I catch up with Span CEO Arch Rao to discuss the company's expansion from consumer panels to the utility-focused Span Edge which can be used to create a true distributed power plant. We discuss why this is key to accelerating electrification and examine how the system works to respect consumer choices while managing grid constraints.
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David Roberts
Hello everyone, this is Volts for May 2, 2025, "The coolest new home electrification widget." I'm your host, David Roberts. Way back in June of 2021, I talked with Arch Rao, the CEO of a company called Span that makes smart electrical panels. The panels can balance a home's loads — its EV chargers, heat pumps, water heaters, ovens, what have you — to keep total draw beneath a set amperage level, thus enabling homeowners to add electrical appliances without requiring expensive upgrades to their electrical service. Through an app, homeowners can program or prioritize various loads based on price or preference.
In March, Span announced a new product that immediately caught my eye. It's called the Span Edge, and the intended customer is not a homeowner, but a utility. Basically, it's a Span panel, but rather than being installed behind the meter on the customer side, it is installed at the meter, effectively integrated with the meter. The company calls it an "intelligent service point."
Among other things, this gives utilities direct, hardwired access to it, which could enable them, if enough of these things are installed in their service territories, to coordinate multiple homes, whole neighborhoods, based on changing grid conditions. It could create a true and reliable distributed power plant.
It usually takes more than a cool new gadget to warrant an episode of Volts, but this one effectively creates a whole new product category and overlaps with several trends and discussions we've heard here on Volts recently. So, I'm very excited to have Arch Rao back on to tell us what prompted this pivot and what it will enable.
With no further ado, Arch Rao, welcome back to Volts. Thanks for coming.
Arch Rao
It's great to be back, David. Thanks for having me.
David Roberts
So, listeners should go back and listen to that original pod, but you've been making these smart electrical panels. You're still making them. You just, as far as I just saw a couple of months ago, I think maybe a month ago, just came out with some new ones, bigger ones. So, you're still in that business. So, explain then, what is the business logic to pivot to this new category? Talk us through the sort of steps of your thinking why you felt like this was needed.
Arch Rao
Yeah, absolutely. First, I'll start by saying it's less of a pivot, it's more of an expansion of our product strategy and it's one that we've been working on for several years now. Back in 2018, when I founded the company, I'd like to think we created a new product category with smart panels. And over the course of time, we've successfully built a number of really capable features in the smart panel that we've now deployed across all 50 states here in the US and we're continuing to deliver exceptional customer value. But as we think about how to really drive adoption of electric appliances in home, how to really increase the utilization of the existing electrical grid, it has been obvious to us for a while that solutions like Span should be deployed at scale by utilities as part of utility distribution infrastructure.
David Roberts
I mean, you have a program with some utilities, like you have a program with PG&E, for instance, through which homeowners who have this smart electrical panel already installed give PG&E access to it. So, PG&E can basically use those smart panels as part of a VPP. What's wrong with that strategy? Why isn't that enough?
Arch Rao
Yeah, I think that is a strategy. And I think we're trying to find more ways to reduce the cost burden for customers to electrify, find new ways for adoption to happen at a much more rapid scale, while leveraging all of the core capabilities and functionalities that our product provides. At its core, the Span panel is a sensing device, a control device, and an intelligent local gateway. It can do that in one of many form factors. It can be installed as part of a new home that's being constructed, be it a community of homes being built by a home builder, or be it homes that, as we speak today, are being rebuilt in areas that have been impacted by wildfires.
And in a new home context, the version of our panel that makes the most sense is a panel that has 40 circuits or more, typically, just given how circuits are distributed in a home. Let's say it's one of our existing homes and you're looking to add just an EV charger today and maybe plan to add a heat pump, you know, a couple of years down the road and want to replace a gas water heater with an electric water heater, then perhaps you only need 16 or 24 circuits. And now we've built a version of the product that can accommodate that as well at a lower cost entry point. But those are still solutions that are consumer-led adoption, or installer-led adoption, or in some cases home builder-led adoption.
And that has been growing for us, and that's great. But I think there's a real opportunity for us to say, "What if I can save money not just for an individual customer, but we can actually reduce the cost of capital expenditures that go into overbuilding the distribution grid?" And let me share some metrics there that I think you and your listeners might appreciate: the average utilization rate of the US distribution system is around 42%. What I mean by that is the loading factor. On any given day, the average utilization of the available capacity on the distribution grid is only about 42%.
David Roberts
That's actually higher than I would have thought. You know, like, I think maybe Volts listeners know, maybe. But it's worth emphasizing, you know, like electrical systems are generally built for peaks.
Arch Rao
Exactly.
David Roberts
Peaks are, by definition, the exception. So, when you're not peaking, you've got a lot of spare capacity lying around. I t's just like cars; cars are sitting around 95% of the time. People don't really think about it. And this is really interesting right now since, as you I'm sure are very well aware, there's this huge stampede on to find more electrical capacity. So, it's a little crazy that everybody needs new capacity and simultaneously more than 50% of our existing capacity basically goes unused. Like, that's kind of the background fact here.
Arch Rao
Yeah, I couldn't have said it better. That's exactly right. But ironically, as you rightly pointed out, there is a perception that we need more capacity and that stems from customers being told by the electrical contractors or customers intuiting that, "Hey, I only have a 100 amp panel in my home and 100 amp service, if I want to add a 60 amp EV charger, I'm going to require more capacity." But let's think about the actual usage pattern from our fleet. Now that's thousands of homes, tens of thousands of homes across the US. 92% of homes across our fleet have 40 amps. That's about 10 kilowatts of unused capacity in their homes all of the time.
