Shape Load Perfectly, Inject Energy Optimally with Sonnen's Blake Richetta

We’re on the verge of one of the biggest energy shifts in decades: the increasing use of demand side resources.

They’re often referred to as Virtual Power Plants, or VPPs. Add together thousands of rooftop solar installations and home batteries and you reach levels of power equal to medium sized power plants. They add power capacity, can provide key grid support in ancillary services, and give consumers uninterrupted power during outages of any kind.

Unfortunately, the budget bill passed yesterday by the Senate would make this much harder. (We talked about the bill and its implications but we recorded on June 23 before we knew how bad it would actually be.)

VPPs are already working in Texas, and started to gain momentum.

This week on the Energy Capital podcast, I spoke with Blake Richetta, CEO of Sonnen USA, and one of the most forward-thinking leaders in the clean energy world. We broke down what’s happening in Texas, why the rest of the country isn’t paying attention, and what’s at stake if we get this wrong.

The Big Idea: Solar Alone Isn’t Enough. Batteries Make It Work.

Blake lays it out clearly: The economics of rooftop solar by itself don’t work very well. You need a battery to make the math work.

At midday, solar power is often so abundant it’s not worth much on wholesale markets. But during the evening — when people are getting home, turning on ACs, cooking, watching TV and the sun is setting — prices rise.

A battery allows you to store cheap solar and sell it when it matters most.

As Blake put it, that allows you to shape load perfectly and inject energy optimally.

It’s not only a savings strategy; it’s also a boon to grid reliability.

And if thousands of homes do this together? You’ve got a power plant, one that’s already connected, decentralized and closest to load, and can scale to solve some really difficult locational problems on the grid.

What’s a VPP, and Why Are Texas Homeowners Getting One for No Upfront Cost?

This isn’t theoretical. This is live in Texas.

Sonnen and their Texas partner, SOLRITE, have already deployed over 3,000 residential batteries into a fully operational Virtual Power Plant. Here’s what makes it different:

* A zero-upfront-cost offer for homeowners

* 40 kWh, 9.6kW battery storage system: bigger than what most homes get

* A locked-in energy rate (~12¢/kWh with a small escalator), generally lower than market prices

* The ability to participate in grid services without even noticing

Texans get resilience and savings. The grid gets flexibility and stability. The model works.

Key Takeaways

* Batteries unlock the real value of solar: economically and operationally.

* Texans want energy independence and resilience to extreme weather events, and this model delivers it.

* Competitive markets enable this kind of innovation in Texas in a way other states can’t match.

* The grid gets stronger when consumers get stronger.

* The President and Congress are poised to significantly slow down what Texans are doing.

What Comes Next

Sonnen and SOLRITE are betting big on a Texas-led VPP revolution. But there’s still work to do:

* Unlocking distribution-level grid value (like locational value and deferred infrastructure costs)

* Expanding ADER pilot (aggregated distributed resource) programs

* Supporting U.S.-based battery manufacturing to reduce foreign dependency

* Ensuring that federal policy doesn’t kill the momentum just as it starts to scale.

Texans remember what it feels like when the power goes out. VPPs offer a smarter, cleaner, more resilient future, without needing to sacrifice freedom or reliability.

We finally have the technology.We finally have the market model.Now we need the political will to help Texans strengthen themselves and strengthen the grid, too.

Energy Capital is produced by ClarityForge Studios.

Timestamps

00:00 – Introduction03:00 – How Sonnen helped develop Virtual Power Plants and paired solar w/ storage06:00 – Using Texas’ competitive market to make VPPs available for $0 upfront cost12:00 – Consumers’ cost to get a VPP through a retailer and a “VPA”17:00 – How VPP economics work for Sonnen and its partners (hint: it’s the batteries)19:30 – The market is sending signals for “firming” right now22:00 – The resiliency benefits of solar & storage, advantages over generators26:00 – Grid following vs. grid forming batteries for backup power32:00 – ADER pilot in Texas, grid services from VPPs33:30 – Fundamental goal: shape load perfectly and inject energy optimally37:00 – The potential to monetize the distribution value of VPPs and ADERs41:00 – How Distribution System Planning using DERs could lower costs45:00 – Tapping into locational and temporal value of distributed energy51:00 – Why some utilities make the leap to VPPs and tap the value of DERs55:00 – How vertically integrated utilities in Texas could benefit from VPPs57:30 – Implications of federal budget bill on residential DERs (as of June 23)1:02:00 – How market value can, in time, replace tax credits1:03:30 – sonnen’s manufacturing in America to realize the tax credit adder sonnen’s manufacturing in America to realize the tax credit adder1:05:00 – Final thoughts on being a “disruptor” in the market

Resources

* Sonnen USA (home battery & VPP solutions)

* SOLRITE Texas Virtual Power Plant

* SOLRITE + sonnen VPA launch (January 2025)

* Utility Dive: Texas grid-optimizing VPP details

* Abundance + SOLRITE + sonnen VPP collaboration

* 25D Residential Clean Energy Tax Credit (IRS)

* SEIA: 25D Solar Tax Credit explainer

* Senate’s “One Big Beautiful Bill” tax credit updates

* Reuters: U.S. Senate adjusting rooftop solar line in budget bill

* AP News: Senate GOP solar & wind incentive cuts

* Reuters: Rooftop solar firms warn House bill would set back sector

* We’re Not Relying on the Texas Grid This Summer. Michael Hardy, Texas Monthly.

