly, but your building is changing too.
We all live in states where renewables portfolio standards are way up, decarbonization goals are extremely ambitious. If your building is heated with gas and will soon be heated with heat pumps, electric heat pumps, if your building right now has a parking lot for gas cars, but it's about to have electric vehicle chargers all over the place, if your building heats its hot water with gas today and electricity tomorrow, [00:19:00] all these are huge changes in how your building uses energy and how you should be making energy-related decisions.
Deepa Lounsbury: Yeah. And James, another way of answering your question, Why should a building owner care? A quote from a property manager at CVRE: “Looking at my electricity bill is so complicated. I know that my year-over-year increase in electricity is 26%, but I have no idea why.” So, why are those rates complicated, why are they so hard to decipher, why have they been going up? Those are the things that demand flexibility can answer.
James Dice: I think about adding another layer here, which is if I'm an organization — either a tenant or landlord or whatever type of building you're talking about here — if my organization has carbon targets, then I have to figure out at some point — maybe this isn't the low-hanging fruit, maybe it's further down the line — I have to figure out at some point how to match my demand with renewables supply.[00:20:00]
Deepa Lounsbury: Absolutely. We have integration with WattTime that gives real-time carbon intensity metrics for kilowatt hours used at specific times of day. So, you can choose to just use cleaner kilowatt hours with your flexible load. For folks that want to optimize for emissions intensity reduction, that's another benefit.
James Dice: Let's talk about the product. DemandEx is the product. Can you talk about what it is first, without jargon? Can we explain it in the most simple way possible?
John Powers: Let me give it a try; tell me when I get to jargony. Basically, it's an energy management control system that controls all of the flexible loads in a commercial building.
Flexible loads usually we think of as heating, ventilation, and cooling is the biggest one in most [00:21:00] buildings today. The ones I talked about that are coming down the road, electric vehicle charging and certainly water heat and stationary batteries in some cases, which are not big in small-to-medium commercial buildings today but could become bigger.
We control those resources that are flexible, those loads that are flexible, to minimize your electricity bill and potentially to maximize your benefit from demand response or other market opportunities. So, you can reduce costs, increase revenue from participating in utility or other electricity markets.
How we do it is we watch the demand all the time. We watch the one-minute usage of your building, minute by minute, 24 hours a day, 365 days a [00:22:00] year. Demand charge management is hard. You can't blow it even once; one 15-minute interval in the whole month will ruin your entire savings. So, we watch everything carefully.
We have a forecast of what the whole building load is going to be, a forecast if there is solar of what the solar is going to be, put all that into an optimizer, and we control all the loads to keep your demand charges low.
James Dice: In the Nexus world, we call this advanced supervisor control, which is an acronym that I think I've made up, but often there's so many acronyms that I don't know which ones I made up or which ones came from others. So maybe I did, maybe I didn't, it doesn't matter. But the point is that there are existing systems in an existing building that this system sits on top of, and it does something in a supervisory way that's in addition to what the existing control systems are doing.
John Powers: That is a perfect way to describe it. I'm going to steal that [00:23:00], because the beauty of DemandEx is that it is not a replacement for any of the things you've already put in your building. We try to not require any type of retrofit beyond the very minimum. You don't have to change the HVAC equipment. You don’t have to change the lights or the battery or anything else. It'll work with existing building energy management systems, if there is one. And if there isn't one, it's a simple sort of rip and replace of dumb thermostats with smart, wireless communicating thermostats, and that's it. One-day installation for the ability to control basically all the flexible loads in the building. That was key to us because this is a product, not a project.
We target the small-to-medium commercial space, because everybody else targets the Salesforce Tower or the Sears Tower or something.[00:24:00] That's project economics. That's fine business for somebody else. Product economics is we've got 665,000 buildings in the United States that we have to get this into, the small-to-medium commercial buildings that are big enough to need something like this, and small enough not to require ridiculous levels of precious little snowflake engineering. We're all about making this as easy to drop into a building as possible.
James Dice: Cool. And I'd love to know, was the focus on smaller buildings because of the original DOE grant or was that a focus area that you were like, we need to focus on this, like you just said, because no one else is.
