Distributed batteries are having a big moment. On one hand, companies like Base Power and Tesla have leaned into large residential batteries that export power back to the grid, but need permits and inspections to operate. At the same time, however, a new category has emerged: small, “plug-in” batteries that don’t require an electrician or complex installation, let alone a permit.
In this episode, Shayle talks to James McGinniss, co-founder and CEO of David Energy (yes, the biblical reference is intentional). David Energy is deploying these nimble, permissionless systems today for both residential customers and small businesses, and James argues that this approach could usher in a new era of massive scale and affordability for distributed energy resources.
Shayle and James cover topics like:
- Why James prefers the term “plug-in” over “permissionless,” and what falls into this bucket, from balcony solar to battery-enabled appliances
- The murky regulatory landscape around micro-DERs
- How plug-in systems can effectively drive soft costs (permitting, labor, customer acquisition) down to nearly zero
- How high energy prices in Germany drove the adoption of 4 million plug-in systems in just a few years
- The appeal for small businesses: how shaving just a few kilowatts of peak demand can generate significant savings for commercial customers in markets like New York
- Future form factors, including batteries integrated directly into cooktops, heat pumps, and other household appliances
Resources
- Catalyst: How Base Power plans to use its fresh $1B
- Catalyst: The new wave of DERs
- Catalyst: Is now the time for DERs to scale?
- Latitude Media: Can VPPs unlock grid capacity for data centers?
- Latitude Media: How do we turn small-scale, distributed energy into a multi-trillion dollar sector?
Credits: Hosted by Shayle Kann. Produced and edited by Max Savage Levenson. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor.
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Transcript
Shayle Kann: I am Shayle Kann, and this is Catalyst. Distributed batteries are starting to have a moment. There are lots of examples of this. The biggest recently is probably Base Power. You may remember I had Zach Dell, the founder of Base, on the pod a few months ago right in the wake of their billion-dollar fundraise to deploy residential batteries throughout the country. If you are talking about residential batteries, Base is at one end of a spectrum. Their whole play is oversizing the battery to use it for market participation.
But there is another end to the spectrum, which falls into the category of so-called “permissionless” DERs, or plug-in. It is a broader category that includes things like balcony solar, which is really popular in Germany. I would say the main thrust of the category, at least in the US, is very small batteries that you can usually plug into a standard 120-volt outlet. You can use them to provide backup for a large appliance, but also maybe to reduce peak charges on the bill, participate in demand response programs, or even aggregate enough to become a virtual power plant. They aren’t just for residential consumers; as you will soon hear, small businesses can also take advantage of them.
It is an interesting area with a somewhat unsettled policy and regulatory landscape, but there are things about it that are extraordinarily attractive, largely the potential for speed and low-cost installation. I’ve been spending time trying to make sense of this category, and the person who really understands it best is the one actually deploying these systems. James McGinniss is the founder and CEO of David Energy. They are deploying these plug-in systems today—you’ll hear a little bit about doing it at small businesses in New York—and they believe there is a real business there. James, welcome.
James McGinniss: Thanks Shayle, thanks for having me. I am super pumped to be here.
Shayle Kann: Excited to finally have you on and to talk about permissionless DERs. Start by telling me: what are permissionless DERs?
James McGinniss: It is funny because I think Duncan coined the term “permissionless” on our podcast a couple of years ago, and I’ve actually started using a different term. Permissionless is for the wonks; what I’ve been using is “plug-in” for customers and consumers because it’s more intuitive. I do think there is an important distinction between what those two terms mean. Permissionless to me is a very broad category of technologies across segments, verticals, and customer sizes that refers to not needing interconnection agreements. Really, anything that helps you get interconnected to the grid faster and puts less burden on the interconnection process falls into this bucket of permissionless things that I’m personally excited about.
Some particular examples are everything from Impulse Labs having a battery in a cooktop that is plug-in, to Electric Era doing battery-enabled DC fast charging where you wouldn’t need an interconnection upgrade. C&I off-grid may still need permits of some sort, but you don’t need an interconnection. I think permissionless, at the end of the day, speaks to the concept of being able to do things without heavy red tape or regulation, particularly when it comes to interconnection.