Transcript

Doug Lewin (00:07.928)

Virtual power plants have massive potential to make the grid more reliable and resilient and lower costs for consumers. But all that hangs in the balance. Welcome to the Energy Capital Podcast. I'm your host, Doug Lue, and my guest this week is Sonen CEO, Blake Richetta. Sonnen is a German manufacturer doing a large business in the United States, particularly in Utah, California, Texas.

Doug Lewin (00:36.114)

among their leading states. We recorded this on the 23rd. So just about a week ago and just at the very point that the Senate language was starting to come out, we were actually recording in the morning, so that language wasn't out yet. We were not able, obviously, to talk about the very latest of what is going in the Senate as this podcast is dropping. That said, it is highly relevant.

Doug Lewin (01:04.299)

because we did talk about the threat to the tax credits that help people get solar in storage at their homes. So when the next hurricane or ice storm or whatever it is hits or just a general power outage, which happened all the time, 95 % of them are on the distribution grid. And it's just because the wind blows really hard. A storm comes through, lightning hits a transformer, whatever it might be that knocks the grid out. People want to have solar and storage at their home.

Doug Lewin (01:32.91)

It's good for them to have that resilience. It's also good for the grid when those distributed assets can participate to support the grid. This is something Blake and I got into in great detail. I learned a ton, as you'll hear. A lot of times, asked questions about things I didn't understand. Learned a lot from Blake and really excited about the promise for virtual power plants, distributed energy resources, particularly in the Texas construct. But before we get into this, I think it's really important to say, given the moment that this

Doug Lewin (02:02.488)

podcast is gonna be dropping. All of that is in serious, serious doubt. And if you are somebody that was hoping to have solar and storage in your home or hoping that distributed solar and storage could make the grid stronger, all of that is very much in peril. I will be covering that at the newsletter and further on the podcast.gluon.com. But for now, enjoy this great conversation with Blake Riketa, CEO of Sonin US. Thank you.

Doug Lewin (02:32.814)

I'm Clay Kraketta. Welcome to the Energy Capital Podcast.

Blake Richetta (02:35.746)

Thank you, Doug. It's such a pleasure to be here.

Doug Lewin (02:38.786)

Great to have you. We've been obviously trying to get this together for a while. Really excited about the things you guys are doing at Sonnen, particularly in the Texas market, but let's just start at a high level. What is Sonnen for folks that don't know? Brief with this answer if you can, because I want to get into all kinds of different policy things, but it's important that people know what Sonnen is. So let's start there.

Blake Richetta (02:57.39)

Sure. Sonnen is a pretty special company. I joined Sonnen in 2016 when I left Tesla because of the incredible advancements that Sonnen had made in the European market and specifically in the German market, which is still really a world leading position in the virtual power plant based energy system. And we looked towards Sonnen even at Tesla with inspiration of how do they do what they do? How they achieve so much as such a

Blake Richetta (03:26.892)

at that point, small company that was really fast moving sort of startup. This was back in 2016. Sonnen started in 2008 with the innovation process of the first battery, 2010 launched the first product to the German market. And a very short summarized answer is that Sonnen, which in the German language is the Sonnen, which is the plural of sun, sort of like suns. There's no real English translation. Sunny battery, I don't know, was inspired by this idea that

Blake Richetta (03:56.854)

solar needed to have a greater purpose and that the intermittency of solar was a dead end for the German energy system, which was already being seen economically and scientifically. And then we needed to harness and harmonize solar, help it produce real value for the grid and serve real authentic grid services and also help balance the grid. that led to the concept of the virtual power plant, which Sonnen was the

Blake Richetta (04:25.528)

first in the world for residential batteries to ever launch back in 2012, which is like ancient history. mean, at Tesla, were still trying to figure out the Model S and figure out the Roadster back then. And so you fast forward to now and this whole idea of networking batteries and swarm dispatching them and locational clusters to perform grid services that replace power plant energy or infrastructure to really help energy transition truly be affected.