David Roberts
Wait, these are people with 100 amperage services?
Arch Rao
That's correct. Across our fleet. Right.
David Roberts
So they're not even reaching 100?
Arch Rao
That's right. Because your base load consumption is much less than 100 amps.
David Roberts
Right. So, I think the way to put this is just like there's a bunch of spare capacity on grids. It's fractal, even if you look at the individual house, it's basically the same situation. Right. There's a bunch of unused capacity at any given time because it's built for the peak.
Arch Rao
That's exactly right. And 100 amps, for what it's worth at a 240-volt 2-phase grid, is 24 kilowatts of instantaneous power to your home. Right. The largest appliance we have in our home right now is an EV charger that draws about 9.6 kilowatts instantaneously.
David Roberts
Right.
Arch Rao
So, you have to imagine a corner case when your EV is charging at the same time, your water heater is running at the same time, your HVAC air conditioning system is running at the same time, perhaps your induction cooktop is on before you're at that peak demand. And what Span has, I think, very elegantly done is to say, "Look, if and when that situation arises, I have a control system built into your panel that can regulate just a handful of loads. I just have to throttle your EV charger back for 10 minutes, I just have to slow down your compressor speed for 15 minutes, I just have to pause your water heater for 30 minutes." And that's plenty.
David Roberts
These are always brief peaks, so it's not like Span's going to turn off your EV charger for hours or anything, it just dials things back a little bit. Generally, I think, and I've been meaning to ask you this, I wanted to ask you the first time actually: My sense is probably that the vast majority of events in which the Span panel has to actually intervene to avoid, you know, crossing that peak — do homeowners notice? Most of them are, most of them sort of like background enough that the homeowner would never know unless they were told that it had happened.
Arch Rao
It's the latter, and that's a very intuitive question because the perception usually is, "What is the customer experience or what is the sacrifice I need to make to electrify?" And I'll tell you again empirically, because we know this from our actual fleet data, empirical evidence, the average duration of what we call a "power up" event, that is where I have to enact control, is about eight minutes long and the frequency of it over the course of an entire year, the number of events you're likely to encounter, even in a home that already has an EV charger and potentially an electric water heater and air conditioning system, is on the order of a dozen to 15 times. And in none of those times do I actually have to turn off a load completely.
Especially because the probability of you approaching your peak is going to happen — like I said, when your EV is charging at the same time as your air conditioning is running — and we focused on being able to do software-driven throttling of the EV charger or the compressor speed, if you will, or the water heater set point. But what we've also built, and this is where I think the core science of our product really is compelling to the utility or a home builder or a UL certification agency, is that in the unlikely event that the software fails, we have built the functional safety backstop into our panel. That is, if push comes to shove, we're able to isolate just that one circuit very safely through hardware controls.
But in virtually any scenario, we don't have to use that hardware control. We can enact the throttling that we need to do, which are software controls.
David Roberts
I return to my question then, which is that houses with these Span panels installed have this ability to throttle various circuits. And theoretically, if a utility could access a bunch of those panels in a bunch of those homes, the utility could throttle loads based on not just the individual home's need, but the grid's needs. So that seems to give the utility access. So then, why do we need this devoted product if the utilities can already, in some sense, access the existing Span boxes? Why do we need a utility-focused Span box?
Arch Rao
It's about scale. So, let's come back to your original question right now. Take the same use case and imagine if the utility can, instead of augmenting or replacing your meter with a new smart meter that only has measurement capabilities, not control capabilities, either augment it or supplant it with a grid edge device, hence the name Span Edge, that can give them visibility into all new sources and loads that are likely to be added to your home. And the ability to avoid distribution CapEx investments and the ability — by the way, this is just the cherry on top of the cake — to orchestrate them in the few hours in a year when they need to manage not just your peak, but a system level peak.
That's the problem we've solved by building a smaller version of our product that can be deployed in less than 15 minutes in any customer's home in the US by sitting at the meter. It does not require an electrician to come and rewire your electrical system, but it's a proactive installation by the utility at the meter. And obviously, there's an advantage now where the utility can target which parts of the network they deploy this into, as opposed to waiting for customers to electrify and find Span and adopt it.
David Roberts
So, it seems like the main sort of advantage here is not so much a particular functionality. This is not a new functionality; it's just more about giving utilities control over where they're deployed, more or less allowing the utilities to be intentional about where they're deployed rather than this being a consumer-led "we're just waiting to find out which consumers buy them," basically.
Arch Rao
That's right. So, both will continue to happen in our business supports both. Right. We're going to continue to enable customers to buy our products or home builders to buy our products, or contractors to buy our products. But we see a clear opportunity and in fact, a present need for utilities to be at the forefront of innovation and say, "Look, this technology exists, I can address my advanced metering needs, I can address my distribution grid investment needs, and I can give the customers a solution that allows them to accelerate their electrification journey."
David Roberts
I just wanted to clarify one thing before we move past it, because a lot of people are going to hear this and think about smart meters. So, just the distinction here is a smart meter is a sensing reading device, basically, that will tell you what is happening. This is that plus controls, you can actually control and throttle the loads. So, that's how this is distinct from a smart meter.
