Distributed energy resources are everywhere, but connecting buyers and sellers is a coordination nightmare; I talk with James Johnston, whose company Piclo is tackling that problem head-on. He explains how they’ve built a transparent, open marketplace where utilities and other buyers can procure flexibility as a simple commodity from a wide range of sellers. We discuss how this model is already working in the UK and how it could allow data centers to pay for faster grid access in the US — potentially unlocking billions in private investment for VPPs.
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David Roberts
Hello everyone, this is Volts for November 12, 2025, “How to make a market for distributed energy flexibility.” I’m your host, David Roberts. The great thing about distributed energy is that there is a lot of it. It’s not just solar panels, batteries, and EVs, furnaces, hot water heaters, HVAC systems, stoves — any small-scale energy use can theoretically be managed to the grid’s benefit and thus counts as distributed energy. If you add all that up, the amounts are gargantuan.
The problem with distributed energy is that it is distributed. Controlling my EV charger doesn’t do the grid much good. To have any real impact, someone needs to control tens of thousands of EV chargers. Who signs up those tens of thousands of EV charger owners to this program? Who pays them? Who coordinates their chargers? Who determines where and when demand shifting should take place? How is its value determined?
Scattered and inconsistent answers to these questions have limited the growth of the distributed energy market and the grid flexibility it could bring. And lord knows we need flexible grid capacity these days.
A company called Piclo is taking aim directly at this coordination problem. Working to reduce frictions between what they call “flex sellers” and “flex buyers.” It sets up distributed energy resource markets — DER markets — where those with DERs to offer, from individuals to businesses to aggregators, can sign up, get vetted and qualified, and make deals directly with DER buyers such as utilities, system operators, and data centers. The aim is to standardize basic market parameters to enable easier participation and rapid scale-up.
Piclo started off in the UK in 2013, gained real momentum and geographic reach in the 2020s. It launched a nationwide market in the US in March of this year and by September had market participants including more than 350 utility buyers across all 50 states. Today I’m going to talk with co-founder and CEO James Johnston about how the market works, who can participate, and what sort of scale might be possible given enough market standardization.
With no further ado, James Johnston, welcome to Volts. Thank you so much for coming.
James Johnston
Thank you for having me. Great to be here.
David Roberts
I’m super geeked about this, James. I was telling a friend the other day, there have been a few times in my career, not a ton of times, when someone has told me the two-line elevator pitch for what they’re doing and I immediately think, “Ah, yes, of course someone’s doing this. Why was no one doing this already? This is an idea whose time has come.” I definitely thought that when we talked briefly in Berkeley last year. You said, “I’m setting up a market for distributed energy.” Immediately I thought, “Yes, yes. Why has no one done this?”
Before we jump into that, talk a little bit about the problem you’re trying to solve with Piclo. What is the problem with current DER markets, utility markets? What problems are you solving with Piclo?
James Johnston
That’s a great question. The fundamental challenge is the traditional way that utilities and ISOs have set up their markets is in a bilateral structure. That works fine if you’re a large utility and you have purchasing power — DER aggregators are interested in participating in a particular program. But there are hundreds of utilities across the US. It’s a hugely fragmented market. We’ve already mapped over 400 programs or markets across the US, each with slight variation on a theme, slightly different approach, different contract terms, different technology focus points. If you don’t have a level of standardization here, it creates a huge barrier for entry.
More than that, if you have such a fragmented market, you can’t really call it a market in itself, because how do you value this? How do you compare? Where’s the most valuable place to go? How do you compare apples and oranges? What we’re really trying to do is bring all of this fragmentation together into a single place. In every other sector, online marketplaces and platforms have played a huge role in democratizing access, scaling up participation, and delivering outcomes. This is now the time for the energy flexibility sector.
David Roberts
I kept thinking about eBay for some reason when I was thinking about you. eBay having that platform unlocked retail opportunities for hundreds of thousands of people, probably millions at this point, who otherwise had stuff to sell but didn’t know where the buyers were, didn’t know how much their stuff was worth, etc. That platform unlocked an enormous amount of trade. I feel this is a similar model or, as you say, you could cite any number of online marketplaces. This is why when you told me what you’re doing, I thought, “Yeah, it’s crazy there’s not one of these for distributed energy already.” It’s crazy that if you have distributed energy, you just have to wander out into this wilderness of 400 utility programs and read about each one individually. The fragmentation is madness.
James Johnston
David, first off, I’m glad you said eBay and you didn’t jump straight to dating website, because we’ve had that comparison. Whilst it’s nice, I think we’re beyond that, so thank you anyway.
David Roberts
Yeah, eBay’s got a more innocent vibe. Grandmas are selling their beads or whatever. Tinder brings up unpleasant associations. Let’s talk about these markets you are building. Tell me, who are the sellers? You’ve been doing this in the UK for a while now. I’m guessing in the UK you’ve got a pretty robust market going at this point. A lot of experience there, more than in the US so far. When you set one of these things up, who is selling and what are they selling?