Blake Richetta (04:55.522)

has been the central purpose of Sonnen. And we have the largest virtual power plant in the European Union, 180,000 houses. And then we have some very substantial virtual power plants here in America with the biggest utility managed directly controlled VPP in the country here in Utah. Now almost 6,000 houses. we have smaller VPPs in California and Puerto Rico and other states. And as you pointed out, we have a big...

Blake Richetta (05:24.266)

launch happening in Texas with our VPP. Let's

Doug Lewin (05:27.19)

Let's

Doug Lewin (05:27.41)

just jump right in and talk about that. There's a lot of different directions we could go, but let's, let's talk about Texas. It's the energy capital podcast. How many homes do you have here? What's your aspiration? And like, obviously it's not a sales pitch, but we do want customers to kind of understand like, what does this mean for them? How would they actually get a hold of these? So yeah, let's, let's jump right into Texas. What's going on.

Blake Richetta (05:48.75)

Absolutely. Well, the Texas VVV is led by our partners. They are just an incredible organization. highly recommend you maybe looking at having the CEO of this company on because he is such a pioneer company called Solright. S O L R I T E. Regan George is the founder and innovator in chief there. And what Regan basically set out to do is use the deregulated Texan market structure to create a

Blake Richetta (06:17.624)

framework for the virtual power plant that looks very much like what has been achieved in Europe, because Germany's a totally deregulated energy market. The most close thing to it in America is indeed Texas. But he wanted to do it in an American way. And he wanted to do it in a way that enabled people to get solar and battery in their home and join the virtual power plant without paying anything at all upfront. And having

Blake Richetta (06:46.958)

substantial backup power, is another thing that the German market's not very concerned about, is backup power. And so having really a American VPP in the deregulated Texan market was the mission. And that's being achieved. So to your question, I believe there are well over 3000 houses now and they just launched. What was it? Not even real.

Doug Lewin (07:09.088)

January. I think the announcement was in January. Yeah.

Blake Richetta (07:13.288)

And moving so fast, they're raising substantial capital and they've used fundamental principles to be able to do a true and scalable virtual power plant in Texas that are, I think, principles that might've been, well, I don't know, maybe lost on some other companies and other types of entities, but they're relatively risky. But at the same time, these fundamentals, if pursued, allow you to have a full VPP with a full value stack.

Blake Richetta (07:42.882)

And that's what's SoulRite has basically launched. That's their innovation is financially and then market wise and all this stuff making work.

Doug Lewin (07:51.886)

So this is going to be just a heads up for the listeners. We are going to get a lot more into this in future months and dare I say years because the Texas competitive market is such a fascinating thing. So just a level set for folks that may not know. So about 75 % of ERCOT is in competition. Austin Energy and CPS in San Antonio are as well as the co-ops are exceptions to that.

Doug Lewin (08:16.694)

and the sort of nomenclature of the market, they're often referred to as NOEs or non-opt-in entities because they didn't opt into competition. But the rest of the state, and that would cover most of the DFW area, there's couple, you know, Denton and a few other sort of carve-outs there, but basically most of the DFW area, almost all the Houston area, Corpus Christi, Laredo, Lubbock just opted in in the last year or two, are all competitive. And that means that consumers can choose

Doug Lewin (08:43.617)

their own energy providers. That is pretty unique in the United States. There is customer choice, obviously, in a dozen or 15 other states, but that's kind of more limited to commercial customers, whereas here residential can actually choose. So a lot of people still have never chosen, like 20 years after they could have chosen, a lot of people are still with their legacy provider, which turns out to be Reliant or TXU. Those are kind of the legacies, but there's all this possibility in the market out there. And for years, I've been working in this space for 20 years. remember

Doug Lewin (09:13.396)

literally 15, 20 years ago at the Capitol, people talking about this is how we're going to get these new technologies out to market. It's the competition, right? It's the competitive market that's going to deliver that. And I think just in the last couple of years, we're really starting to see that happen. So when you talk about market fundamentals, you're talking about a company in this case, Solright, working with you to provide the technology and then marketing that to customers and saying,

Doug Lewin (09:39.626)

what's important to you. And for customers, know, it's a choice, right? Nobody's in Texas required to do this. But if they decide that they don't want to have to pay upfront for solar and storage, but they're willing to enter into a longer term deal. And maybe this is where I should have a conversation with Mr. George. I think you said his name is, but as much as you're comfortable speaking about that, I'd love to, I think people are really curious about this and want to know. So maybe if you could talk about that a little bit more, like what does that look like from a customer side?

Blake Richetta (10:06.86)

Yeah, sure. Absolutely. And just to cap off on what you had said, caps on what you had said earlier, the market fundamentals, you're right. The competition, the free enterprise that is enabled in Texas has really inspired a lot of this. Ironically, you can look at Utah where we have this enormous VPP success as well. It's interesting. It's a vertically integrated old school energy market, Rocky Mountain power, exactly. And now all of Pacific corps, we're in four states now.