Arch Rao
Yeah, and let's draw, maybe, perhaps, a bit more of a technical distinction. Meters have also evolved in the last 20 years and many went from being very simple 15-minute interval readers, now having more compute and communication capabilities, if you will. But they're still ultimately a sensing device for billing purposes. You can envision a world where a meter can talk to a local appliance over Matter or Bluetooth or Wi-Fi, independent of the transport layer of the comms protocol. But what it cannot do is provide that functional safety guarantee, if you will, that I can isolate a particular load that's a violating load that keeps my grid safe.
David Roberts
Right. For that, you need controls; you need the panel.
Arch Rao
You need more granular controls. Right. And the design of Span Edge, we've designed it so the cost to the utility is very marginal. Right. We're saying, "Let's build an eight-circuit version of it that the utility can deploy where the customer can expand over time." But by doing so, eight circuits is, say, four dipoles. You can conceivably add a solar battery system, an EV charger, a heat pump, a water heater, induction cooktop as the case may be, and 95% of households across the US are yet to adopt those appliances.
David Roberts
So, when you say a customer can expand it, would that mean like... well, let's just talk about the physical thing itself for a second. So, like, who needs to give permission to install this? Is it the homeowner that needs the utility's permission, or the utility that needs the homeowner's permission? Who is installing it?
Arch Rao
Yeah, this is an evolving conversation. So, I'll tell you what we're seeing in terms of the scatter pattern. Right. Most utilities would prefer to install it themselves using their meter technician network that they have.
David Roberts
And would they have to ask, like, would you have to ask the homeowner, presumably, like, can we install this? Like, does the homeowner control that?
Arch Rao
I think there's two prongs to that. One could be: "Look, we've been owning and installing meters in your premises now for decades," right?
David Roberts
Just a fancier meter in some sense, right?
Arch Rao
That's right. You can think of this as sort of the natural evolution of the meter itself. And by design, we mean for this device to sit outside the home, just where the meter already is or adjacent to the meter. The other version of this is to say, "Hey, customer, if you really don't want to, we can avoid installing this. But when you do come around to needing a service upgrade, you're going to have to pay for that. You're going to have to pay for us to come in and re-conductorize your home and retrench outside your home and put that cable in."
That's just a cost somebody has to bear. Right? And typically, it's the customer that has to bear that. I think there's a slightly different side of the prism to look at this too. From a customer's perspective, the benefit here is they're essentially getting a free electrical sub-panel that is smart.
David Roberts
I mean, they're getting one of your Span panels for free, right?
Arch Rao
I was going to go there. It's not just any sub-panel, it's a smart panel that allows them to eliminate the cost of having to potentially, in the future, reconductorize the service to their home, if you will. But much more importantly, when they want to electrify, there's a two-prong benefit to the customer and the utility here. If my water heater breaks, that's a gas-powered water heater and I do want to switch to electric. If I didn't have the solution, I probably would have to wait several months for the utility to come and upgrade the power line to my home.
That's not happening. Whereas now, I have a ready solution that I can just drop an appliance into that any electrician, any contractor can plug into, because it's designed to be a standard panel interface. And from the utility's perspective, that's also a net benefit because now they're able to accelerate the kilowatt-hour revenue growth that happens from the electrification adoption that they've now enabled.
David Roberts
Right. And so, just the physical box itself, it's bigger than a meter. It's not, you know, people are familiar with the sort of little glass-covered orb, meter, whatever, sitting on the outside of their house. This would effectively attach a big box next to it. It kind of looks like an electrical panel-shaped box.
Arch Rao
Yeah.
David Roberts
So, it's not nothing. But, you say the installation itself is relatively easy and straightforward, and you don't need an electrician. That's a little mind-blowing to me.
Arch Rao
Yeah, look, it's bigger than your meter, obviously, but it also is functionally a lot more than a device that can only measure the consumption of your entire home. What we've designed is we've leveraged sort of existing science around meter collar adapters that have existed for a few decades now and said, we will intercept the meter or we will sit at the meter and allow for power to flow into our Span Edge device, which is arguably a distribution panel, a small sub panel, if you will. But where the innovation has come here is to say we have a modular solution. So we've been able to minimize the size of the product to be not that much bigger than let's say, a box that Comcast would install outside your home.
But solve for simplicity of install. We don't want it to disrupt the customer experience. We don't want it to be something that requires us to go into a customer's home and rip out the existing panel, do sheetrock work, or any carpentry work to get it in. We've designed it to be wall hung using a simple bracket and to be affixed very easily into an existing meter by building this adapter that is a common interface to all standard smart meters in the US. So that's what's allowed us to speed up, if you will, the delivery model. But until you add a load to it, its value is mostly around sensing. Right. Sensing the whole home. It can sort of give the customer the ability to accept new loads. And that's where I think this targeted model helps with the utility.
Or, in some cases with some of our California utility partners, one of the other models they're exploring is if a homeowner calls me and says that they need an interconnection study done because they want to add a new electric load because their contractor told them they need a new service, I'm going to give them this alternate option, which is a cheaper, better, faster option to say, "Here's a Span device instead."
David Roberts
So when you say "before a load is hooked up to it," so like if I just hooked it up outside my house today and I have an electrical hot water heater, would it automatically be able to control my electrical water heater? Or is there some special connection between the water heater and the box that I need? Like, does it have to be wired to each appliance?
Arch Rao
Yeah, that's a good question. So, things like electric water heaters that have a standard CTA-2045 comm support, we would be able to talk to through our gateway without it being rewired to our panel.