James Johnston
This is the fundamental point. Before directly answering that, when we look at the US, the traditional model is the buyer — the utility — first of all specifies the technology type for a particular program. “We’re going to run a thermostat rush-hour reward program, we’re going to subsidize battery deployment, we’re going to do X, Y, and Z.” The marketplace model is powerful because you don’t need to do that. You can publish a need for megawatts or megawatt-hours in a certain location for a certain duration and then maybe some other technical parameters, such as “I need this flexibility, this response to last for four hours.”
You publish that open request into the marketplace. If you design the parameters right, you don’t need to specify upfront which technologies you’re going to allow in. This is the aha moment that really kicked off in the UK because we started scaling up the market in 2018 and back then we were calling this the “flexibility marketplace.” No one was using that term. The flexibility market in the UK in 2018 was primarily gas peaking plants, and utility-scale batteries were only just starting to evolve behind the meter. Residential flexibility wasn’t a thing; it was a future thing.
What we found immediately was, yes, there was a good level of participation from these traditional thermal assets, but there were these new emerging innovative players, these EV charging companies that were taking part and, guess what, the price point that they could bid in at was significantly lower, more competitive than some of these traditional assets. All these new insights started emerging. When you open up the playing field and you don’t predetermine the outcome, you will be surprised.
David Roberts
The goal here — and this is exactly what clicked with me — the goal here is to make flexibility a fungible commodity, so you can price it. There are a million different ways to produce flexibility, but the whole point of a market is to isolate what is the valuable thing and how valuable it is. I think maybe more so than a lot of my ideological fellow travelers, I have a lot of respect for markets and markets quite a bit. This is precisely what they are good at: price finding, value finding.
How much is flexibility worth? Let’s find out by having the buyers of it compete to bid on it, rather than these isolated, “I’m doing a thermostat thing” and “I’m doing a hot water heater thing.” That’s precisely, to me, the promise of it — we’re narrowing in on what we want to buy and sell.
James Johnston
That’s not to say there are no challenges. There’s only so much a market platform can deliver as value if the rules specified by the buyer aren’t well thought through. That can mean lots of different things. If you design the rules for who can participate or the technical parameters, it can sometimes really minimize participation to particular segments unnecessarily. Doing this right is not just about having the platform, which is a major part of the puzzle. It’s also about engaging the buyers to have some level of standardization on the contract terms they’re putting on and thinking about how these things work.
In the UK we talk about revenue or value stacking and it’s seen as a positive thing. I’m quite surprised on my travels in the US where it’s seen as a double accounting problem rather than something to be supportive of if done right — that’s the key point. The two things come hand in hand. You need to have thoughtful attention to the market design, to the contract terms. No man is an island — if everyone does that by themselves, the value or the promise of the marketplace can’t deliver either. That’s what’s really worked in the UK.
David Roberts
To return to my question, if you set it up this way and standardize the ask from buyers — they’re just after flexibility as such, however you want to produce it — who rises up to satisfy that demand? What have you seen in the UK? Who are the big players on the seller side? Is it mostly aggregators?
James Johnston
It depends on the country and the historical developments in the market. In the UK, which has a very well-developed aggregator model, most participation is via independent aggregators and retailer aggregators, with also independent project developers, the occasional large industrial and commercial participant that might play directly on the marketplace.
David Roberts
I was going to ask about that. Is there a minimum threshold here? I’m assuming I, as a residential solar and battery owner, am not going to have enough energy to make it worth my while to directly participate in this. Is there a minimum?
James Johnston
You have to be a company or an organization to have an account, a membership on Piclo. Beyond that, this is a market rule set by a buyer when they set up a market. We have had some instances where some of the more innovative distribution utilities in the UK have been testing out the limits and just putting no minimum size and seeing what happens.
David Roberts
Interesting.
James Johnston
It’s a balance. You don’t want to be managing thousands of individual small players. You want some level of aggregation, but you also don’t want just one large single super aggregator. You want some competition. That’s a balance in the market. To mention, and this may be an interesting perspective for some players looking internationally, in Portugal, we see there isn’t a well-developed aggregation history there, and there’s a lot more direct participation in the market. Therefore, if you’re an aggregator, that could be an interesting market to go and have a look at.
David Roberts
One thing you could use these markets for is to see where your services are needed.
James Johnston
Transparency drives many beneficial things. One interesting perspective that we get is, in terms of how the platform works, if you’re a flexibility owner or aggregator, you register your assets on the platform and that’s part of the journey to matching with opportunities. As a byproduct, we’re getting quite a lot of visibility into, at a country level, what’s going on — what kind of assets and how that changes over time. What we’ve seen in the UK, because we’ve had the market there running now, coming up for seven years, is you can see the macro trends shifting over the years.
In the early years, 60–70% of the assets by capacity were gas peakers. Now 60–70% of the market by capacity is utility-scale batteries. You can see that shifting. What’s coming up now as the fastest growing by capacity is behind-the-meter, residential-level flexibility — that is the fastest growing.
David Roberts
Via aggregators.
James Johnston
Via aggregators, yes. In a big way that’s smart EVs, but it’s also battery systems and other types of residential assets. There’s also a growing next wave we see: flexible renewable assets. Renewable production sites also providing the flexibility and these so-called secondary assets.
David Roberts
Was that via curtailment?