Doug Lewin (10:29.292)

Is it Rocky Mountain Power?

Blake Richetta (10:36.844)

And it's interesting that was a success that was based on certain fundamentals and also had, let's call it some conservative, ethos, color to it. And of course we also had the support of the quote unquote liberal because we always do when it comes to renewable energy, but we have this other side support that I think is really special. It's a growing story now, but the virtual PowerPoint being a technology and infrastructure that

Blake Richetta (11:04.706)

both sides of the aisle can get behind, which is kind cool. And now we're seeing that in Texas, but ironically, Utah sees themselves as very conservative and they arrived at this vertically integrated model is good and that's conservative to them. Texas also conservative, but sees that free market classical liberal conservatives, conservative view as the way the Texan system wanted to progress, of course, with free enterprise.

Doug Lewin (11:31.906)

More of a Milton Friedman kind of a conservatism.

Blake Richetta (11:35.498)

Yes, exactly. So I think there's a funny somewhat of a connection here. It's interesting is that once again, here's a market that's somewhat conservative, but the VPP ends up being something that seems to really resonate well. And I think will resonate with consumers and regulators and retail electric providers. And we get both sides of the aisle, if you will, excited about it. So that's just a foundational statement for me as it pertains to the consumer. Yeah. So in Texas, the consumer can choose.

Blake Richetta (12:03.97)

course, whatever retail electric provider they like, like you said, in the deregulated areas of the Texas energy system in ERCOT. And if they choose to go with Solright, Solright will give them options of retail electric providers that support the virtual power plant. So then they still have the power to choose a retail electric provider, but they have to choose a retail electric provider that actually supports the virtual power point concept. If they don't, then there's no way it

Doug Lewin (12:31.756)

So Solrite itself is not an REP. are not a retail electric provider. They're partnering with

Blake Richetta (12:36.502)

No, and that's a pretty good separation. think they are financing. They own the solar and the batteries. So look, it's Urquhart stuff that's maybe not great there for retail electric provider. And they are selling it. Well, they're not selling the equipment. They're selling these agreements, these power purchase agreements, which they call a virtual power plant power purchase agreement, which is way too many P's. So they shorten it to VPA, world's first VPA. And so

Blake Richetta (13:04.306)

They're providing the financing, they're doing the installation, they own the assets and they provide this agreement with the homeowner regarding these assets. And then as far as what the homeowner is paying for with Sol-Rite, they're paying a monthly fee for a fixed amount of solar production from the solar array on the roof, which is either coincidentally when it's produced, also consumed in the home, or it's time shifted and harnessed in my battery and then harmonized with the load later in the day or

Blake Richetta (13:33.974)

If it is above the solar production that the homeowner purchased, then that solar can actually be activated within the Ricat market after it's been harnessed in the battery. anyway, so to go back to your basic question. So what's happening here is the customer is signing up for an agreement with Solrite. Solrite is paying for the installation and the equipment of solar and battery in their home. Unprecedented amount of batteries, 40 kilowatt hours average of energy reservoir for

Blake Richetta (14:02.082)

backup power, is way, way, way higher than the Texan average and a decent size solar array. The customer pays monthly for the solar production and they get all the backup power effectively for free. And so this is really cool. It's a really neat option. And I'll finish with this. The rate that the customer is paying for the solar production from the Solar Right Solar Array is basically around

Blake Richetta (14:30.67)

retail market rate or even a little lower. And why that's substantial is that most of the solar PPAs in Texas today, the rate that you pay for solar production is actually quite a bit higher. So you're seeing 19 cents, 20 cents, 21 cents for PPAs.

Doug Lewin (14:46.99)

Are you talking about like for residential customer? It's 19 cents. Okay. Okay. Right. Cause as I saying, the commercial market, we're looking at like $40, $50 a megawatt hour would to be four or five cents, but for customers, it's much higher for, for residential customers. No, no, no. front of the meter, utility scale. Huge distinction. Just wanted to make sure we were clear on that.

Blake Richetta (15:00.598)

You mean in front of the no-

Blake Richetta (15:03.753)

Right.

Blake Richetta (15:08.522)

not correct to say four cents. Right. Not four cents for commercial behind the meter, brother. But yeah, for in front of the meter solar farm utility scale, you're obviously you would see a 45 cents for commercial behind the meter. I don't know the exact number quite a bit higher. Residential behind the meter would be the highest. Right. So 19 or 20 cents. mean, anyway, so if commercial residential Texans paying whatever 13, 14, 15 cents or something for their electricity.

Doug Lewin (15:24.664)

Yes.

