Nicola Phillips is Latitude Media’s head of events.
The clean energy industry has been talking about the latent potential of distributed resources and demand-side management for two decades. The concept of the “grid edge” was coined in 2013. But during most of this period, load growth was flat, and utilities didn’t have an incentive to orchestrate distributed resources in lieu of building more or upgrading existing centralized generation.
This moment is different. As load growth surges and capacity constraints outrun sheer volume constraints, there is pressure for the first time to use these resources to their full potential, not just to manage peaks. It’s a disruption that raises a lot of important, and previously unexamined, questions about how this market scales.
That’s why Latitude Events is organizing Flex Summit, happening this October 14–15 in Austin. The two-day conference will map the path forward for grid flexibility and distributed capacity in the AI era.
There are five narrative trends in particular we are paying attention to.
1. Partnerships are driving scale and momentum.
Startups and major companies alike are forging deals both with each other and with utilities to take best advantage of DERs. A few examples in the last year alone:
- Tesla, Sunrun, and Renew Home announced a partnership in June to deliver a combined 16 gigawatts of flexible capacity to hyperscalers and utilities. The framework, dubbed “capacity-as-a-solution”, will create what the three residential players are characterizing as the largest VPP in the country — albeit one that spans many service territories.
- Voltus is making its own bet on the potential of aggregating demand-side resources. After unveiling its new offering — called “bring-your-own-capacity” — back in September in partnership with Cloverleaf Infrastructure, the VPP provider announced in June that it had secured its first BYOC customer: Google. Through the agreement, the hyperscaler will fund a three-year, 100-MW program to aggregate distributed resources in PJM.
- Last fall, Sparkfund filed its own first-of-a-kind proposal with Minnesota regulators for a distributed capacity procurement framework. Capacity*Connect will involve developing a network of distributed batteries of between one and three MW in partnership with Xcel Energy, totaling up to 200 MW. It puts the utility in the unique position of both owning and operating the distributed assets, which has come with controversy.
- In April, Octopus Energy and Lunar Energy teamed up to offer a new electricity plan to Texas residents. The plan offers a deeply discounted home battery with fixed energy pricing for three years to participating customers.
- Base Power, meanwhile, is making a play for many of those same Texas homeowners. A newly expanded partnership with Guadalupe Valley Electric Cooperative will provide 50 MW of capacity across GVEC’s territory. Base announced its first 2,000 customers outside of Texas in June — in ComEd territory in Illinois, right in the heart of PJM.
2. Asset management and operation is evolving as technology gets better and cheaper.
The declining cost curve of batteries might be the single most important development for the distributed capacity market. Battery costs have fallen 8% year-on-year since 2010, and more than 99% over the last three decades.
When batteries get that cheap, it becomes possible for aggregators and operators to buy and deploy them as grid assets, prompting them to develop new business models that accelerate the value flexibility can offer customers and the grid. Batteries are increasingly an entry point for VPPs.
For utilities, VPPs have long been stuck in one-off programs, which limit their scale, duration, and impact. But the technological and market shifts underway open the door for DERs to be integrated into ongoing resource planning, optimizing these resources for higher utilization, lower costs, and emissions reductions.
3. States have stepped up, largely driven by affordability initiatives.
In spite of their potential, there is no federal standard for distributed resources.
At a federal level, the implementation of FERC 2222 — the 2020 ruling requiring grid operators to let DERs compete in wholesale markets — has been stymied. Implementation from state to state has been lackluster. This has left regulation and policy largely in the hands of state governments.
Many of the recent state-led pushes have been driven by affordability concerns:
- In January, Governor Mikie Sherrill (D-N.J.) signed a pair of executive orders aimed at reducing utility bills and developing VPPs. The following month, the New Jersey Board of Public Utilities issued an RFI asking utilities to explore how they might use DERs to address affordability concerns alongside issues of grid congestion and reliability.
- Virginia became the testing ground for the utilization agenda with an historic bill that passed in April that aims to help the state “get more out of the grid we have.” For the first time, utilization metrics will be formally incorporated into the state’s planning processes. The Utilize Coalition — which boasts Google, Sparkfund, Renew Home, Tesla, and SPAN among its founding members — aims to replicate this model in other states.
- In April, California’s SB 1282, the Battery Integration and Grid Reliability Act, passed with a high margin of support. The bill enables vehicle-to-grid and vehicle-to-home technologies, helping lower electricity costs and strengthen grid reliability and resilience.
- In New York, SB S9500A (also known as the GREAT Act) is currently making its way through committee approval. The bill would establish a statewide VPP program, providing financial incentives to participating residents and businesses.
4. The changing demand stack is opening up financing opportunities.
As the value of distributed resources is better realized, it unlocks the opportunity to treat these resources as an investable asset class. Distributed assets carry risk that centralized generation doesn’t: aggregated cashflows, variable dispatch, multiple counterparties. More conservative capital has typically steered clear.
But as that capital stack evolves, so do the financing opportunities.
Distributed batteries are also starting to benefit from the same market trends that residential solar experienced a decade ago. Third-party ownership models are enabling battery developers to access institutional capital — and with it long-term cash flow — via asset-backed securities.
5. Our climate is changing — and our grid with it.
All of these market and technology shifts are converging at a time when our grids are outdated and overburdened. The changing climate has caused more and worse extreme weather events, which are pushing electrical infrastructure to the brink. Grid resilience, as a result, is becoming a growing focus for both utilities and the startups looking to serve them. (This is the focus of another of our conferences: the Power Resilience Forum.)
At the same time, trillions of dollars are being pumped into the AI race, and hyperscalers and large energy buyers are desperately seeking capacity to meet that demand. (Cue another Latitude Media event, Transition-AI; the most recent installment took place in April.) Some of that capacity is coming online in the form of large new gas plants or renewables projects, but some of it is also distributed.
Ultimately, we have many more questions than answers. Is there a market participation model for DERs that will win out? How big a role will utilities play? Can distributed capacity actually be a direct solve for the data center crunch? And who will ultimately bear the costs?
We’re meeting in Austin in October to start to answer those questions and more; join us.