James Johnston
Yes, curtailment. Or other ways to smartly manage voltage and other parameters in the inverters. We class these together as secondary assets. The primary purpose of an EV is not to provide flexibility to the grid, it is to move you around. You could argue the primary purpose of a battery in a house is to soak up your excess solar, and you have these secondary assets, these demand response assets. We are seeing the trends that they will be the majority of flexibility within five years in the UK.
David Roberts
That is fascinating. This is one of the coolest things about finally setting up a market for all this stuff — just the informational aspects. It’s hard to get your head around what people are doing. The US is huge and sprawling. What is going on on the ground level, flexibility-wise? It’s very hard to wrap your head around it — setting up a common market. Another question about sellers: How much vetting do you do? Does Piclo do? If I’m a buyer and I encounter a seller on the website, what assumptions can I make about due diligence?
Should I assume I need to do all the due diligence that I would do in a normal marketplace? Or can I assume that you have done some basic scrutiny? What do sellers go through to get on the site?
James Johnston
There’s a two-step process now to get on the platform. We do a basic check, have a conversation with them, check they’re a viable business, they are in the game of providing flexibility. That’s so everyone on the platform registering assets and participating is a bona fide company in this space.
David Roberts
There’s been a touch — a human being has reached out and touched each seller.
James Johnston
Yes, but that is only your base entry. To enroll in any market, there is a long list of KYC-type checks that can be added by the buyer.
David Roberts
What’s KYC?
James Johnston
Know Your Customer. Sorry, that might just be a UK acronym — I’m learning which acronyms have jumped across the pond and which haven’t. Essentially, enrollment processes which the buyers can configure: what do they need to know, what documentation, what evidence of viability. Also on the technical side, in terms of their capability with their flexibility assets, etc. What’s pretty neat is we’re also driving standardization on this. Providers can upload information once to the platform and then that can be used as a passport to all these different buyers.
David Roberts
This is another thing I was thinking — it must be such a relief for the sellers not to have to do this 50 times for every potential customer.
James Johnston
The final part of this, which builds up over time, is we gather data on the actual performance, because part of the marketplace is we can facilitate the sending of the data signals. Whether that’s dispatch or after the fact, supporting measurement and verification.
David Roberts
Let’s back up a minute. On the website, buyers and sellers can meet. They can come to an agreement. How much of this is on the website? Is it start to finish on the website? Can I do the contract, sign everything, etc., all through the website?
James Johnston
That’s the whole vision. You have a digital experience.
David Roberts
That goes all the way through: I find the flexibility I need, I sign the contract, I buy it, and then I can also operate it through the platform?
James Johnston
Yes.
David Roberts
Operate just means I send the signals when I need flexibility and they respond via the platform.
James Johnston
This is a key point. We’re an independent platform trusted by both sides, and a lot of data is shared to the platform that is not in the public domain. There’s a lot of trust here about us. Part of that agreement is we don’t make decisions on behalf of either side. We don’t decide where a buy order comes from. We don’t decide what price to bid in, because we are essentially running the auction — we are running the market. What we do is make sure that all the data sets that need to be transferred from either side at every step of the process are done in a streamlined way.
David Roberts
Just taking the soft costs off of all this, which were so built up. For the US, is this just one giant pooled marketplace, all of the US? If I’m searching for flexibility, can I go to the website and search all 50 states, or are there discrete marketplaces?
James Johnston
Where we started out was discrete marketplaces. This is almost the traditional instinct of a utility — it’s their territory, it’s their market. We are a vendor into that, helping them with procurement. That worked well to a degree. But you don’t solve the fundamental issue, especially in the US, that an aggregator covers all 50 states and wants simple solutions. We’ve now evolved and this is what we launched in March earlier this year — the open marketplace, where all buyers, all sellers in one platform, and anyone can sign up now to become a buyer, not just utilities, which is really exciting.
David Roberts
We’re going to return to that later. I’m very excited.
James Johnston
Exactly. The key point here is if you go onto piclo.com now, we have already started to map out or index all of the existing utility programs in the US. Think of this as layer zero on visibility. We are just saying, “This is what is already out there.” We are already adding value to the ecosystem by creating a global source of truth here. You can upload your assets on the platform and we can help you understand which programs you may be eligible for. This is where we start building relationships with the buyers.
They can then claim their accounts. They can plug more into the platform and get more value out. More streamlined enrollment. They can run procurements on the platform. They can actively start buying. There’s a choose-your-own-adventure type experience with the platform. You can use as little or as much of it as you like.
David Roberts
Isn’t it going to be the case that, for probably legal or regulatory reasons, most of what utilities buy is going to be in their own area? I would presume whatever regulations they’re under are telling them to improve their own grids. Do you get a lot of, have you seen a lot of cross-utility area buying and selling?
James Johnston
The starting point for us was hyper-local flexibility. This is feeder-level congestion. “I need to procure some downward demand in this particular street.” That is the hardest kind of flexibility because it is so localized.
David Roberts
You don’t have the liquidity of a bigger market.
James Johnston
That’s where we started — the hardest problem. Over time we’ve gone to easier markets. To give you a sense, one market that we created is a secondary market for the Great British capacity market, which operates in a similar vein to the PJM capacity market — subtle differences, but more or less the same. If you want to do secondary trading, you have to know who the other counterparty is, agree a deal, and then lodge your trade with the capacity market official platform. We thought, “It’d be great if people that had a need to do secondary trading, whether to offtake or take on contracts, could advertise it on Piclo.”