Blake Richetta (15:37.058)

for sole right to charge 12 is really good. mean, it's just below the, and it's way, way, way below the other residential PPA competitors, if you will. So the customer is signing an agreement that they're going to allow all this stuff to be put in their house. They're going to pay this amount and they're going to use a retail electric provider that supports the virtual power plant. If they don't want to use a retail electric provider that supports the VPP sometime in the future, they can completely

Blake Richetta (16:06.946)

go away from it. But what happens then is there's a new fee that Solrite has to charge them because they're no longer able. Solrite's not able to monetize the battery anymore.

Doug Lewin (16:16.194)

So if they were to leave, there is like sort of like an exit fee or something like that. But as long as they stay with them, that 12 cents is guaranteed over the 25 years. Wow. Okay. So that's, mean, that's,

Blake Richetta (16:26.99)

Oh,

Blake Richetta (16:27.25)

by the way, there's a little tiny escalator, it's like, gosh, you have to ask for reading. It's like 2 % or 1.5%.

Doug Lewin (16:33.804)

No, no, that's fine. I will interview him at some point and we can find more. And even before we put this out, Blake, we can get to Regan and just say, give us the information. We'll post it on the show notes. So people have all the, know, obviously anything we say here, here's where like I'm the son of a lawyer. Read the terms and conditions that we'll post. But I want people to have as much specific information, but also kind of this general understanding of what's the size and shape of the offer. So that's what we're trying to do here for the particulars. can read the T's and C's. So.

Doug Lewin (17:03.062)

I would imagine the solar component is going to vary house to house and solar is very valuable, but really like the secret sauce here is the batteries. And I'm talking to you with Sonin, so like this is kind of teeing this up for you, but you talked a minute ago about like the shifting factor there, right? You can actually store up that solar. So that's where when you talk about like 19 cents, right? In the middle of the day in Texas,

Doug Lewin (17:29.848)

We're recording on a very hot summer day. Peak's going to be somewhere around 80 gigawatts. The price is going to be like two or three cents on the wholesale markets. It's very hard to make that work, but if you can shift, if you can store up that solar power and then deploy it back to the grid in a battery, sometimes even at the net peak when the sun is down and demand's still high, sometimes we're still in a four or five cents. But some days in Texas, know, cap is $5,000 a megawatt hour. There's ancillary service market. So there's lots of different ways.

Doug Lewin (17:59.832)

kind of monetize that. You said there's a 40 kWh battery. You're actually doing two batteries that are 4.8 kW, roughly 5 kW, 20 kWh each. So you're putting a 10 kW, 40 kWh system on every house, pretty much standard.

Blake Richetta (18:16.81)

And 9.6 kilowatts, 40 kilowatt hours. Yeah. And that's exactly right. And I think the fundamental here is that solar by itself, especially at the end of the distribution system adjacent to the customer's load behind the meter can be good, as you said, but it's also intermittent and relatively can be volatile, variable energy generation. And it depends on what market you look at to see the extent of that. But certainly in the German market and the California market, we've seen it pretty

Blake Richetta (18:47.79)

And, it's been very substantial what renewable energy has done, both positive but also negative to managing the energy system. So this idea of, yeah, if I'm just pumping solar into the grid at noon because it's sunny, the Texas energy system will punish me for that unless I have this solar buyback program with a retail electric provider that gives me this high rate. The problem with that is the retail electric provider is somehow

Blake Richetta (19:16.034)

subsidizing this whole thing because like you just said if the retail electric provider is buying electricity from you just because you're Pumping solar into the grid because it's sunny and they're buying it from you at 14 cents a kilowatt hour but the the market rate at that time is before sense Even if they're balancing their book it makes no sense to them But they do it anyway because they're trying to get a customer and that's all fine and good But eventually that hits a wall no different than that meter in Dinnie, California

Doug Lewin (19:43.01)

I

Doug Lewin (19:43.1)

mean, honestly, Blake, we've already hit that wall. Like really nobody's offering net metering because of what you just described. Like it just doesn't make sense financially. So we just don't see. And this is one of my like biggest critiques with like people that are pushing some of these like firming proposals and stuff like that. It's like what you just described, the market is sending the signal for firming. The signal from the market is quite clear. Like if you don't have batteries, the economics of solar just don't work that well. So put a battery with it.

Blake Richetta (20:08.312)

Perfectly said. So the idea exactly how you said is basically, look, what we want to do is harness that solar. We want to harmonize it with grid operation. And of course, what that means is we're going to stop it from flowing into the grid unfettered. That's step one. And by the way, that goes to a little bit more of a modern European look to the design, but Americanizing it. So in the European Union, we see way bigger batteries and smaller solar arrays now. And now we're seeing that in California as well.

Doug Lewin (20:33.227)

Interesting.