John Powers: I wouldn't say no one else is, but I think too many people are focused on the giant sort of marquee projects because they look better on your website to say the Salesforce Tower than [00:25:00] it does to say a car dealership in Colorado or a church in the Central Valley of California.
But we saw a huge unmet need for those buildings to have a simpler, lighter-touch way to manage their energy and demand. I think it had more to do with being able to encapsulate it into a product instead of something that is, you send all the PhD graduate students to scoot around a big building for a couple of years, and then you've got a beautifully controlled project you can write a thesis about. That just didn't interest me. I wanted to make a product that could be rolled out to hundreds of thousands of buildings without all that fuss.
Deepa Lounsbury: And I'll add that CVEX estimate estimates that 97.7% of buildings are [00:26:00] 100,000 square feet or smaller. And so not only do those buildings deserve many of the benefits that come with supervisory control — it's also just really necessary from a climate change perspective to address those 97% of the 6 million commercial buildings in the United States.
James Dice: The latest version of CVEX has not come out yet and will probably not have come out by the time this gets published; I think it's in the spring. But by the time this comes out, there will be a white paper that we produced on buildings under 50,000 square feet. And those buildings are like 5.9 million out of the six, something like that in the US, and they use 44% of the energy consumption, they’re about 49% of the square footage. So yeah, it's a [00:27:00] massive, massive opportunity. It's fascinating, too. It's an extremely complex, really, really complex problem. I'll point people to our white paper, too.
Deepa Lounsbury: We want to democratize energy management. We think everybody, every building should have it.
James Dice: Cool. And while we're on this topic, what are the unique dynamics of the smart building space from your guys' perspective that maybe don't apply to bigger buildings?
John Powers: The ability to put something in without having a dedicated facilities manager is really important. A lot of these places have property management firms, which means remote management. In most cases, somebody comes by when absolutely needed or to check up among the other dozen dozens of buildings they're checking on. So, it has to be simple. It has to [00:28:00] be understandable by folks who are not facilities professionals, and it has to work seamlessly. It has to work behind the scenes without generating so much fuss that you can't stick to your business.
We target office retail, church, school, conditioned warehouse, municipal building, anything in that sort of 25,000 to 200,000 square feet. And the folks running a retail store, the folks running a car dealership, a church, a school are not thinking about energy unless something has gone wrong. So, this has to be very seamless and work in the backend.
Deepa Lounsbury: And the two things I'll add: Often for the smaller buildings, the building owner or the pastor or someone who's not an energy expert [00:29:00] will be the one who's in charge of energy. And a lot of them are just exhausted by trying to figure this all out, trying to decipher their utility bill, trying to figure out if I turn stuff on or off. Who do I trust? Can I trust my employees to manage this for me? So, to take off some of that exhaustion and say, we're a bunch of energy nerds, let's manage this for you. Something unique about smaller buildings that don't have the capacity, the luxury of having an energy manager.
And the other piece is that often the smaller buildings can be closer to the financial edge. They have time to search for new technologies, adopt them, but would benefit most from smarter energy controls.
James Dice: Got it. Something that can pay back quicker and be less of a financial investment.
John Powers: [00:30:00] Right. And this is a one-year or less payback investment in all the buildings that we're at. So, it's a very simple economic decision for the customer once they see that it works and is as easy as we're saying. I'll leave it there.
James Dice: Hey guys, just another quick note from our sponsor Nexus Labs. And then we'll get back to the show. This episode is brought to you by Nexus Foundations, our introductory course on the smart buildings industry. If you're new to the industry, this course is for you. If you're an industry vet, but want to understand how technology is changing things, this course is also for you. The alumni are raving about the content, which they say pulls it all together, and they also love getting to meet the other students on the weekly Zoom calls and in the private chat room. You can find out more about the firstname.lastname@example.org. All right, back to the interview.