Shayle Kann: You are not submitting an interconnection request, but there is still an interconnect there.
James McGinniss: That is one of the most powerful concepts in this whole thing. The reason it can be cheaper and easier to do is that the 120-volt or the 240-volt outlet is a preexisting bi-directional interconnection point on the grid. You can actually push power into it, and it is safe to do so at the circuit level. When you look at traditional installs, we are basically doing open-heart surgery on the panel. You have to do all this work with an electrician to actually tap into the system. But there is already a point sitting there for you that interconnects into the home and the broader grid through that outlet.
Shayle Kann: I was trying to think what the extension of that analogy would be. If normal interconnection is open-heart surgery on the panel, is this like sticking a lollipop in your mouth or putting on a t-shirt?
James McGinniss: It’s like putting on a t-shirt. It is a function that you have available to you.
Shayle Kann: There is stuff that is not so relevant in the US currently, like balcony solar, which is big in Germany but not so much here. But I think mostly what I want to talk about is batteries. The category that I know you are spending a lot of time in is simply taking a battery and plugging it in behind the meter, maybe connecting it to an appliance inside a home or a business. It seems to have emerged as a category. Stuff like EcoFlow has been around for a while, but there is a little bit of a mini-explosion here, right?
James McGinniss: A hundred percent. I think of what you just described as “plug-in” because it is very intuitive. I actually think balcony solar is part of this and is very relevant in the US today. It is plug-in solar or plug-in batteries. That makes a lot more sense intuitively, and it is a subcategory of a broader permissionless space.
Shayle Kann: Let’s talk about plug-in. Before we get off the idea of permissionless, the question of permission and interconnection is actually a core question regarding the value proposition. What is the state of affairs if I want to plug one of these little batteries into my house? Is it murky? Is it defined?
James McGinniss: It is murky. I think what really matters is safety. There are plenty of UL-certified products that adhere to the NEC, saying you can plug this in and it is safe to do so. There may be jurisdictional authorities or fire departments that have an opinion on what should go in a given location, but at the electrical code level, this is already allowed under current guidance. A lot of the attention recently regarding regulations involves bills now introduced in about 24 to 30 states allowing you to actually export to the grid with these devices.
We think of that as an extremely important distinction. A lot of that regulation is focused on what constitutes an interconnection agreement. I understand the utility’s concern is that if you just start exporting and the grid goes down, line workers don’t know a line is energized. A lot of these rules focus on allowing anything up to typically 1.2 kilowatts to export from a meter. That ties back to the NEC because it gets into what a 20-amp circuit can handle. You could have 20 kilowatts of behind-the-meter capacity with a peak load of 50 kilowatts and never export, and that raises the question: do you need an interconnection agreement for that? It is all happening via the plug with UL-certified products.
Shayle Kann: It is murky, but it seems like in some cases there is stuff you can do now, and in other cases, there is stuff coming that you might be able to do, like exporting. Let’s talk about why this is interesting. How much of the value proposition for putting a sub-1.2 kilowatt battery in a home is resiliency versus savings on your electric bill?
James McGinniss: I think what is really exciting about permissionless and plug-in is that it is about affordability. That is what we saw in Germany; it was not about resilience. That said, I do think in these early applications, if you just plug a battery into a wall and then a device into that battery, you are not pushing power back into the circuit at all. You are just removing loads from the grid. That doesn’t seem to need an interconnection agreement. So, a big focus right now is on the appliance level, which has a resilience angle. You can put a battery connected to your fridge, and it will back that up.
However, the big story is what this does to install costs and accessibility. It is going to drive them much lower than we have seen in the past. For the first time, maybe our industry can really focus on affordability being the be-all and end-all in DERs, not resilience. Over the last decade, it has been a lot of resilience because it is a premium product. Permissionless speaks to these being super cheap, easy, and all about cost savings.
Shayle Kann: They are super cheap and easy because you don’t need design, engineers, or electricians. How much cheaper do you think it can be relative to a Powerwall?
