20 August 2023 |

Electrification from all angels


Virtual power plants are one niche that sits under the broader climate tech umbrella that gets a lot of hype. It’s easy to appreciate why. If you’re an electrification optimist, then the world you imagine out to 2050 is one where most households – in the U.S. at least – have:

  • Solar panels
  • An EV (or two) in the garage 
  • A demand response program they participate in (incentives to reduce energy consumption when grid demand is high)
  • Perhaps even an additional stationary battery

If you consider combining thousands or even millions of these homes into an organized and actively managed network, you suddenly have a lot of energy generation, storage, and flexibility. 

We’re a long way off from that, though. Virtual power plants are cropping up, for instance, in California and Vermont, often powered predominantly by Tesla Powerwalls. Typically these are networks of a few thousand homes where the utility or another stakeholder has paid to get stationary storage and solar into homes. But these are relatively small-scale experiments, and only ~300,000 homes in the U.S. have stationary storage right now. 

Electrification from all angels

Another challenge when it comes to scaling virtual power plants lies on the hardware side. 

Especially when it comes to the dream of using every American EV as a source of battery energy storage. This is something folks talk about often. But there’s one significant roadblock—neither most cars nor most of the U.S.’s charging infrastructure offer bidirectional charging. Said differently, power only flows into vehicles; there’s often no way to flow power back out from a car into a home, let alone the broader grid. 

The Ford F-150 Lightning, which offers vehicle-to-home charging capabilities (Shutterstock)

The list of EVs that currently offer bidirectional charging is relatively short. It includes cars like the Ford F-150 Lightning (vehicle-to-home) and the Nissan Leaf (vehicle-to-grid). 

And even these cars require special EV chargers to unlock their V2G or V2H capabilities. The reason is that bidirectional charging requires additional hardware. When cars charge, AC power from the grid is converted to DC power in the car’s battery. To flow the other way again, you need an inverter to switch from DC power back to AC power. Auto manufacturers aren’t adding inverters to cars (yet) because of the additional cost, weight, and manufacturing complexity this would introduce. 

As a result, it typically falls to charging equipment manufacturers to unlock bidirectional charging.

This week, dcbel, a Canadian home electrification company, announced $50M+ in Series B funding. That splashy round is a clue to the importance of new hardware to unlock V2G capabilities. One of dcbel’s new flagship products is the ‘dcbel r16 Home Energy Station,’ which offers bidirectional EV charging. dcbel claims its system is the most comprehensive home energy station in the world. In June, it became the first hardware provider to get licensed to sell a residential bidirectional EV charger in the U.S. 

Dcbel’s r16 home energy station (via dcbel)

dcbel’s Series B round positions it to pursue growth in U.S. markets where IRA incentives are ripe to accelerate growth. It will compete with the massively-well funded Lunar Energy, which is launching a stationary storage product in the U.S. soon, as well as the heavyweight incumbent, Tesla. 

That said, the bidirectional charger is a clear differentiator. It will be worthwhile to check in in 2024 and 2025 to see both a) stationary storage penetration in homes across the U.S. and b) what the market share of these different players looks like. Perhaps most importantly, I’ll keenly watch how technologies like dcbel’s facilitate the growth of VPPs. 

The net-net

25% of all cars sold in California last quarter were EVs. Close to 1 million households will likely install solar panels in the U.S. this year. Stationary storage should grow precipitously too, though there’s a bit of a ‘low denominator’ effect at play there. 

As these trends begin to make a (relatively small) dent in emissions, what should really make a difference is getting distributed energy systems to work in concert. That doesn’t just require software and machine learning to optimize generation, storage, and usage. It requires more links in the hardware chain, like bidirectional chargers, to harmonize everything. 

Increasingly, from my bird’s eye seat, I’m seeing investors recognize the value of hardware + software businesses in climate tech; the growth stage rounds we’re seeing flow over the past weeks almost exclusively include hardware. If you look at rounds >$20M from this week (covered below), it’s all hardware, a welcome shift from recent years and decades in venture capital.