Blake Richetta (20:36.334)

And it's X is what you see with solar, it's the same thing. So instead of crazy 120 % offset kind of thing that you see for years and years in America. Instead, it's no, it's a 70 % offset and then a huge battery. And this is very logical because then I can definitely catch all the excess solar and drink it in the battery and hold it and then and bottle it up and then use it. And to your point, I might use it against a load later in the day or I might inject into the grid. And you know what? If there's not enough solar.

Blake Richetta (21:06.52)

to really perfect that load shape. Unlike old school solar where there was this kind of weird myth that, you just pump all the solar to the grid. Then later in the day, you pull the same solar back out. of course, it's a physics perspective. That's not how that works from an electrons perspective. at any rate, so what we're doing is saying, of course, no, you're either going to harness that solar and offset your load later. If it makes more sense, the Texas energy system based on price signals, you're going to inject it. You might withdraw from the grid later, but hey,

Blake Richetta (21:36.128)

If solar's not working that well for a day because it's cloudy, you might need to withdraw from the grid during a super off peak period and use those electrons against load. And this is a very, very smart thing for the Texas energy system, but something that people don't do generally in the United States for many reasons, but now we will be doing. yeah, that's the fundamental that just to compliment what you said.

Doug Lewin (22:02.284)

I want to talk about another component of this. So there's obviously the market value, which we could talk about for a lot longer, but I want to talk a little bit about the resilience value. think I heard you say that like that doesn't have as big a value maybe in Germany or Europe. Maybe it's just cause there's like not hurricanes there and stuff like that. But like, I'm curious what you're seeing in Texas in the market. And we'll put a link in the show notes. Texas monthly had an article from one of the writers, I it was Michael Hardy, who

Doug Lewin (22:31.81)

had bought a generator in his first home in Houston, and he described the experience of getting a generator. And I was sort of reading that and cringing a little bit because I'm like, really should have gotten solar storage because the generator, you're probably not going to use it day in, day out. Like you're going to use it only in an emergency. With solar and storage, you've got it for the emergency, but you're using it day in, day out to lower the cost of power and to...

Doug Lewin (22:57.73)

help the grid, if that's something you care about. And this is where I really think like, regardless of ideology, temperament, like there is something in this for everybody. If you care about the grid, it's great for the grid. You don't care about the grid, you only care about your house. It's great for that too. Like it really, you anyway, so let's talk a little bit about the resilience factor. And if you're seeing that in some of the discussions, them, the kitchen table discussions that you and your company are having with customers in Texas.

Blake Richetta (23:28.108)

Yeah, I two points because you brought up two great points. One resiliency and then real quick before, you're right. What the customer connects to. So the beautiful thing about the Solrite model is that you're not coming out of pocket $75,000 for an installation of solar and batteries. And so it's a very different mental process where you hear, Hey, we're not going to charge anything upfront. And it's just a monthly fee that is for the kilowatt hours produced from the solar and then you get the backup power for free. And you're right. People think, well, that's really nice financially.

Blake Richetta (23:57.806)

It's also good backup power wise. And then what you do is you, if you're a salesperson, you authentically lay around the other cool parts. say, look, this is actually solar. That's got a much bigger purpose than just regular solar. Can you believe you get a little power plant in your house? And it's actually doing the same kind of thing as a power plant. And if you do care about fighting climate change, this is a better way to do it. And you might say, homeowners are already going to check out at that point. Actually the research that we have shows that's not the case.

Blake Richetta (24:24.814)

Most people that we've interviewed a bunch of techs at Homework, which was fun. They kind of get into it when they know they're getting these other key benefits as a foundations. They know they're getting low cost solar and backup power. And when you add on what you're doing in a greater level, people think that's neat. Oh, that's cool. That's really neat. They had to brag into their customer. No, sorry, the customers, their friends, something like this. So anyway, we can go back to that stuff later. But as far as the resiliency thing, I

Doug Lewin (24:51.736)

love

Doug Lewin (24:51.936)

that, by the way, and we should dive further into that. But yeah, go on with resiliency. We'll come back to customers. It's really cool. Yeah.

Blake Richetta (24:57.47)

It's

Blake Richetta (24:57.68)

very different than spending 75,000 something. And you're like, I'm not spending 75,000 to save Texas's energy grid. What does that even mean? Right. But it's different when you don't pay it. So resiliency. Yeah. This is really interesting, Doug, because I came from Tesla over to Sonnen and we were in awe, of course, of this idea of swarm dispatching for locational value, substation value, non-bars alternative, all these cool things that we were doing at Sonnen was doing in Germany. And then I look closer to the products and like, ooh.

Blake Richetta (25:28.494)

Over 98 % of the batteries in Germany didn't even have backup power at all. There's not even a grid forming inverter. I'm like, No, batteries in Germany. Batteries in Germany.

Doug Lewin (25:35.47)

98 % of the solar

Doug Lewin (25:40.814)

98 % of the batteries in Germany didn't have backup.