And that's wireless, that's what Wi-Fi is...? That's wireless. We can use the homeowner's Wi-Fi or Span actually has an integrated access point module in it. So even if you did not have homeowner Wi-Fi or for that matter, ISP connectivity, the communication can still be intact. And sometimes we use Bluetooth and Matter as well. So we have some multimodal communication options. But the intended use here is that either the next EV appliance or your water heater itself can be rewired to this device electrically. I mean, not just from a comms perspective, because then that gives the utility the additional functional safety backstop, if you will.
If the comms protocol, for whatever reason, fails, then the relay inside our panel can isolate just that circuit.
David Roberts
Yes. So, this was my next question. Like, do utilities view a hardwired connection to the appliance as substantially more reliable than a wireless connection to the appliance? Do utilities have reasons to prefer hardwiring in this case?
Arch Rao
Absolutely, and it's not just the utilities. First, from the utility perspective, a distribution engineer understands the value of hardware communication into an asset that they need to see and control. But also from a certification standpoint — and at the risk of getting a little too technically nuanced here — we are the only panel product that has a UL 1741 PCS (power control system) rating today, which is different than an energy management system rating. And the distinction really is in the terms that I'm using there. Energy management is good for things like load shifting energy, if you will, energy consumption.
Power controls require the ability to do instantaneous import and export limit controls, because that has a physics impact on it. If I fail to limit the import rate, as in, I let an appliance run without letting it be controlled or throttled, then I'm going to not just potentially trip the customer's breaker, I might have some adverse effects upstream on the distribution grid as well. That's where the hardwired controls become not just necessary, but in fact critical.
David Roberts
Interesting. Part of what you sort of boast about the product on the website is that it's got hardened communications. So, maybe explain how a utility communicating with a panel inside your home is different than the utility communicating with this panel. Why is this panel more reliable in terms of utility communications?
Arch Rao
Yeah. So, I think the functional safety piece of it and the customer experience piece of it are the two buckets to look at it through. Right. The two buckets that have been the capabilities within. The functional safety piece of it has no reliance on external communication. It's a physics-based limit. So, for example, if the conductor rating or the service limit to your home is 100 amps, that is what is hard coded into the device. Right. And the expectation is that the Span panel has sufficient local sensing controls and logic capabilities to ensure that you never violate that from an export or import perspective.
And it's important for us, and we do this through testing and UL certification, to demonstrate that even with no external comms or no connectivity to the internet, no connectivity to the cloud, that limit will not be violated.
David Roberts
I see.
Arch Rao
Then, we talk about communication, and that's driven by utility experience or customer experience. And we kind of think about that communication stack in two categories, looking out and looking in. Looking out is our communication back to the utility, whatever control system you want to call it, ADMS, DERMS layer, just our platform, if you will, and that goes over cellular or the customer Wi-Fi or Ethernet, whatever the case might be, out to the cloud. And it's a set of APIs. But then we spend a lot more time thinking about looking in, which is "What does my customer experience need to be like for them to not experience as hard on-off control?"
Because that's not a good experience. So, the last couple of years, what we built is interoperability with EV charging, with HVAC systems, with water heating, with a slew of batteries that we communicate with. And that can come in one of many forms. Right. It can be wired comms or Modbus, it can be wireless comms using CTA-2045, which is a standard protocol for water heater controls or Wi-Fi with Matter. When we talk to thermostats like Nest or Residio, and that ecosystem has gotten rich in the last couple of years with the Span device.
David Roberts
Can I ask about the ecosystem? Because I had a, you know, I had a guest a few weeks ago talking about the sort of efforts underway to standardize these things. You've got a bunch of different kinds of appliances talking to a bunch of different kinds of boxes, and the danger is just having ten different standards and ten different ways of doing this. Then, it becomes difficult to integrate. Are you finding that there's enough standardization in these communication protocols that your box can talk with more or less any device?
Arch Rao
Yeah, I think for the major devices, there are some established communication standards that have become fairly standardized. Water heaters now in the US, for a few years now, have been required to have what's called an eco port or a CTA-2045 compatible port. And we are able to communicate with virtually every new water heater that's being manufactured in the US today, agnostic of the manufacturer, using a generic module, a CTA-2045 adapter. And that's like a $50 adapter or $60 adapter, if you will. So, I think on the water heater segment, that's been fairly standardized. HVAC, depending on whether it's a single stage, dual stage, multi-stage, variable stage, whatever the case might be system, we can either talk directly to the appliance and that space is not yet standardized.
So, for example, we have a partnership with Mitsubishi where we're using custom APIs to be able to do throttling of their compressor. But increasingly, there is a push towards standardizing communication over Matter for HVAC, at least from what we can see.
David Roberts
Let's pause for a minute because people may not be familiar with this. Matter is a protocol, a shared protocol that people are sort of converging on.
Arch Rao
Correct. So again, you can think about it as you can have any transport layer. The transport layer could be wireless Wi-Fi or Bluetooth, as the case may be. And the protocol is Matter that allows you to have a standard translation library, if you will. And we've seen that adopted by thermostat manufacturers now. So for example, our product today, once deployed, whether you have, let's say, a traditional HVAC system with a Nest thermostat that we can talk to via Matter, or a newer split air conditioning system with Mitsubishi where we have direct integration. Both of those are controllable by our Span.
David Roberts
And presumably, home batteries, I'm guessing, already come with a standardized communication layer.
Arch Rao
Yeah, unfortunately not. But for better or for worse, over the last several years, when the adoption rate of batteries has scaled up rapidly, if you recall, our genesis was a product that could do better backup or software control backup. So, we have good relationships with and integrations with all the leading battery solutions in the US market. So, Tesla Powerwall, the Franklin battery, the Enphase battery, the SolarEdge battery system, if you will, that we have direct wired communication today.