James Dice: You guys mentioned that you start with [00:31:00] HVAC; where this is headed is starting to control everything. Can you talk about how the HVAC works? And let me set the stage here. When I studied this market, you have all of the single-zone packaged, really simple HVAC systems that drive around in a small town. You see little tiny carrier rooftop units everywhere. Those are single-zone systems, traditionally not controlled very well.
There's standalone thermostat and then standalone programmable thermostat, and now we have this wave of internet-connected thermostats. But then in that space that you guys talked about, it starts to get into that more complex commercial, multi-zone, VAV, centralized systems space. Can you talk about, where do you guys play? Do you play across that whole spectrum? Or how does that work?
John Powers: Yeah, we have to play across the whole spectrum because we have to control whatever it is that we find in the HVAC systems, in the buildings. [00:32:00] So we work with VAVs and VRF, and the most common is still sort of a one-to-one mapping between thermostats and packaged units, but many of them in one facility. The trick there is, of course, to make sure they're not all coming on at once, because that would set a demand peak. The trick is to make sure that everybody is comfortable even while you’re modulating some of the usage in some zones and ramping it up in others. So yes, we have to work across that spectrum. And usually the one-to-one-to-one thermostat to zone to rooftop unit are the ones where we have to do a rip and replace, because the energy management system there is, whoever had the biggest thumb the last time they walked by the thermostat — that's your energy control system, and we can help those guys a lot.
We love finding those [00:33:00] buildings. The ones we like best hands down are the ones where you find the locked plastic box over the thermostat. And the very, very cream of the crop is when you find the locked plastic box with the bent paperclip on top for somebody who's going in anyway and making changes to the system. That means that the building is poorly controlled. There's conflict about comfort, there's conflict about energy usage. There's all this Band-aid-on-Band-aid systems that we can in a single day turn into something much more simple to control.
And again, we think of all the fancy modeling and all our fancy predictions as being our value add. But sometimes our customers just say what Deepa said, which is, I was exhausted from worrying about, I noticed that my employees would leave the air conditioning on on Saturday when we're closed on Sunday, and the thing would be on all weekend, and now I know [00:34:00] better. And you can say, well, that's just scheduling. But the scheduling interfaces on most thermostats are like the VCRs of the last century, which is just because they're programmable doesn't mean anybody's programming them. You have to have a central system where you can look at them all, make sure they're all off at the right time, and control it from a familiar web interface instead of worrying about who touched it last.
James Dice: I'll vouch for that. I just moved to a new house, and it has a programmable thermostat, and I'm six weeks in, and I haven't programmed it yet because I don't feel like figuring out how to do it. I'm like the energy management system every day: I have my schedule that's in my head and I just feel mess with the setpoint. I’m not ashamed of saying that, because, like you're saying, the user interface is so terrible, it would take me way too long to figure out how to actually schedule [00:35:00] it.
John Powers: You'd have to redo it every season, and then you'd have to redo it within the season. Every time there was a change to Daylight Savings Time and all the rest of it. It's just not built for the real world anymore.
James Dice: Exactly. Deepa, let's hear about this from a product standpoint. I think John said fancy predictions. Can you talk about how this actually works behind the scenes?
Deepa Lounsbury: Yeah. At its core, what we're doing is changing when flexible loads in buildings use electricity. The simplest way of saying it is we're learning from the past, which means that we're learning about the thermal dynamics of that building, the usage patterns, the equipment, is it a new HVAC system or is it 30 years old. All of these things are really important to figure out how to control a building, and how to ensure that the occupants are comfortable and are following the schedule. We [00:36:00] also do the prediction and the forecasting, to understand: What is the rate structure that we're about to enter into? What is going to be the weather? Are we going to need the HVAC system? What's the solar production, if there's solar? And in many cases, what's the carbon intensity? We take all of these things in as input and then send a control signal to the HVAC units by changing set points on the thermostat. We send signals to the HVAC units or other flexible loads in the building to optimize for all of those things — schedules, rates, all of those things.
James Dice: What should a given set point in a given room or on a given system be at right now? What's the optimal point, given all of these inputs?