James McGinniss: An easy rule of thumb is that soft costs are typically 50% or more of a residential install. Permissionless can effectively put that to zero. Three of the big components are permitting, labor, and Customer Acquisition Cost (CAC). Think about a “buy online” motion where a consumer goes to Amazon, buys one of these, and plugs it in themselves. That totally removes CAC and soft costs. Based on the regulation being worked on now, the permitting side can go away as well. So half of the cost in a residential install is basically gone.
Obviously, they are smaller systems, so maybe they are marginally more expensive per unit. Maybe there are some efficiencies in a Powerwall setup versus an all-in-one system. But that is a marginal difference. The real plummeting costs are still in hardware. If solar and storage continue to get cheaper, those soft costs aren’t going anywhere in traditional installs. If you remove that, it means that in permissionless, your floor is all the way down to just the hardware costs. I find that incredibly exciting.
Shayle Kann: The limitation is scale. Unless regulations allow you to do as much as you want, there are only so many savings. Folks buying home batteries now generally do it for one of two reasons: either they are in California with net metering rules that make it economically beneficial to discharge into the grid, or they are doing it for resiliency because the economics of saving money on your bill with a battery alone aren’t great yet. Is that true with the permissionless ones? You get a cheaper battery, but you can only shave a tiny bit of the peak because the battery is small.
James McGinniss: This gets into the market opportunities that it is opening up. Small is relative to the load you’re placing on it. 1.2 kilowatts and a one-kilowatt battery may be a decent amount of the load if you are a single-bedroom apartment renter. This is the balcony solar stuff. For them, it is extremely economical. That is opening up a TAM that no one is really addressing. The idea of a tenant buying one of these and having access is radically new.
Looking to Germany is very interesting because energy prices were going through the roof, which led to an acceleration in these systems. People were paying 40 or 50 cents a kilowatt-hour and said, “I’m just going to go buy my own solar or plug it in.” All that does is offset the 40 cents they would have had to pay. You don’t even need complicated VPP or net metering. There is a lot of damage these things can do to your bill in a good way behind the meter without needing compensation for exports. In the last four years, Germany has seen 4 million of these systems adopted, which is about the same size as traditional single-family installs. It is over a gigawatt of installed capacity deployed in four years.
Shayle Kann: That is basically the balcony solar stuff, right? Whereas what we are talking about here includes that but is often just the battery.
James McGinniss: Right. That gets into your point on demand charges or demand response programs. To that end, some of the work we’ve seen in New York City is about $50 per month per kilowatt shaved, which to a small business actually can mean a lot, especially if they own 10 locations. If you are doing a couple of kilowatts, that can be pretty meaningful. Or look at work like Standard Potential has done with HVAC units in apartments; you can enroll those in demand response programs even without demand charge management. In a commercial application, we are stacking the full value everyone usually thinks of—delivery charges, demand response, energy values—but in commercial, you are exposed to demand charges, whereas you are not in an apartment.
Shayle Kann: Are these typically multi-hour duration systems?
James McGinniss: They are often sized basically one-to-one, but that doesn’t mean you are using the full 1.2 kilowatts. If you are plugging into an appliance that is 400 watts, that is basically a three-hour battery. In Texas, demand charges are volumetric, and a lot of people add batteries to their solar systems to avoid consumption because they get billed for delivery. Storage alone isn’t going to do that, but there are things you can get out of storage alone, even in residential and even more so in commercial.
Shayle Kann: I am doing rough unit economic math in my head on the New York example. You are saying $50 a month in savings, so that is $600 a year. If the install cost of a residential battery is maybe $800 a kilowatt-hour today, and people think they can get it down to half of that, say $400, it pays itself back in less than a year on just that rough math. That is pretty compelling.
James McGinniss: What we’ve seen in the commercial application is installed costs of less than 10% of system costs. When you go to residential now, it is closer to zero because all those soft costs are gone. Whether it is a battery, solar plus storage, or solar alone in these plug-in applications, it is about affordability. If we can learn from Germany, as bills go up in the US, regardless of the rules, people are going to go on Amazon, buy this stuff, and start plugging it in. This is coming one way or another. It is a bottoms-up, economically driven motion.