David Roberts
You're pretty confident you can communicate with most HVAC systems, most hot water heaters, most EV chargers, most home batteries. Those are the big buckets, right? Is it worth chasing after, like talking to a stove, or... You know what I mean, is it worth hooking up those other appliances?
Arch Rao
It's not worth it, really, from a controls perspective, right? You hit the nail on the head. EV charging, electric air conditioning, where customers are either adding air conditioning for the first time or they're doing a fuel switch, and water heating are the three most likely new loads in a home outside of potentially induction cooktops. And those are the three loads that have the least perceptible impact to the customer when you control them through, let's say, throttling. If I ramped on your EV charger for 15 minutes and you're already charging it for six hours, seven hours, whatever the case might be, there's no impact to you.
Right. And when I control the speed of your compressor, your HVAC is still blowing warm or cold air, as the case may be. You can't tell that it's blowing slightly slower. But I've just halved the power consumption on your panel.
David Roberts
And water, of course, has thermal mass. Once heated, it stays heated for many hours. So, the timing there is not that important.
Arch Rao
That's right. So, our focus has been, let's focus on the three most important loads and the most likely loads to be electrified and therefore be the trigger for a service upgrade or by extension a distribution system upgrade at scale. And if you can control those — and the battery then becomes another reservoir. I mean, if you happen to have a battery, which again, for most customers there isn't an obvious economic argument to have a battery yet. If you happen to have a battery, then fantastic. We can use that to never have to throttle your loads either, because we can just have that inject power into a bus bar.
David Roberts
Yeah, that's true. I guess if you've got a battery, then that does all your throttling, basically. Right. I mean, that basically is what a battery is.
Arch Rao
That's right. But again, there's a cost to the fixed cost of the battery. If I'm able to throttle it appropriately, then it's great.
David Roberts
Unless homeowners really, really, really value backup during a blackout.
Arch Rao
That's right. Think of those as being the four key appliances, if you will, the devices, if you will, that we have prioritized and by design have done integrations with and expanded that interoperable ecosystem around.
David Roberts
So, talk about the pitch to utilities here. So, you know, I mean, we know that demand is rising. We know that lots more demand is on the way. So almost, I think pretty much every utility in the country, more or less, is thinking about "How do I accommodate this?" As you say, one way to go is to build more transmission and distribution infrastructure, build more wires, build more transformers, etc. That's very expensive and slow. So they're looking, they're all out there looking for ways, what they call "non-wires alternatives." Ways of doing this that doesn't involve building that infrastructure.
So why is this, if you're talking to a utility executive, why is this superior to other non-wires alternatives?
Arch Rao
Yep. I'll start with some statistics and I'll go into the technical details here. In the last year, in fact, in the last five years, the category of capital expenditure for utilities across the US that has been the largest and has been growing at the fastest rate is distribution CapEx.
David Roberts
Yeah, that's why electrical rates are going up, by and large. It's not the generation; it's mostly T&D.
Arch Rao
It's actually even less transmission. It's mainly distribution because you start there and then you go up. And again, we talked about the utilization rate or the loading factor on the distribution grid right now and increasingly, and rightly so, regulators and customers are saying, "Hey, utilities, the rate of rise of energy costs is unsustainable. Can we not see that rate rise not happen quite so fast and quite so frequently?" Hence, the utilities are looking for non-wires alternatives, as you rightly put. Span is today both a proven technology that has been deployed at scale and as I mentioned — again coming back to your very first point — we've proven it intentionally through a consumer-led adoption or installer adoption model and now we're coming around to saying, "What if this was part of the infrastructure?"
And we have both the empirical proof points and the validation from some third-party cost per evaluation that we're bringing to utilities. For example, we did an analysis that said if the cost of a Span system installed and the cost of the communication and compute control service over the course of 15 years is X to the utility per endpoint, what is the benefit to the customer and then the benefit to the utility as well?
And this is based on their own published numbers around the cost of transformer upgrades, distribution system upgrades, et cetera. The avoided cost benefit alone is roughly 3x that of the cost of our solution to the customer today, to the utility today. So that's where we're seeing very meaningful and positive conversations happening. So it's no longer a question of "Will this technology work?" It's no longer a question of "Is this technology cost-effective?" It's now a question of "What is the business model that allows us to scale it?" Do we own and deploy it like meters?
Do we do it primarily as a rebated solution for new home construction, or customers that have this service upgrade problem? Or do we find a way to leverage the demand response capabilities that the product inherently offers, or virtual power plant capabilities that also continue to pay for the solution over time? Right. So, I think that's the phase of the conversation we're in. Some utilities and some of our partners have already started to lean in and place commitments to deploy this product, even if it's not at millions of home scale, but tens of thousands of home scale.
David Roberts
So, their main thing is just avoiding building distribution infrastructure. That's the primary value bucket here for utilities.
Arch Rao
I'm saying that's the one that is large and concrete out of the gate today. What we haven't talked about, quite frankly, is some of the software capabilities. Well, first, if I can give you meter quality data, and by the way, we are an ANSI grade meter in the sense that we're listed to ANSI C12 accuracy for billing purposes. If I can give you that meter data at the premise level and now down to an appliance level, that is hugely valuable to a utility that otherwise pays for that with advanced metering infrastructure. And now I can give you meter and sub-meter data with which you can do, if you wanted to, very clever things like not just time of use, but type of use tariffs.