Deepa Lounsbury: That is very, very [00:37:00] subjective. At the time of implementation, we sit with the customer and we figure out what is their desired temperature range for each zone. And it can be very different for a sanctuary, an office building, a showroom for a car dealership. But we do operate within ranges, and we find that, compared to prior to installation, usually we're staying closer to their desired set point than they were before. But we do operate with a range.
James Dice: Cool. When I looked on your guys' website, I came across this pre-cooling virtual battery concept. Can you talk about how that piece works? A lot of people will think, oh, I can't do a lot of flexibility because I don't have a battery. How does this concept work?
Deepa Lounsbury: I like to say, use what your mama gave you. [00:38:00] Your building is a battery, right?
James Dice: That’s the quote of the episode. We always do a quote, and that’s going to be it.
Deepa Lounsbury: Your building is a battery. Every building is a battery. Your wall, the thermal mass of your building is a one-to-five-hour battery. Everyone has the opportunity to utilize that. You're going to keep heat in for a little while, even if you turn off your HVAC, some of your HVAC units for a little while.
So, yes, we do help that building plan ahead by pre-cooling, that's one of the things that we do. And I look at load profiles every day, I see that a lot of buildings with building energy management systems often do set their peaks in the morning: it's 7am, all the HVAC units turn on. But that's only one control strategy.
There are many, many different control strategies. For example, there's [00:39:00] noticing that you're about to set a demand that's going to cost your building thousands of dollars in one minute and still having 14 minutes to correct for that, and so that rapid responsiveness to reality is also another element of it.
James Dice: How do you guys make this concept scalable? You've talked about churches, car dealerships. We have a lot of those in the US.
Deepa Lounsbury: 17,000.
James Dice: If you're listening to from outside of the US, we have a lot of churches and we have a lot of car dealerships, there's a lot of those. So how do you guys make this to where I don't, as an energy engineer working on your team, have to look at every building to make the decision on what that control sequence is?
John Powers: The thing we were talking about earlier is that the learning through looking at usage patterns, that's not us — that's our machine [00:40:00] learning algorithms that are looking at those usage patterns. We have automated the ability to tell what zone has what kind of thermal capacity, what can be — when you turn off one zone, the temperature might increase very quickly, another zone, it might increase very slowly. All that stuff is modeled out without having to do that manually. The machine learning is a fancy word, but it's critical to our business. We are learning the thermal parameters, the uncontrolled loads. So, we need to have a good prediction of what the loads we're not in control of are going to do, so that we can control around them.
And then in the case of solar, we also have a machine learning algorithm that does the predictions for what the solar is going to be, because one cloud can wreck your whole month of savings too. So, it’s [00:41:00] the automation that makes this scalable for sure.
Everybody talks about artificial intelligence replacing jobs; this is replacing jobs that aren't being done. Our artificial intelligence is watching every minute what's going on in every zone, every temperature load of the whole building, output of the solar if you have it, and making calculations out multiple hours into the future as to what your best usage right now is to keep your demand low for the whole day.
Again, humans can do it, except, no, they can't — because again, humans have jobs and humans would have to dedicate their entire day to watching a bunch of data that they don't usually have much access to. It's much better to put that up in a brain in the cloud and let that handle all the decisions for the building for you. And if there's a change in schedule or an override that says you have to have this one room cooler right now, [00:42:00] you can override anything we're doing, no problem, but you want to spend your day managing by exception, not managing every little decision.
Deepa Lounsbury: And the other thing I’ll add to that is designing this product for a radically simple installation and implementation is in our DNA. We've all seen tons of academic projects where they install tons and tons of sensors and make every building perfect. We've simplified the installation, so we just need minute-level energy monitoring and a gateway, which means that it's low cap CapEx. And then the fact that we don't need a million sensors and that much stuff installed in the building and that it's accessible for a bigger audience, including tenants, by the way, means [00:43:00] that it's, we tried to design for scalability.
James Dice: Pretend I'm your pastor. You're talking to me on the phone. I just purchased off your website and you're about to send me your thing. What do I have to do to set this up?
Deepa Lounsbury: That's a good question. We've done this a few times. We still do have a field operations team because we do need a minute-level energy monitoring device that does need to be installed by an electrician.