We just built it and now we’re the de facto secondary market for the capacity market. That’s something which is not locational. You just have to be in Great Britain. The equivalent that we’re exploring in the US is with resource adequacy, starting off in California, but this can apply in other places and that would be CAISO-wide rather than on a particular utility or load-serving entity territory.
David Roberts
It’s interesting thinking out into the future — once all the buyers and sellers get comfortable with this setup, you might see more outside-the-box thinking in terms of those boundaries. We talked about the sellers a little bit. Let’s talk about the buyers. Mostly for now utilities, maybe not in the future — we’re going to get to that later — but for now mostly utilities. What’s the pitch to utilities here? You have three areas where you’re telling utilities, “This will make your life easier.”
Run through those real quick.
James Johnston
When we look in the context where we started in the UK and Europe, there is in motion a major regulatory change across Europe happening in real time where distribution utilities are being incentivized or told that they have to start procuring flexibility rather than just de facto build more grid — where it makes sense. This is a new capability for these organizations. They had not had the need to build up capacity, systems, processes to deal with it. The proposition in Europe is we can help you run an end-to-end procurement process that complies with local and European regulations.
We’ve done this in multiple countries — Italy, Portugal, UK, Ireland. We’re the trusted platform and we can help you recruit customers in and, depending on choices you make, we can also help dispatch or settle those markets.
David Roberts
Can I pause for a second on recruitment? Recruitment just means signing up people to participate, signing up people and businesses to participate in these markets. This is legendarily — I was just the other day looking at one of these comparisons of the cost of rooftop solar in the US versus other countries, versus Australia or something. There’s a giant price difference, and it turns out that most of that price difference is customer acquisition, the laborious task of finding people and signing them up to these things. If you can go to utilities and say, “We can help streamline that piece of the puzzle,” that alone is huge.
How do you do that with recruitment? Is it just by setting up this market and sending out a signal to sellers saying, “Hey, there’s an open market here. Come on in”? Or do you do something more proactive to recruit sellers at the beginning?
James Johnston
We proactively recruit sellers. Targeting aggregators in the first case is key, but the superpower that marketplaces have — which every utility program doesn’t have right now — is network effects. The first couple of sellers you need to attract to the market are the hardest because you might only have one buyer, but you then have a cohort of active sellers. In the US we started in New York and then expanded to Connecticut and now Massachusetts, and then across the states. That first cohort then starts to attract more buyers. You now have a cohort of buyers, and you have more sellers. You have a nonlinear growth model here.
David Roberts
You just have to kickstart the thing.
James Johnston
You have to kickstart it, and then it can work. This is the, coming back to the YouTube or TikTok analogy, it’s the content producers on the site themselves who are advertising themselves, not the platform that’s doing all the advertising. They do a little bit of advertising, but it’s the parties, the ecosystem, the community themselves, because they want to get the outcomes for themselves using your platform. If we start getting that right, then it really starts to work.
David Roberts
You get a flywheel effect. You’re helping utilities find sellers and participants. You’re giving them a standardized platform through which to procure these resources. You also mentioned grid modernization, which is there are lots of reasons why you might buy flexibility. You might do it because regulations tell you you have to, in the UK, etc. But then there’s also grid issues — grid congestion, grid problems — which, as all Volts listeners know, DERs, targeted DERs, are very good at solving. Have you seen lots of that happening on the platform, not just regulatory compliance, but real-time solving of grid issues?
James Johnston
Absolutely. The starting point is always with a marketplace. You want to see if you get participation. You want to keep the systems as simple as possible. You would have a human at the utility logging into the platform, uploading files, using the user interface, doing things manually to get started. Absolutely fine. Where you go on the journey — and we’ve seen this in the UK and other countries — is that’s where you start. Within a couple of years you go, “This seems to be working, but we have to scale this up by a thousand times more feeder stations, this isn’t going to work.”
It’s all about APIs and we have API connection into multiple utility control room vendors. We have announced partnerships with companies GE Vernova, Mitsubishi SGS, and some others that we haven’t yet announced. This is all about providing a streamlined utility DERMS integration with marketplace-type model. That’s part of the standardization — the standardization across contracts, around market design, but also around the systems for dispatch and measurement and verification. When you get that working well, that’s when you can do some magical things. With a few hours’ notice you start seeing problems in a specific feeder that automatically sends a signal onto the marketplace and then reacts.
That’s where we’re starting to get in some countries in Europe and in the UK — that’s when it starts getting really exciting.
David Roberts
The market solves these problems automatically, makes them visible, and makes the solutions available, and it runs itself at a certain point.
James Johnston
There’s an interesting debate and there’s always a big debate around whether this should be tariff-driven response or contracted response. What we find for highly localized specific technical issues that you want to pay over the odds so that you definitely get a response, having a market-type approach is the best outcome. If you were to lump this all into tariffs, you would struggle to get the granularity without pissing off a couple of people who weren’t expecting to have a huge spike in their cost. For those highly targeted, getting the services you need on the feeder level, this automated marketplace model makes sense.