Right, but that's one element, that's another sort of, say, cream on top of the cake. But we've gone one step further, actually, David. What we've done is to say, "If I can keep your home below 100 amps, and I actually am seeing that more often than not you have 30, 40 amps of unused capacity anyway. What if I was able to virtually or dynamically change your service rating using software to be lower for short periods of time?"
David Roberts
Let's tell people what service rating means.
Arch Rao
Sure.
David Roberts
So, a 100 amperage service rating on your home means your home can draw in 100 amps, no more or you're going to fry things. That's the service rating of the home. And so, you're talking about having a dynamic service rating where the utility can see your level, your average level of use, can see your minute by minute use, really, and can keep the service level lower than 100 but above what you're actually using. And that frees a little bit of space, basically, like that little sliver of capacity. You free up that, whatever, 40 amps remaining in each home, in a million homes, that's a lot of capacity.
Arch Rao
You could build data centers with that, potentially.
David Roberts
Yes, I was wondering when those words were going to be spoken. I can't remember the last pod I did where that did not come up.
Arch Rao
I have a love-hate relationship with the, let's call it, fascination with building large data centers at the massive scale we're building it and the capacity required to meet that need. But setting that aside, we can come back to it if you're really interested in my points of view on that. The dynamic service rating capability can now be applied not just to your home, but what if it can apply that to all the homes downstream of a substation that is currently congested because of some other reason? And we've built that software capability.
David Roberts
Right. And this, I think, is really to me, was the cool bit and the eye-opening bit, which is that if you've got these things installed on whatever thousands of homes, millions, whatever, and the utility can see them and control them, then it gives utilities the ability to sort of coordinate things on just a way, way, way, way more fine-grained level than they are able to now, basically.
Arch Rao
Actually, our thinking is more than the ability to fine-grain control. It dramatically simplifies how we think about grid utilization. I'll expand on that. What does the distribution engineer care most about? What does a utility get scrutinized over? Reliability of energy delivery. If I'm able to ensure that the sum of all my sources and demands, and as you know well now, the grid is bi-directional in a lot of ways, etc. If I'm able to ensure that this subset of my distribution network can operate within a, and using technical jargon, a "dynamic operating envelope" that I can define and I might need to change it at different points in time because I might have an aging transformer that can't be loaded more than 80% of its rating. I might have a particularly hot day when I have too much load coming on at the wrong time or at the same time.
So, from the utility perspective, they actually, if you really get to the bottom of it, care less about being able to control individual thermostats, water heaters, and EV chargers. What they care more about is, "Is my reliability rating high because I have a stable distribution grid where I'm not overloading or underloading it in the wrong way or like partially loading it in some areas?" On the other side, what Span has enabled with the software that we have facing the customer is to give customers agency. You may be better off allowing Span to locally throttle your EV charger, but I might have somewhere to be in an hour and I might say, "Actually, Span, change my priority. I would rather in real time now you pause my water heater because I'm not planning to have a shower. I don't care about air conditioning. I'm out the door in a few hours."
So, I'm able to change that much like we used to do for what we call software-defined backup in the day. You're now able to offer a stack rank through your app of "How do I plan to stay within 100 amps?" Or by extension, "How do I stay within, let's say, a temporary limit of 70 amps, but actually get compensated for it by the utility?" And that's unprecedented.
David Roberts
Yeah, and it brings up a question. So, from the customer's point of view, from the ratepayer's point of view, they're mostly interacting with Span through the app. They're looking at all their loads and you know what's using what. From their perspective, it makes functionally no difference whether the panel is sitting behind the meter in their garage or at the meter outside. From the customer's point of view, the interface, the functionality, it's all the same.
Arch Rao
So, that means the customer is in control. Meaning, as you say, the utility wants to dial back your EV charger, you can say, "No, I don't want you to do that, because I need to be somewhere." And I wonder, does the fact that the consumer has the final say, does that do anything to sort of diminish the kind of global reliability of all this? Do you know what I mean? Does that introduce any kind of X factor? Does that reduce the confidence we should have in all this? I mean, how does that all average out?
If anything, that is the win-win with this, so to speak, right? Because I'm not saying, "Hey, David, you got to throttle your EV charger." I'm just saying, "Here's your updated budget for the next couple of hours," right?
David Roberts
You've got to stay under 100 amps.
Arch Rao
That's all.
David Roberts
But theoretically, so could I as a customer say, "No, I don't want to do that." Do you know what I mean?
Arch Rao
So, that's where it becomes a little bit more of, is there an economic incentive to it or not, versus, is there a need to do it? If you're automatically enrolled in a program, a utility might say, "I'm giving you these free services and a free device because I'm opting you in by default, but the likelihood of me calling on you is very low." But much more importantly, with Span, what's different is, unlike traditional demand response programs, where it's a call and response model with, again, traditionally very unpredictable levels of participation.
David Roberts
I mean, right now, they're incredibly, as I keep saying, they're incredibly analog right now. Like, right now, they literally involve a lot of, like, phone calls and stuff.
Arch Rao
Yeah. Again, I'll offer a somewhat, perhaps a striking point of view on this. Demand response programs aren't very effective. What I mean by that is the components of demand response programs that are most effective are the utility calling like a 5-megawatt steel manufacturing plant and saying, "Please turn off your smelters."