But we basically schedule an installation. It could be next week, and we need to put in the energy monitoring device and then potentially a gateway. And if it's a very small church that has the thumb-controlled thermostats that John was referring to earlier, then we replace those thermostats with smart compatible [00:44:00] thermostats. Then we learn for a month. And then after that we start actually taking control actions to make your building smarter, more efficient, more dynamic, and more comfortable.
John Powers: We already have some partners who can do this themselves, so it's not like we're having to build a huge force of people in trucks to go do all of this. We're working nationwide. We have probably about as many customers outside of California as in, and a bunch of them are in Colorado because we've got a great partner in Colorado who could do a lot of this work themselves.
Every time we do a site, we improve the documentation and the process; everybody's job is to knock another step out of the process. Simplify, simplify, simplify, to get it to the point where — we haven't got it to the [00:45:00] point where you can do a self-install in most buildings, because there aren’t skilled electricians in most buildings yet. But if your facility has an electrician, you can just call that person in, and we can document the whole process and they can do it. Same with the HVAC technician that you're using; that person can put the thermostats in, no problem, if they're required at all. And the integration between our gateway and the existing building management system is 10 minutes. It's basically reading BACnet over IP in most cases — reading and writing BACnet over IP, which is super simple to plug in. All the work is being done in the cloud and by our own engineers.
The onsite work is simpler every time we do it. And one-day install is just the beginning. We want to have a half-day install, and then we want to have a two-hour install. [00:46:00] Then we want to have a one-hour install, and so forth. We're cranking away to make this simpler every time.
James Dice: When you say your partners, you're talking about a local contractor that offers this as one of their products that they sell?
John Powers: Yes. We work with partners because it increases the spread that we can cover very easily. Our first partners were in the solar industry because this fits very well with solar. Solar is great at saving energy, but not demand. So, we have some partners in the solar industry. We have partners in the HVAC and controls industry because it's a perfect complement to the products and services they're already providing. And then we're working with some IT folks who are interested as well.
James Dice: Cool. Let's talk about the savings aspect of this. The old paradigm is that I save money on my demand charge on my utility bill. Then we're moving into [00:47:00] more like you talked about with getting paid. So how do you guys capture the revenue streams that could come out of this? Or how does that work?
John Powers: We try and leave plenty on the table. We want it to be an easy decision for the customer. We provide the service as a fixed upfront fee and a fixed monthly fee, depending on the size of the building.
It's a very simple-to-understand, simple-to-approve-and-buy system. We're not doing shared savings. We're not doing a calculation based on every little difference between your building and the rest. There's one price for small, medium, large, extra-large buildings within our categories we talked about earlier, and then there are some add-ons based on the additional complexity of things like solar battery, car chargers, things that are major changes add some number of dollars per month. [00:48:00] But the basic idea is, a small number of thousands of dollars upfront and a small number of hundreds of dollars per month.
James Dice: And the savings would come from the bill through the utility directly?
John Powers: Yeah, the customer at the moment saves exclusively through their utility, their utility bill. But that's just the economic side. We really have heard from our customers that they value four things, not one: the four C’s, we're calling them. Basically, it's comfort, because all energy management systems have to maintain comfort in the building, or there's no point. Comfort control, because as I said before, a lot of these folks feel like they're out of control both of the operation of their systems and of the costs of those systems. Costs, for sure. And then carbon — as Deepa said, helping a lot of these businesses [00:49:00] hit their sustainability goals is a very important priority for them too.
If you can help the business with four problems at once, instead of just one, the offering is much stickier. People don't cancel after they start saving money and feeling better comfort and control. They are just going to stick with the product.
James Dice: And then where does the, I'm going to sell this building's flexibility aspect come into this — is that a future capability?
John Powers: That's a near-future capability. We're going through the process of integrating some of the demand response protocols that are already in the market into our software. That's a next-quarter thing. And we're working with providers of demand response to add that capability to our customers, and theirs.