David Roberts
One of the things I was thinking about reading about this is previous Volts pod on the subject of DCPs — distributed capacity procurements. The idea being that utilities should proactively procure distributed energy resources just like they procure any other kind of resource. They should say where and when they need the DERs and procure them themselves rather than waiting for people to sign up one by one. Having this platform makes that a thousand times easier. It gives a very standardized way to do that.
What about fraud and abuse? I’m sure that’s the first question you get from everyone you talk to. What are the guardrails in place to prevent, for example, in carbon offset markets, people signing up claiming they’re managing a forest and it turns out the forest doesn’t exist? Everybody’s antenna is up about this right now. How do you think about fraud and abuse? How do you think about your disposition towards enforcement?
James Johnston
That’s the right word — enforcement. If you want to enforce, the first thing you need — and let’s get to the different models for enforcement in a second — is data. Do you know what’s going on? If you don’t know whether a forest is there or not, how are you going to enforce? The sweet thing about flexibility in particular is it’s entirely data driven. You’re signing a contract which outlines the methodology by which you are going to be assessed and you have to provide evidence after the fact whether you delivered that or not.
You can check what’s happening. The point about the marketplace is it creates a lot of visibility here. The second layer is there are two different ways to enforce. One is putting penalties in place, the contracts, which make it really expensive if they’re not playing ball. The other approach is incentivizing. We have the data, we have the historical performance data. Did you perform?
David Roberts
Sellers have some way of gaining reputation, gaining reputation points. I don’t know what — stars, I don’t know how you express it.
James Johnston
It’s more complicated than an Uber rating, to be clear. That’s the right mental model. You can create a market where you have a minimum amount, minimum volume that you’re allowed to be dispatched unless you have a trading history or the right ratings. Coming to the point about fraud or abuse, that’s layered in on this and becomes a data science problem. If you believe there are bad actors in the space, they will always find ways around the current rules and regulations to make money and bend the rules.
This then becomes a data science problem because we have the data, we can see a lot about what’s going on, and then we can make calls around, “We think that you are on the wrong side of the rules. You’re not allowed to play in the marketplace anymore.” There are no financial penalties there.
David Roberts
It would be a lot of work to cheat this. You could probably only do it once.
James Johnston
The risk of cheating in a transparent marketplace that’s checking whether you’re cheating — and if it finds out then you lose your major income source — will make people think twice. That’s how digital marketplaces deal with fraud and abuse: if you break the rules, you get deplatformed. That’s an incentive in itself.
David Roberts
Let me ask a related question. If I’m thinking as a utility, I need to make long-term contracts. I’m planning three years, five years, ten years into the future. If I’m looking at aggregated DERs, can I trust that these same homeowners will still be cooperating with this program in ten years? I wonder how confident people are in long-term contracts in this market and if there’s anything you can do as the platform provider to de-risk these things somewhat or is that just a matter for the market participants themselves?
James Johnston
The first thing that we do offer is a secondary market, as I mentioned earlier, and we offer this for all of the markets. If someone is not able to provide the service that they’re obligated to, they can find a similarly verified party — might need to be in the same location — that can provide that service and that de-risks it to a significant degree. The other point is being thoughtful around how and when you rely on flexibility versus grid hardening or other solutions. It also depends on if you need to rely on flexibility because you don’t have any grid hardening solutions up your sleeve because there’s no physical space, or there are other challenges, permitting issues, etc., then you might want to over-procure and take a more stochastic approach. Again, it’s a data analysis problem. On average, these types of technologies provide this level of certainty, this level of longevity, and will over-procure by this much. A lot of this comes down to new kinds of capabilities that utilities should have — around data science and around understanding stochastic behaviors rather than purely deterministic, “I’ve got a single power plant and I know what to do with it” type mentality.
David Roberts
It does seem market scale and liquidity will do some work to trim off those uncertainty tails a little bit over time. We’ll just have more data about how things work long term.
James Johnston
To my point about the trends we’re seeing in the UK — and we see this everywhere at different stages — residential-level flexibility is the best kind of flexibility by definition because it can solve problems at every level of the grid because you can add the capacity up. It solves the immediate low-voltage grid all the way up to the national grid. There’s an element of a postcode lottery. If you are looking for locational flexibility and if you’re a single large, let’s say, peaker plant or utility-scale battery, if you’re in the right location or not, there’s a bit of luck of the draw. However, we’re seeing the trend being every single household having some sort of flexibility, whether it’s EV or battery or a heat pump. The chances that there will be loads of options of flexibility in that location and commercial industrial sites as well are just getting higher and higher every day.
David Roberts
There are houses almost everywhere. That’s what I was trying to get at in the intro. Once you start thinking about what we mean by distributed energy, it’s everything out there. It’s everything that people are using. All of it, in theory, could be signed up and controlled. If you think about the totality of it, you’re talking real numbers. I want to talk about the ACE program, but briefly before we get there, talk a little bit about where you are now in the US. What’s the scale of DERs that are flowing through the market at this point?
How many devices, how many utilities, how many programs — what’s the current scale and what do you see in, say, three years?
James Johnston
We have 1 gigawatt or just over 1 gigawatt of DERs registered across 50 states. This is in the last six months. You look at the UK, we have about 35 gigawatts registered, which is most of the market. That gives you a sense. I think we will get to — my prediction is 10 gigawatts in the US by the end of this year.
