Episode 173: Reducing Blackouts & Saving Electricity with OhmConnect's CEO, Cisco DeVries

Today's guest is Cisco DeVries, CEO of OhmConnect. Cisco explains what OhmConnect does, how their platform works, and what led him to serve as CEO. He also touches on the relationship between OhmConnect and CA utilities and barriers to large-scale deployment. Plus, we have a lively discussion on pricing carbon and other policies that would address climate change.

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What is OhmConnect? How did it come to be?

So OhmConnect is a seven-year-old technology company. Essentially, we are a newfangled energy company. The simplest way to describe what we do is that we help our customers save energy, and then we pay them for saving energy. And that seems a little bit bonkers to people, because not only do they save energy and their bills go down on their utility bills, but we're also paying them. And people can make hundreds of dollars a year. So it can be a meaningful amount of money. The whole purpose of OhmConnect is really to make the grid responsive. A bunch of years ago, seven years ago, we were really lucky that a couple of amazing people came together to start the company that had a background in energy trading and energy markets and a background in social gaming and building technology for the whole world.

What did working on climate at the local level mean at the Mayor's Office? How did that manifest in those days? And also, just from a timeframe standpoint, what days are we referring to?

So this was 2006, 2007, right in there. The problem with anything at the local level or at any governmental level, I should say, is that the first thing people want to do is study stuff. Let's do reports and studies. That's important, 'cause we need to learn a bunch of stuff, but it tends to take place instead of action. And one of the things that I and the mayor at the time, really wanted to do was like, "Yeah, okay. We're going to need to do some studying and researching and figuring out. But also, let's put some boots on the ground. Let's figure out something we can do."

The nice thing about local government is that the boots are on the ground, right? That's who actually fills the potholes. So you actually can do things that affect people in real life. And from there is where I got kind of focused on this notion that we should start financing solar and efficiency projects. People couldn't afford it, but you could save money and save energy if you did. But they're expensive upfront costs. And that became a problem I just couldn't shake when I was at the city.

We ended up creating what's called PACE financing, property assessed clean energy, started the first program there, and then realized that there was going to have to be some sort of public/private partnerships. So, I left the city after five years and ended up starting [Renew Financial]. Just trying to solve a problem one step after another. You don't really realize exactly all the steps. You're just like, "Well, now I need to solve the next problem," and then you get there and you're like, "Well, there's another one," and you just keep going.

I heard you on another show and you were saying that there's a federal law that's been on the books for a while that basically, the utilities are required to pay the same for energy usage averted as they would for new energy that comes from natural gas or another supplier, correct?

That's right. So a megawatt is a megawatt. And this has been true since 2011. Federal law has said, in the electricity market in this country that is under federal jurisdiction, which is most of the country, [the market] must accept a megawatt of energy reduction and pay for it the same way that it accepts and pays for a megawatt of production from a power plant, which means OhmConnect in California, despite the fact that we have no infrastructure and generate no power because we can reduce 150 megawatts of power at a time predictably and reliably, we are a power plant. We're a virtual power plant. We are rated as a power plant by the state regulators, and we are paid by the state energy markets exactly as if we burned natural gas and pumped electrons into the grid. That's why we can pay people. That's where the payment comes from. That's why we're paying you to do that, pay you as a person, or pay any customer to do it.

In general, what motivates customers to start using OhmConnect? Is it cost? Is it status? Is it perks? And also, how do you segment the different personas that you serve?

When OhmConnect started, the idea was all these people are going to want to do right by the climate. And the problem is it's not true. People say they want to do right by the climate, but they don't actually do it for that reason. They can feel guilty about it, but they're not doing it. And this is one of the hard things to learn as we go through this process of adjusting, is that, as much as people say that they'll be good, they think they're better than their neighbors, and they're not going to do more, at least not consistently. So what you have to do is connect the economic incentive, because if it's just like, "Hey, this is the right thing to do. Let me put this plug on your refrigerator," people won't do it. But if you say, "Look, your refrigerator should buy you a beer" people are like, "Oh, that's cool." 

And so what's happened is we've actually moved from trying to find the sort of first adopters environmentalist folks. And now, we've actually figured out that where we're actually having the most success, where our customers are coming from tend to be low income, moderate-income, middle-class families who could really use an extra hundred dollars. They can use an extra $200.

For most people, that is a meaningful amount of money for back-to-school shopping or a dentist appointment they didn't expect. And so they're doing it for economic reasons, but then they're proud of it because of the environmental benefit. And that's one of the reasons they tell their friends and family about it. So referrals turn out to be our biggest source of new users. And most of those come from people who are having a good experience. And yeah, they're making some money, but they're proud of it. It is the environmental benefit that is secondary. You have to start with the economics.

What do the utilities think of OhmConnect, and does it require a formal partnership with you and them individually in order to offer your services in the region that they support?

So we work with utilities, but not in the way people normally think. So we don't provide a program for utilities. We're not contracted with utilities to provide this service. We actually operate as an independent power plant. And what happens is we sell our megawatts to the utilities, like any other power plant. We have contracts with them on the supply side. So we say, "Hey, look." They're like, "We need 10 megawatts during the peak periods in July." We're like, "Great. I will sell you 10 megawatts peak periods in July for the summer months or the whole year or whatever it is." So they're buying it from us, but they're just like they were going to Calpine or Constellation or any other entity that owns generation and buying from them. So it's a really interesting flipping on its head, where literally they're buying power from their own customers during these peak periods instead of buying it from a traditional generator.

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