Blake Richetta (25:44.802)

Yeah, can't do back up at all. Okay.

Doug Lewin (25:47.37)

they just can't provide it. they were literally just for the homeowner at their house and couldn't do anything for the grid.

Blake Richetta (25:54.274)

Nope, not at all. No backup power. If the power went out, the solar and the battery would just turn off, which is how most... No backup power.

Doug Lewin (26:04.49)

There wasn't like an IEEE 1547 or something like it wasn't configured to island. So it would just shut down when the grid went down.

Blake Richetta (26:12.942)

That's, well, that's part of it. 1547 would be interesting, but really the fundamentals are, let's start with the fundamental, which is, do you care about having backup power or not? If the answer is no, the way I design an inverter is as grid following only and not grid form. So when you go into nano grid mode, you have to grid form and 1547 aside, I can do nano grid without 1547, but I could just be a grid forming inverter. But if I'm a grid following inverter and I cannot change the grid forming, which by the way is a much cheaper way to build an inverter. So you save a lot of money.

Doug Lewin (26:25.73)

I see.

Blake Richetta (26:42.23)

a lot of money by building an inverter that doesn't grid form and doesn't form a nano grid. So first of all, there's this huge cost in all American energy storage systems and most Americans don't even know could be taken out completely if they were in Europe. And you might say, why does anybody want a battery if it doesn't do backup power? Well, because the virtual power plant was the whole reason. The self-consumption first, the harnessing the solar and using it properly because in Germany, basically, if you're injecting solar, say this

Blake Richetta (27:10.23)

legislation called the Anoyabata and the Ganges, which is like their version of net metering. And effectively by about 2015, if you're injecting solar into the grid, most of Germany, you're not getting anything. You can get far. So the battery market became an essential and very important part of the business, but it wasn't about backup power. was about, my gosh, I need a battery or my solar's useless. And it's going to be great. I'll get, you know, finance by monetization.

Blake Richetta (27:40.334)

And that only changed a little bit when the Russians invaded Ukraine. And then you saw some Germans wanted to have some backup power because they thought there could be a war. then that kind of went away now too. So it up to like 10 % of the market. Now it's stacked down to two or 3%. So why I tell you all this is that Sonin's this awesome leader in virtual power plant. We're so excited to Americanize that. But we had no experience in backup power, barely at all.

Blake Richetta (28:07.466)

American energy storage companies are the polar opposite. They're all backup power. That's the only thing they think they're supposed to do. And they have no idea how to do a genuine virtual power plant. And so we're very fortunate. There were years ahead still of even the closest American company on this VPP thing, but we definitely had to play catch up on the backup power thing. So to your point, do people care about backup power in America? And in Texas, the answer is, yeah. And we had to build

Blake Richetta (28:37.506)

grid forming inverters and backup power capable products. And also German loads are much smaller than American. So you had to make a more robust and beefy. So long story long, we have achieved that backup power need for Americans to feel good about having backup power and the VPP. And that is the Sonin USA unique solution.

Doug Lewin (29:03.214)

Okay, love this. All right, and thank you for indulging my dumb questions, but I feel like that sometimes the dumb questions are the best ones. So I needed to understand what you were saying there. It's actually incredibly important, right? Because this is a big issue at ERCOT right now. And I'm sure, I hope that what he requisited, Dan Woodford and the whole crew at ERCOT operations, Pablo Vegas, everybody over there listens to this because this is a big issue. There are NPRRs right now around grid following versus grid forming.

Doug Lewin (29:31.724)

You're you're saying is on the distributed side, at least through your model, and I'd imagine most of the companies that are working on distributed, for the reason you just said, because resilience is so important to customers, are going to be doing grid forming. That means we could be getting a whole lot of assets distributed all around the grid that they can potentially, they can potentially use. I'm putting that in air quotes for people just listening, because at the end of the day, and this is again, the beauty of the competitive market,

Doug Lewin (29:59.358)

Unlike in a place where you have a vertically integrated utility that's gonna control that, unlike in a place where it's going through the grid operator to do it, it's actually going through the retail electric provider and their partners, close to the customer, making sure it's a good customer experience. Because if it's not a good customer experience, you got nothing, right? Like your business is dead in the water. But still, these grid forming assets all over the grid to help deal with problems.

Doug Lewin (30:25.76)

like what happened in Spain in April. If you had a lot of grid forming inverter batteries on the grid, that would have made a big difference here. We're about to have them. Okay. Yeah. Yeah. Anything else you want to say about that or we can...

Blake Richetta (30:38.936)

No,

Blake Richetta (30:39.176)

I didn't mean to catch up. Look, our fleet in Spain, like almost all batteries in Spain don't do backup power, so that wasn't very helpful. But if you had backup power, then that would have been great. Anyway, I think the American solution of both VPP, smart battery that works with the grid and a battery that can actually provide backup power is a great optimization.