David Roberts
Just to give people listening a sense of scale, a gigawatt is a very large nuclear plant. 35 gigawatts in the UK — that’s a lot. That’s 35 nuclear plants in the UK. If you can imagine that in your brain, that’s a substantial number.
James Johnston
The maximum demand in the summer in the UK is 50 gigawatts or that order of magnitude. It goes up to about 70. That’s a lot of flex that’s available. It’s quite amazing if you think about it.
David Roberts
You’re getting up where the flex numbers are a substantial percentage of total demand, which is amazing what we are going to be able to do once we are accustomed to that.
James Johnston
That’s not just all behind the meter or what you might classically in the US call VPP — virtual power plant — type flexibility. That’s also thermal peaker plants and utility-scale batteries, as well as behind-the-meter stuff. When we say flexibility, we mean all of that. We’re not just talking about behind-the-meter stuff.
David Roberts
One thought that occurred, which I think is very interesting, is there is a lot of argument in the US these days about what is the cheapest source of flexibility or new capacity. Is it small nimble gas plants or is it solar and storage, etc.? Arguing, arguing, arguing. Finally, this gives you a way to find out, to literally find out which of those is more valuable by how much people will pay for them. We can settle these arguments, if nothing else. Delightful to me.
James Johnston
We believe in open data. A lot of the historical bidding information is published on the platform. You can see trends and understand this. Typically, we do see the outcome that the smaller the assets are, even if it’s a large aggregator, the more competitive the price. It is something we do see.
David Roberts
That’s going to be much fun data coming out of this as it gets bigger. To me, one of the most exciting aspects of all this. Volts listeners know at New York City Climate Week, I did a panel with Ari from Rewiring America and Rewiring America’s big idea that they put a paper out on is, “We’ve got these hyperscalers, data centers who desperately need to get on the grid. Every day they don’t get on the grid, they’re losing enormous amounts of money. They’re focused on speed to the grid and to get on the grid they need to free up some capacity.”
It takes forever to build a nuclear plant, takes forever to build a natural gas plant. What is the capacity that’s available quickly? It is residential and business flexibility. That is where you have slack capacity laying around right now. Is there some way we could set up a system whereby these hyperscalers with all this money, who are in such a hurry, can pay for residential flexibility in order to get on the grid? Love that idea. We talked about it in the panel. Later in the week, you approached me, saying, “Hey, we’re doing that.”
Let’s talk about the ACE program then, which is, as far as I can tell, what you’re saying is, “Look, data centers, we’ve got this platform set up where we’re selling flexibility, come buy it.” Is that the basic idea?
James Johnston
Absolutely. All the benefits that we just mentioned at the beginning around not prescribing what they’re buying. They say, “We need this kind of...” These hyperscalers are going to be in energization queues and the different requirements of what they need to solve for can be different. Where they are, whether they need generation or there’s a transmission constraint, it will define a different system need that needs to be solved. What our platform allows them to do is not prescribe a solution. The Rewiring America solution is neat, but it’s one of lots of different alternatives.
Maybe they just need to procure some thermal generation, maybe they need to procure flexible behind-the-meter resources in a specific feeder on the network, or maybe they just need to reduce the overall peak demand and subsidizing the build-out of energy efficiency in households hits that. The beauty of the marketplace model is you have these potentially new buyers — these hyperscalers and data center operators — publishing what they need in order to get energized faster. It’s open for everyone in the market to bid in and try to win these contracts, which could be highly lucrative. The fundamental aha moment that we had is the cost or the lost revenue of not building out, especially an AI data center, is absolutely enormous.
David Roberts
Yes, it’s mind-blowing.
James Johnston
It’s mind-blowing. If you allocate a fraction of that, even just conceptually, say 3% of that, you could have the biggest pot of money for VPPs and flexibility that the country has ever known, just because the numbers are insane. This is why we’ve been playing around with this model for years, looking at how you could bring renewables on faster and offset curtailment arrangements and things. It’s always boiled down to it’s neat as a model, but the economics don’t quite work. This has changed with specifically AI data centers, but all data centers.
The economics are crazy that now it makes sense that this would move the market, this would change things.
David Roberts
By having a data center that is not able to hook up to the grid, you are losing $20 million a month or something truly ludicrous like that. As you say, those are amounts of money that would be transformative in the VPP world. Just shaving off a tiny bit of the money involved in data centers and putting it towards VPPs and DERs and flexibility would be such a huge pot of money from the perspective of those tiny nascent markets.
James Johnston
There’s an economist view which is really interesting around cost reflectivity, because another model is tariffs, but you have tariffs which aim to be cost-reflective. Let’s say you offer a data center a new tariff —
David Roberts
You’re guessing.
James Johnston
You’re guessing. There’s a black box problem there. Where does that money actually go versus a pure play? The data center is paying for this outcome, which is faster energization, and that money is going straight to the flexibility, which then solves the system need. That’s why it’s exciting.