David Roberts
If you're going to make a phone call, you want to get a big chunk, right? Like, that's a lot of soft costs. That's like a lot of labor costs or time or whatever. And if you're calling, you're never going to call 10,000 individual customers or, I mean, you can text them, but you have no idea who will respond or with what.
Arch Rao
Yeah, so I think the point I'm trying to make is, even if we have irregular participation, there are a couple of levels of controls here, right? One is the way the service rating or the dynamic service rating works is it still honors your personal preferences in terms of your stack rank and Span works hard locally using local controls to keep you below that new dynamic rating, if you will, for a temporary amount of time. But also, I'm able to see the entire fleet now and say, "Actually, I have available capacity here." And it goes one step further.
I'm able to see what types of loads are being controlled and throttled and being consumed in real time because we have circuit by circuit visibility. That's what allows us to be highly potent in terms of the utility being able to call on what has historically been demand response to now what I like to think of as dynamic service rating or dynamic operating limit for the network.
David Roberts
Right. So, even if an individual household goes rogue for whatever reason, turns on all its devices, or refuses to stay under its limit, the utility is balancing a pool of houses. It's a group of houses, a group of buildings. So, you can still balance that out. So, I guess, like, you can have customer control and reliability both if you have enough, like a big enough pool, basically.
Arch Rao
That's right. And what that translates into is, I think, the theme of the day across the board, across American utilities, is affordability. And you can't sacrifice reliability for affordability. You also can't sacrifice customer experience in pursuit of affordability or reliability, for that matter.
David Roberts
Well, speaking of sacrifices, I did want to ask about privacy. I guess this is everybody's — you know, I find just talking to the public, talking to people who are not following all this furious development in this space, which is like week by week at this point, you know, the very first thing they think is, "The utility turning down my water heater. Yikes!" Like, or the utility knowing when I'm turning on my hot tub, or... you know what I mean? Like when I'm taking a shower or whatever. People, I think, are naturally a little freaked out at the idea that instead of their home just appearing to the utility as a single sort of like level of demand, it's suddenly the utility can see inside to your things.
Arch Rao
I think I understand the logic.
David Roberts
Yeah, like what do you tell people? What are the privacy protections here? What do you tell people about privacy concerns generally?
Arch Rao
Well, first, I think before we talk about Span's specific capabilities and how we address privacy and security, it's understandable but it baffles me how we vilify utilities. You know, they've had our energy consumption data and water consumption data for decades now. Right. They can see a water meter going up and down and they can correlate that to time.
David Roberts
I guess that's what smart meters have been doing for years anyway.
Arch Rao
Right, exactly. So, I think the utilities care more about ensuring that energy delivery is cost-effective and the system is stable than they care about knowing when you're taking a shower. But that's just my point of view. On privacy, I think we take this seriously. I think your data is your data, your information, like what amount of information you want to share with the utility and how should be obvious to you and explained to you, and you should be able to control that. And thankfully, there is this wonderful device that we all have in our pockets that allows us to give that agency to customers.
And that's what we're focused on. Right. When we think about our consumer app, for example, we go to extreme lengths to make sure that we notify customers of their information and what part of that information can be used or can be shared. I don't think the utilities, even if they could have circuit by circuit level energy consumption information, are really looking to utilize that in any way, good or for bad. You get what I'm saying?
David Roberts
Yeah, I mean, I do try to represent these privacy concerns fairly, but I do sort of wonder like, "Why would a utility care when you are taking a shower?" I guess, you know, like if you have a grow operation, you might worry about a utility having your information. But yeah, I do sort of wonder like, how much information is there in this really? Like, you know, "Dave runs his stove every night at 8."
Arch Rao
I think they care about, at least from my point of view, from a data science perspective, the conversations we have with utilities are more about "What are usage patterns in aggregate?" Or "What are distributed generation patterns in aggregate? How does that correlate to a five-year horizon of investment planning that I'm doing on generation or transmission or distribution? And are we solving for the right things over there?" I think those derivative information or analyses are a lot more valuable in general, I think, to a utility than specific information of consumption.
David Roberts
Well, a related concern, and you know, if listeners listen to my pod with Cory Doctorow, he's big on "enshittification," he calls it, but basically, we live in a tech world of platforms now and we're all very familiar with the dynamic whereby a platform begins very customer-friendly to lure you in and then sort of once you're in, it tries to sort of make it difficult to get out. And then once you're in and it's difficult to get out, then all of a sudden it starts exploiting you and gets crappier and crappier, draining more and more value out of it and shoving more and more ads at you, etc. This is the sort of worry about platforms.
And so, I guess if I'm, you know, Cory Doctorow and I'm looking at this, I'm worried like what happens if I get — you know, right now all this looks very pro homeowner. It's all upside for me. It looks great. But like once I'm all signed up and Span sees and controls all my appliances and then I get stuck on Span and then Span is less customer friendly once I'm stuck. Do you know what I mean? This concern about platform capture, how do you talk to people about that?
Arch Rao
That's a very good question. I think one of the things that's probably worth drawing a distinction around is that we are not pretending to be the voice agent in your home or the gateway that is trying to connect all the appliances in your home with your email account, with your calendar, and so on and so forth. Right? Our primary purpose is to be a control system for power and energy, hence where our product is located too. We're not trying to be inside the walls of your home, we're typically outside the walls of your home. So, for what it's worth, that's our operating hypothesis.
And at the risk of trying to defend our benevolence here, we also don't try to charge customers for functionality that is the core premise behind why you would buy the product. Right? Like, we have carrying costs in terms of communication to the product even after we've sold the product today. We don't try to saddle the customer with a "Here's a $5 a month fee. You got to pay just to be able to see your data."