Doug Lewin (30:59.896)

So you get the best of both worlds. got that resiliency benefit for the home. Also, because it's grid forming, it's actually, its benefit to the grid is much, much greater as we were just describing.

Blake Richetta (31:11.054)

Yeah, I mean, it's the biggest benefit for the grid forming local device is that you're able to have backup power for a building. You're able to basically close off a little energy system and become your own little grid. And that's the biggest value that's different. But yeah, as far as the virtual PowerPoint grid services, it adds a little bit, but not a ton. It could in the future add more. But yeah, so anyway, the point is that Americans who are always benchmarking Generac and

Blake Richetta (31:40.428)

backup generators can get a battery that actually does this whole virtual power plant magic and also does the backup power. that's how to know.

Doug Lewin (31:50.03)

It's pretty incredible. It's pretty amazing. So let's talk. There's a couple different things I want to go into. I want to go to the sort of transmission system operator side in the ADR task force. And then I want to come back to the distribution side and do a little compare and contrast because Europe has DSOs, distribution system operators. We don't have those in America. I want to get into all that. let's... Someday maybe. We were just talking about grid forming and the potentials. So the biggest benefit you said is the...

Doug Lewin (32:18.86)

backup power on site and that's a huge benefit. But isn't that where the ADR pilot in Texas, the aggregated distributed energy resource pilot is heading that these distributed resources actually can provide benefit to the grid in the form of ancillary services?

Blake Richetta (32:35.726)

Yeah, and that has nothing to do with the grid forming inverter So it's just a little bit different on the nomenclature so you can do I mean in Germany we do nine grid services is the most advanced residential battery-based VPP on the planet by far and most of those batteries are not grid form, so that's now as it pertains to ADR and what Adder is doing and the opportunity it's providing I think it's a terrific program I think people like Arushi Sharma Frank are really

Doug Lewin (32:47.51)

Got it.

Blake Richetta (33:04.534)

were terrific in the way that they drove this and all the many people in Texas that drove this. But I I have a relationship with her and I know she's, I feel like she's just brilliant. And I think Adder is ADER is really a good overall program. And you're right. It's trying to drive towards a deeper value stack for batteries. And I think the way that Solrite has launched this, which is kind of neat, is it takes the fundamental first of shape load perfectly. And

Blake Richetta (33:34.188)

by doing so, and by the way, I'll add to that, also inject energy optimally. Just by doing that, you increase the profitability of the retail electric provider quite a bit. And if you have a fundamental concept that says, the profitability of the retail electric provider went from X to Y because of the battery, well, you don't need any, because Texas is so well-built in the deregulated structure, you actually don't,

Blake Richetta (34:03.982)

don't say this too passionately, but you don't need anything else. You don't even need ADR to be able to say, okay, well, what was the extraordinary profit created by this daily cycle? Well, that extraordinary profit basically needs to be split with the owner of the battery, in this case, Solrite. And what that does is it allows Solrite to spend money on all this stuff. They're taking a risk, a big risk. But if they believe in it and they really believe in the value,

Blake Richetta (34:31.575)

They can raise billions like they've already raised over a billion for the consumers of Texas to have all this equipment. And they're betting on the fact that the extraordinary value brought by the battery when they split the profit with the retail electric provider will make it make sense because what they're getting from the homeowner doesn't do it. So basically the capstone it the magic here is that without even having ADR, you have this powerful model that just lies on the foundation of our cot system.

Blake Richetta (35:02.21)

And then if you add on, if you're going to add on non-spinning reserves and frequency response, woo, that's just terrific. I'd be very excited at all the different grid services that we could add on. And a much more, let's call it, even if you take a look at locational value and you said, Hey, with 30,000 batteries in this area of west of the DFW area or whatever, making that up as far as a load pocket, that actually has X amount of value, both

Blake Richetta (35:30.22)

mitigating, peaking power plants and mitigating infrastructure. Wow. That would be a lot more monetization. I think that's the direction ADR would go and where Texas in general is going. So capstone is that the fundamental statement for me or overall statement is by using the basics, we make this work and it's very scalable. You do need a pioneering financier that bets on all this, which is very hard to find. Nobody wants to bet on this.

Blake Richetta (35:59.564)

And then the final piece is at a retail electric provider that wants to do it. And then the final piece is that on top of that, we can add all these other things to actually get the full value of the battery.

Doug Lewin (36:11.65)

Yeah, so that ends up being kind of gravy on the potatoes, ricing on the cake. The cake itself is the market fundamentals of sort of shifting that power around and injecting the power into the grid when it's needed. Then you can potentially monetize ancillary services for increased revenue and things like that. So there's still though, the question of the distri