David Roberts
This is price discovery. This is what markets do. This is one of the basic features of markets — they tell you what these things are worth, rather than having regulators guess how much they’re worth. As I’m looking at this program, you frame it as a new program, but as far as I can tell, this would just be data centers using your platform. You’re not talking about building a separate thing for data centers, or a special market for data centers. This is just about data centers coming into your marketplace and using it mainly.
James Johnston
Absolutely. It’s a little bit too early to name names, but we’re talking with a number of independent data center operators, hyperscalers, who are very excited by this model and could use it tomorrow. They could sign up, publish a need.
David Roberts
Another good thing about markets is you can just do it and you don’t have to wait on a regulator.
Why aren’t they doing this already? Is there anything you need to do to make it available to them or is this a matter of them waking up to the opportunity and coming to you?
James Johnston
If you look at data centers and flexibility in the last six to nine months, it has really become one of the most talked-about, exciting conversations in the industry. It is mainly focused around on-site flexibility and very exciting flexible compute and all of that. That is all good stuff. What we found is what is amazing — at the same time, we announced ACE a couple of weeks ago —
David Roberts
Which, quickly, what does it stand for?
James Johnston
Accelerated Community Energy. Around that time, the week before and a few days later, two other parties announced similar models and now we’re starting to hear this model being talked about by lots of different parties. There’s a time and a place where, and we serendipitously or accidentally announced it right in the middle of when people are talking about it. We’re getting some insights from hyperscalers going, “The most precious commodity for them on site is space.” They don’t want to be building out huge amounts of on-site DER flexibility if they don’t need to.
Because space is such a premium, the earning potential that they have with these AI racks is high enough that if they can pay to solve this problem...
David Roberts
If you’re paying for flexibility on the grid where the data center is located, it amounts to the same thing, doesn’t it?
James Johnston
It amounts to the same thing, but you get more because you can have the same benefits as if it was situated on site. Still, to be clear, some on-site flexibility is a great idea for resiliency and other use cases. If you put it on the grid, you can start solving other problems on the grid which also exist, whether these are locational issues or otherwise. It’s a neat way of solving what we’re calling the “missing money problem” in flexibility, where having to go to regulators to negotiate how to increase budgets for flexibility with the impact on rising costs to ratepayers is a difficult discussion.
In a lot of places, that’s where flexibility gets stuck in the mud. If you can take out the cost equation, these utilities almost get flexibility for free.
David Roberts
Utilities are legendarily — everybody knows this — legendarily conservative for good reason. This seems a lot for them to process: this third-party platform market where hyperscalers are paying for flexibility. What needs to happen at the end of that is the utility saying, “Okay, this flexibility counts, thus we will let you onto the grid.” The utility is still at the center of this. Are utilities comfortable with this, with the market, with the dynamic, with all of this? What has been their reaction when you talk to them about this idea?
James Johnston
Generally a lot of excitement when they first hear about it. They’re “What does this all mean?” Then they go, “We’re doing that in a different way already.” The only difference is they had to go to the regulator to negotiate a budget for subsidizing the build-out of batteries or whatever. Fundamentally, the only difference is where the money comes from. When it comes to flexibility, the key thing for us is we have the track record — for the last seven years we’ve been working with utilities across the US and across the world.
This isn’t a new startup that’s just come up with an idea. We have the track record and are trusted by utilities.
David Roberts
Utilities believe that the flexibility is real. It’s not completely new to them. They’re somewhat familiar with the product.
James Johnston
There are different ways. This is why it’s so neat. It could be that what’s happening is you’re subsidizing the build-out of flexibility into existing programs. They’re using their existing tools to dispatch and measure and all of that. It could be that this is just the data center procuring generation capacity that they then enter into wholesale markets or get accredited in other ways. The beauty of this is the marketplace allows you to solve the problems you need to solve to get energized fast and present it to all the different stakeholders you need to present to.
Not in the first instance, prescribe the solution.
David Roberts
This is all basic market stuff. Anytime you can move something like this into a market, you get clarity. You get clarity about what’s available, you get clarity about what the value of it is, you get clarity about the timing and all of that. All of this will be available.
James Johnston
You get scale — especially the hyperscalers. They say, “Oh, and this is global?” Yeah, we can work everywhere in the world. This then starts to get pretty interesting.
David Roberts
The amounts of power they are talking about are gargantuan in some cases. I’m curious whether their initial reaction was, “This is beans, this is small beans here. We need big stuff and you’re out there selling little baskets of small stuff.” I wonder if you ran into any of that. People have trouble wrapping their heads around the idea of distributed stuff adding up to something substantial.
James Johnston
The level of how distributed it is — we’re agnostic, whether it’s residential level or we’ve got 100 megawatt plus scale generation and storage devices on the marketplace. Some of it’s not small. The first reaction we get is, “We’re already doing something like this.” Then they realize that they were thinking about it in a small, fragmented way and now they can do it at scale. That’s the aha moment they have.
David Roberts
What would be required for this to get going? They could just come start buying tomorrow, these hyperscalers — the door is open. Are we waiting for anything?
James Johnston
We are with a number of parties and we’re always open to more parties. We’re exploring where we can get the first proof of concept, which region in the US or in the UK that we’re going to get this up and running. The utility sector always runs on precedence — you need one example to get over the line and then open the floodgates. That’s the focus — we’re working with a couple of parties, we want to get one of these over the line and then I reckon we’re going to open the floodgates.