[00:50:00] The full-on loaded flexibility markets are probably still a year or two away. I talk about demand response as kind of the intermediate version we talked about in the middle there. But the full-on load flexibility as a service that provides money to the building in California, it's no more than a year or two away, the rest of the country a year or two behind that. I think California will show the whole country, through CalFlexHub and other initiatives that are going on, that this is not as futuristic as people think — this can be done now.
James Dice: Interesting. All right. I'm excited about that.
John Powers: Yeah, me too. It’s what I've been waiting most of my career for.
James Dice: I’d love to, before we close out, talk about a couple of compelling case studies, stories from these types of [00:51:00] customers. I think this audience, the fact that we talked about the small buildings market earlier could be a little bit of a surprise to them, but let's talk about what you've actually seen in some of these, and some success stories from doing this, and their buildings. Do you have any great stories to start with?
Deepa Lounsbury: Yeah, I'll start with a couple. And these two are kind of on the opposite ends of the spectrum in terms of what equipment exists in them or existed in them before implementation. The first one's on the really simple side. Simple is not supposed to be negative.
There's a church in the Central Valley that was installed two years ago. That building, it’s a small church in a very modest-income area. They have no facility [00:52:00] manager, no building energy management system. It's basically the pastor and a few volunteers that were managing energy. They also didn't have smart thermostats. But they did get solar. And they got solar, and they were surprised after the solar was installed, that their bill was still so high.
Until we looked at their building, they were considering a battery. But that battery would have cost a hundred thousand dollars. And they were looking for mainly the economic value proposition rather than backup power. We noticed that their peaks were being set by event-driven HVAC loads; like many churches, they have their peaks on, they have events on Sunday mornings, evenings, and then the preschool and then the one-off weddings and funerals at the church.
So, there, we took out the old thermostats, put in new [00:53:00] ones, and basically started control. We have the gateway, the minute-level energy monitoring. And we've made that a DemandEx-equipped building. We saved that building 30% on their demand charges, which ends up being $75,000 over 10 years, which they're investing in their local community, at their food banks and their soup kitchen. And, also, the pastor can focus on his congregation.
On the opposite end of the spectrum in terms of complexity of existing equipment, one of our customers is a school district in the Central Valley, and there they have a building energy management system, they have Pelican thermostats, they have a controls contractor. All of these systems are working together, and the [00:54:00] school is satisfied with how they interact with them today. But they're still paying a ton of money in demand charges and time-of-use charges, because the best a controls company can do today is set static timers, and maybe change them every season. So, we've installed, and we are a layer on top of that existing equipment and those existing contractors to optimize their energy use dynamically and with the predictive controls.
In terms of reality, it's not totally straightforward to enter someone else's territory and start singing Kumbaya. But, as James likes to call, it change management …
James Dice: Yeah, multi-stakeholder change management.
Deepa Lounsbury: Exactly. We explained that we are going to make the school even happier together. [00:55:00] They like setting their schedules through this program. The teachers like this brand of thermostats and pushing the Up and Down button there. And they also want savings. Schools are, public schools, especially in this country, are always looking for ways to save money on energy and spend more money on books. We enable that.
James Dice: Absolutely. Cool. I'd love to hear just a little bit about how you guys message that to the existing stakeholders that are responsible for those controls. In the school district, you said controls contractor, but then there's also probably a facility staff, unlike at the church. So how do you say, this is the way that we're going to do things. And Kumbaya.
John Powers: The benefits of our software are [00:56:00] additive to any of the strategies that are already in place. We're not taking anybody's work away from them. It's a little bit of an educational sale, because load flexibility is a new concept to a lot of these folks, but they're really smart about HVAC systems and about the notions that are behind controls.
So far, when we've had these interactions, we've found a new partner in most cases, because the folks who are already in — school districts are a good example — if they're in one, they're in several, within the state of California or elsewhere, and they're on the hook to deliver savings to their client. So, we look at it as an opportunity to educate more of the market and work together to bring sort of these additive benefits. We're never going to put an outsourced facility manager from [00:57:00] Extensible Energy onsite at a school district, but that's the business model of some of these other folks. It's a complementary offering, once you get the education piece taken care of. We're working, again, to make sure that gets communicated more clearly every time.
