Podcasts

Going inside utilities to scale DERs

Going inside utilities to scale DERs
(Photo by Joe DelNero /NREL)

Episode 81 of the Factor This! podcast features Sparkfund CEO Pier LaFarge, who is partnering with some of the largest utilities to deploy hundreds of DERs on their behalf. Subscribe wherever you get your podcasts.

The energy industry often pits utilities and clean energy advocates as enemies duking it out from opposite corners of the ring.

As the narrative goes, utilities drag innovation to preserve the status quo. They’re lobbying, some say, has tanked the value of distributed energy resources, leaving the residential solar and storage industry in turmoil.

But one company doesn’t bother with that framing, even if it may be true in some cases. Pier LaFarge, the CEO and founder of Sparkfund, believes utilities provide the only realistic vehicle for scaling DERs. They partner with utilities by taking on their brand identity to deploy DERs on their behalf by managing customer engagement, financing, development, and construction. The DERs are deployed based on the utility’s needs, whether to provide clean power generation, grid services, or defer system upgrades as a non-wires alternative.

It’s safe to say LaFarge is a bit of a clean energy outsider with his framing of utilities. But he may have a point.

Residential solar developers are struggling in part due to rising customer acquisition costs and other so-called “soft” expenses that make up the bulk of the bill. Those who wanted solar got it. Not to mention the equity concerns tied to the cost shift that typically benefits rich households. But Sparkfund doesn’t sell DERs— they invite utility customers to contribute to a more reliable grid, sometimes offering a lease payment as a kicker for hosting the system.

“(Investor-owned utilities) all of a sudden have this very clear advantage of being able to assess and experience the full marginal cost of transmission, distribution, and generation,” LaFarge said on the Factor This! podcast from Renewable Energy World. “They are more capable of enacting the doubling of the grid at the lowest marginal cost to society.”

Watch the full episode on YouTube

A decade ago, LaFarge was working in his first job out of college as a carbon accountant for ICF International advising large corporations. He realized these companies didn’t know how to execute sustainability plans effectively, and his guidance often led nowhere.

LaFarge realized companies needed more than a consultant. They needed someone to tell them what to do, and then do it. He launched Sparkfund in 2013 and extended that mission to utilities, as well.

“Something that’s always made Sparkfund different is a belief that the energy transition is going to be about infrastructure and less about customer choice and adoption,” LaFarge said. “When you take that mindset, it leads you to the idea that utilities have a foundational role of providing this enormous machine, a landscape-scale grid that determines everything.”

LaFarge doesn’t dispute that utilities are slow to change, because they have to be. The chartered monopoly is granted to ensure access to low-cost and reliable power for everyone. For generations, we took utilities for granted— as long as the lights turned on, nothing else mattered.

That dynamic has obviously changed due to the threats posed by climate change, including the increasing frequency of extreme weather. The lights still need to turn on, and stay on, but they need to also be powered by clean electrons. Decades of stagnant load growth have given way to power-thirsty data centers clamoring to connect to the grid, manufacturing returning to the U.S. in droves, and steady electric vehicle adoption.

Grid capacity will likely have to double or triple to meet the demands of the energy transition by 2050. It’s “the technical complexity of the space race with the economic scale of the U.S. highway system,” a frequent LaFarge characterization.

In the early days of renewable energy, clean alternatives could not deliver on the low-cost promise. So, LaFarge doesn’t fault utilities for hanging on the sidelines. Rushing to deploy emerging, untested, and expensive technology wouldn’t have been responsible. But that’s all changed as solar panels and batteries have become the cheapest and cleanest options for delivering reliable power.

“Until society arrives in a moment where those technologies align fully with the charter of a utility, they won’t take that action,” LaFarge said. “What’s exciting is I think we’re in that in that moment now.”

Courtesy: Georgia Power

There may be no better demonstration of that moment‘s arrival than Sparkfund’s first utility customer.

I can anticipate your first few guesses. Probably one of the California IOUs. New York’s Con Edison is pretty progressive on DERs. Com Ed in Chicago? Maybe.

But, no. It was Georgia Power — yes, that Georgia Power — that bought into Sparkfund’s mission before anyone else. The deal wasn’t propelled by an ambitious state climate policy. There’s no lucrative market opportunity for DERs in the Southeast. The utility was “curious” about how they could enhance their customer relationships.

Six years later, Sparkfund has deployed hundreds of DERs on behalf of Georgia Power and enabled “hundreds of millions of dollars” of development and construction work in their territory.

“When we first started talking to utilities about this (in 2015), they had no idea why this would need to be a part of their world,” LaFarge said. “Their load wasn’t growing. They had (demand-side management) programs. They were doing energy efficiency to the extent mandated by regulators. And when you said, ‘Hey, do you want to pay us to be an extension of your utility?’ Like, why?”

Partnerships with Xcel Energy, Shell, and Constellation have followed. In Southern California, the company deployed distributed energy resources at 1,200 as part of a utility program for wildfire resilience. LaFarge did not share the customer name, but Sparkfund partnered on a virtual power plant pilot project with SDG&E last year. In total, Sparkfund has deployed more than 3,000 projects in 48 states for utilities, creating over $400 million in energy systems value, the company claims.

Utilities are copycats. Few want to lead, but the rest will follow once the case has been made. And, in LaFarge’s view, it has.

“Utilities are sitting there waiting to be fast followers. They are going to drive DERs to gigawatt scale,” LaFarge said. “It’s ironic, but a lot of times that’s how history works.”