David Roberts
That’s going to be an amazing transformation of a bunch of different things. When you look ahead at that moment, that floodgate moment, what scale are we talking about here? I think you ran some of these numbers. If you peel off 3% — this is somewhat arbitrary — but if you peel off 3% of the money that’s flying around in the data center world, that data center investment, what would that amount to in the flexibility world, in the VPP world?
James Johnston
Every week you hear an increased forecast of how many gigawatts of data centers we are getting. Even if you took a highly conservative, a mere 100 gigawatts, 3% at current cost would bring in $40 billion in new revenues for VPPs, which would treble the size of the market. That is just insane.
David Roberts
That will be quite something to see. We’re on the verge here — this is just to wrap it up — verge of hyperscalers, rather than just sitting on their hands frustrated or indulging in these SMR dreams, can just start spending money and getting flexibility immediately. Once a few of them do that, once they see that’s possible, you’re just going to get an enormous... This is what the people in the DER world and the flexibility world have been waiting for. Where is the money?
Where is the money for scale? This could unlock that. It’s going to be super exciting to watch that unfold. As a final question here, even though you have been doing this for a while, I think especially in the US this market still counts as nascent. This is very early days for setting up this marketplace. We have early adopters coming in. One of the cool things about markets is, as networked systems, they have emergent effects. All sorts of crazy things happen with scale that you cannot necessarily predict.
Two-parted question: Are there major improvements in your platform, in the operation of this thing, that you have in mind that are waiting for more money, more scale? Do you have a roadmap of improvements? Beyond that, once this gets really big, do you have any speculation about what kind of emergent effects we might see, how this might change big macro trends? That’s a lot for a last question. I know it’s dinner time there too.
James Johnston
You have to be living under a rock not to see the potential of AI in transforming everyone’s product roadmap. There’s a real interesting promise here where things which don’t currently scale because you need teams of thousands of people could scale in the future.
David Roberts
That’s part of why I was asking about whether you reach out to sellers individually. I’m wondering how high-touch, how manual some parts of this remain and whether those parts could be automated over time.
James Johnston
Exactly. The platform itself we’re always investing in. We always forecast next year, if it’s 10x more volume than last year, we try and get ready for 100x. There’s always investing for scale on the fundamental platform and plumbing. In terms of rethinking how the market can work in an age of AI — that’s super exciting. How is this going to play out? No one has an answer to this. What happens if every business has its AI agent acting on its behalf, trying to secure the best deals, doing things like bidding into flex markets?
David Roberts
An AI energy trader, in-house.
James Johnston
We may see an explosion in the number of participants in the market and these virtual participants acting directly on behalf of businesses and people. I’d say that’s where I’d put my money on being the most disruptive thing coming. We’re well placed to support and scale that if it does arrive.
David Roberts
I’ve always said this from the beginning — what is really going to get DER markets to take off is automation. There’s so much hands-on stuff still. You read about these demand response programs even today — many of them are, “We sent an email to a thousand people and asked them to go turn a knob somewhere.” All of that stuff is eventually going to be automated. Everything is going to be automated eventually. That is going to be huge for scale. I wonder if you have any thoughts about the ultimate scale of this market.
Do you think flexibility that you can procure, distributed flexibility, is eventually going to be equal in scale to, say, the natural gas, electricity market? How big of a player could this thing be? Do you have any glittering five-year, ten-year dreams?
James Johnston
The way I describe it is, flexibility is eating the world or everything becomes flexibility. You look at renewable power trading, every renewable generator is becoming a hybrid site, it’s all morphing together into one. This is our vision. When we set up the marketplace in the first case, we could see this decentralized energy transition emerging and the first thing that gets impacted is the assets themselves. You’ve gone from big assets down to small assets, but the systems for managing the markets, the system operation, is not immune to change.
We need new kinds of markets for this decentralized world, new kinds of system operation. That’s what we built, that’s what we set out to build — a new kind of market designed for this decentralized world. The long-term vision is this is beyond flexibility. This is just the new market layer for the energy world.
David Roberts
You imagine in the future — everybody talks about data centers, but transportation is electrifying, residential is electrifying, industry over a longer term is electrifying. Everything that electrifies becomes a flexibility asset automatically. Then you’re talking about transportation, industry, residential, all of that being in a single pooled market. That is mind-blowing to imagine the level of flexibility available once everything is pooled together. Flexibility becomes a fungible commodity that boggles the mind to contemplate.
For me at least. James, this has been a thrill, as I expected. I’m glad you’re doing this. As I said, the minute you told me, I thought, “Why aren’t 100 people doing this? Why isn’t everybody doing this?” It does seem like there’s going to be a first-mover advantage. Do you think there’s going to be multiple of these markets or do you think the logic of this moves eventually toward one giant market?
James Johnston
I think you’re going to have a handful. You look at other market or platform plays, there’s always a dominant one and a second place and a longer tail. It’s not a construct where the market can accept hundreds of them. It just doesn’t work.
David Roberts
An eBay and an Etsy, maybe, to our analogy. Thank you, James. Thanks for staying up late and talking about this. This is super fascinating. I appreciate it.
James Johnston
Thanks, David.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I’ll see you next time.