Deepa Lounsbury: I'm really glad you asked that question, James, because there is a whole ecosystem around buildings. It's not just a controls contractor. It's not any single person that we need to please. While we are demand-side flexibility at its core, nobody wants to buy demand-side flexibility. We have to package that in a way that is appealing to all the different people in that ecosystem and solve real pain points. In the case of the control contractor, they don't want to be changing schedules every day; [00:58:00] that's not a good economic value proposition for them, either.
So, they're happy to let us do that. But I'll just say, when you're thinking about the ecosystem, there's the building owner, there's the property manager, the facility manager, the tenants, the financier, and we really have to speak to all of them and their pain points and the things that they care about. That's how we have to speak to all the different people in the ecosystem — how all of us in the industry have to speak to those people.
James Dice: Especially as we scale down to the small building, right? Because like you said, you could have five people doing all those things. Then you could have one person doing all five.
Deepa Lounsbury: Exactly.
James Dice: Cool. All right. I love, I'm going to call it the simplicity quest that you [00:59:00] guys are on for smaller buildings. The white paper that would have come out last month unpacks the complexity stack for small buildings — these are all the ways in which controls are too complex right now — and then proposes a simplicity stack. We'll put the link to that in the show notes. People can check that out.
It sounds like you guys are already on the right track as far as, let's remove all the complexity we possibly can. I'd love to hear, as we close out, what you guys are excited about for this coming year.
John Powers: I'll just say, this is based on my earlier comment about what's changing in the industry, this is just a breakout year for us. 2022 is, we finally, at the end of 2021, are seeing the market moving in the direction that we've been working towards. So, timing seems just amazingly right at [01:00:00] the moment.
And I think that the greater attention of the market on these critical problems is dovetailing with our technical and staffing progress in a way that I was really delighted to see in this last quarter. So, I think it's a breakout year for load flexibility, and hopefully for us as well.
James Dice: Awesome. All right. How about you, Deepa?
Deepa Lounsbury: I, as John said, love that demand side flexibility is leaving the walls of the DOE and RMI and coming into the real world, and happy to be part of that wave. I'm also excited about, as I mentioned before, democratizing energy management.
I really think that every little building deserves the benefits of better control of their building, remote control. And the last thing I'm really excited [01:01:00] about is working with all the really passionate people in the space who are working on their own little wedge of the solution. We’re working on just one of them, but all of them are important to make our buildings more sustainable and healthier places for us to live and work in.
James Dice: That's a great mindset to close things out with.
Deepa Lounsbury: John did prepare two truths and a lie, if you’re still doing that.
James Dice: We don't typically do that when there's two. Because I wouldn't want to hear him from him and not from you. All right. Let's hear it.
John Powers: Well, I went back to my 30-year history in the business and went over some of the things that I've done, that I'm not going to say I'm proud of, but I think they're weird enough to stump the [01:02:00] audience.
All right. While he was mayor of Oakland, I once lectured Jerry Brown on the future of energy in California.
I led the team that put the first load shape on the internet.
I once went to Amory Lovins’s house with a bunch of coal plant operators.
James Dice: Wow. That was tough. Two of those are true. My gut is that the load shape one is false. It had the least amount of information.
John Powers: No, actually that one I believe to be true. It's hard to prove, but I'm pretty sure that's true. I did meet Jerry Brown, but believe me, if you've ever met Jerry Brown, he lectured me on the future of energy, not the other way around.
James Dice: As a non-California, and that would be a piece of information that I could have used that I didn't have.Thanks so much again, both of you, for coming on.
John Powers: Thanks for having us, James. This was really interesting. Good discussion. Looking forward to engaging with your audience.
James Dice: All right friends, thanks for listening to this episode of the Nexus Podcast. For more episodes like this and to get the weekly Nexus Newsletter, which, by the way, readers have said is the best way to stay up to date on the future of the smart buildings industry, please subscribe at nexuslabs.online. You can find the show notes for this conversation there as well. Have a great day.