Shayle Kann: How do you solve for Customer Acquisition Cost (CAC)? You don’t get to spread that cost across a large system. The only way to make this work is if CAC is effectively zero.
James McGinniss: Obviously there is a digital channel CAC. I think it is very different for a third party wanting to offer this to customers as a VPP versus an OEM that is just listing it on a website where it is actively bought by the consumer. I think more about the latter case. If someone is just going and buying it, compare that to door knocking; it is exponentially cheaper. Even if not zero, it is going to be a very small part of the overall cost for the customer.
Shayle Kann: You mentioned demand response participation. Generally, you need minimum scale to participate. Can a one-kilowatt load reduction participate on its own, or do you need to amass sufficient density?
James McGinniss: It can be both. An aggregator might need a minimum threshold of, say, 100 kilowatts, but at the device level, the minimum per meter might be 100 watts or 10 watts. It is different based on every jurisdiction. In NYISO, there may be a 10-kilowatt per meter rule. Other places like Massachusetts will have it by the device itself, enrolling directly without going through the meter. From a technical lens, you can go as small as you want. It is not hard to validate these things are doing what we think they are doing. The blocker would just be how the rules are set up for a given program.
Shayle Kann: I know you are doing this at businesses too. At the macro level, can you get enough of them deployed that it starts to matter? Can we get to hundreds of megawatts or gigawatts?
James McGinniss: Yes, 100%. I listened to the episode with Andy recently, and you made this great point that it is all about removing friction. If you think about affordability and scale, it ties back to friction. Given that Germany did a gigawatt in a handful of years in a much smaller country, it wouldn’t shock me to see tens of gigawatts deployed in the next five to ten years in the US. That would make a meaningful dent not just in the DER space, but in the capacity shortfall we are seeing with load growth.
Shayle Kann: Everyone in the DER world is chasing the data center issue. The utility needs more capacity to bring the data center online. Can you construct a third-party deal where somebody deploys a bunch of DERs and it counts as sufficient aggregated capacity to accelerate the interconnect? The minimum scale from a data center perspective is probably 100 megawatts, so you would have to deploy that at a hundred thousand premises.
James McGinniss: I think that example is interesting. My hope would be the data centers are building a lot of onsite capacity as well. But if you think about a lot of the big grids out there with 30 to 90 gigawatt peaks, you are getting into double-digit percentages of capacity potential from these resources. It is not some afterthought like 0.001% of the total peak load. I think we can see 10% or more, which is wild to think about in these small systems. In commercial applications, we see paths to do Powerwall size or multiple Powerwalls. When you narrow this to just apartments, it is a little limiting compared to what plug-in can do in general. You could see 5, 10, or 20 kW systems deployed through outlets.
Shayle Kann: From a product perspective, are these pretty commoditized? Is there much magic or improvements that can be made apart from driving down cell costs?
James McGinniss: A hundred percent. We are just seeing the early beginnings of form factors. There is going to be a lot of innovation in form factors around batteries. You can think of a battery in a cooktop, or how the battery is actually designed for a plug-in application, which is extremely nascent. A lot of the early plug-in stuff was using camping setups because that was what was available. Now we are looking at 120-volt versus 240-volt outlets, the right shape, placing them on a fridge, hanging them on a wall, or tucking them in a corner.
There is also the idea of it being an infrastructure-grade asset. Companies are focused on not building a camping battery, but building things to be networked at scale so you may be running gigawatt-sized VPPs with all these little plug-in batteries. A lot of the companies I mentioned have all been started in the last five years, so it is incredibly nascent from a product standpoint. I think even Carrier is doing a battery in a heat pump. There is going to be a lot of innovation.
Shayle Kann: That was all the time we had. It is super interesting to watch how this is going to play out. It is an underappreciated category, at least in the US. Thanks for helping me walk through it.
James McGinniss: Thank you, Shayle.
Shayle Kann: James McGinniss is the founder and CEO of David Energy. 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 Max Savage Levenson. Mixing and theme song by Sean Marquand. Stephen Lacey is our executive editor. I am Shayle Kann and this is Catalyst.