And I think I can say this as the founder of the company, and it's something that I've believed for a long time: We are not planning to get to a level of penetration and say, "Oh, by the way, now, David, you have a product, you got to pay me money for it." And I say that because I think we are confident in other software services that actually are valuable to you and to perhaps the grid operator or the utility, if you will, that are monetizable not at 100% subscription, but even at partial subscription. I'll give you two examples of that maybe.
One example is what we already talked about. The utility highly values reliability, and they are interested in saying, "Look, we are willing to pay for the cost of connectivity and the cost of dispatching API-based controls to communicate to devices at the edge of the grid that can help us regulate power on the grid in real time. That is a valuable service, and we're willing to pay for it because it allows us to keep the cost of energy delivery down lower for our customers." So, there's a societal good and there is a technical good, if you will, that has actual economic value that we can quantify and charge the utility for and not you for.
I do think there are more interesting things we have started to do now with our data. We actually generate close to 15 billion, 20 billion data points a day, even with a somewhat nominal penetration we have across the US, a very humble fleet of homes that we enable with Span today. But we've started to be able to understand the data in a way that I think could be a layer of added protection for the customer.
David Roberts
Have you unleashed AI on it yet? This is what I'm assuming: that you've got all this data, you're going to anonymize it, then you've got a massive data pool that you're going to send AI digging through, looking for insights.
Arch Rao
Yeah, AI or machine learning, the nomenclature aside, I think yes, we have, but I think keep in mind our data is not capturing conversations you're having in your kitchen. Our data is time series energy consumption data. So, it's a lot easier to parse through in some ways. It's a lot of it and it's actually fairly boring data for the most part. And what we focus on is the parts of the data that aren't boring. If I start to see that your voltage surges or sags often, would you see value in me letting you know that, "Hey David, I think you may have an electrical issue that's causing your voltage to surge every once in a while."
David Roberts
Right, and you can spot those before they become a real problem. This is a thing with these sorts of electrical problems. Like, if you can spot that early.
Arch Rao
You're a smart man. You got there before I did. But that's exactly right. We can see line one and line two being out of phase and potentially causing your air conditioning compressor to fail. Not today, but if you keep using it like this, it's going to fail. By the way, we can start to identify what might be earlier symptoms of ground faults and arc faults in a home circuit. So, let me put this to you: not just to be able to see your energy consumption in an app, and maybe this is a survey that we can run through your audience. Would you be willing to pay $5 a month to potentially avoid an air conditioning system or a water heater from failing in your home, which arguably ends up costing people more to fix after the fact than before the fact?
David Roberts
And that would just be like a monitoring service, basically like a...?
Arch Rao
Again, this is not me announcing a product capability on your podcast yet.
David Roberts
You can't put those two lines back in phase remotely. It would just be to notify people.
Arch Rao
Think of it as Span Protect. Right. We are looking at data that you otherwise have no way to see or read, really no way to assimilate and make sense of. And we're building capabilities to say, "Look, we're actually looking at it all the time. Most of the time it's benign and it's useless, but some of the time it actually is very telling of something. And what if I could tell you ahead of time that there is an opportunity for us to prevent some other catastrophic failure that is going to happen?"
David Roberts
Yeah, if you could help to prevent electrical breakdowns, disasters, faults, and things like that, I mean, that is value.
Arch Rao
And I'll tell you, there's actually a monetized quantitative value there. Right. We have on our cap table, for example, investors that are insurance companies. And what if I can reduce the cost of your home insurance because you have a solution like Span? Would you then pay X dollars for it? You can kind of do the math there. It starts to make sense.
David Roberts
Yeah, interesting. Time has flown by. I have one final question, or kind of questions. So again, I did a pod — I've become the guy who starts half his sentences with that phrase — I did a pod with Pier LaFarge, who is working with utilities. His whole idea is that rather than utilities fighting with distributed energy and fighting with distributed energy providers and that whole supply chain, why don't utilities just do distributed energy? In other words, they're more likely to know where distributed energy is needed, where it would be helpful to the grid, etc. And it occurs to me that a utility with this kind of visibility into its residential fleet is really going to have a good idea of like, "Where would a battery help? Where would a little additional local generation be helpful to the grid?" It's going to be very good at targeting distributed energy.
And doing what's called, you know, what Pier calls a distributed — crap, I can't remember the name — DCP, basically like a giant RFP for a bunch of distributed energy in a particular area. I don't know if you would be integrated in that effort at all or if that would be a purely utility thing, but they would definitely like it seems like your product would be useful for them in that. Have you thought about that side of things?
Arch Rao
Yeah, Pier and I have connected in the past. SparkFund, I think, is an interesting enterprise. Let me maybe answer that a little less specifically and abstractly and say: One of the historical friction points has been the growth and adoption of distributed solar, let's say, in customer homes. And we've seen how that fight has played out here in California with the NEM-2, NEM-3 transition, but also more broadly with the decline of feed-in tariffs. Which was expected in many ways, but nonetheless could have been transitioned better. But that kind of is a good example or perhaps the most useful example we have looking back at customer-owned distributed energy or asset-financed distributed energy resources.
Specific to solar, I've long held a point of view that solar is not the right anchor product. And what I mean by that is, if you as a consumer say, "Look, I value self-reliance, I value self-sufficiency," and therefore I want to put solar on your roof, that's fantastic. But I think it's conflating that to being an economic argument is a little bit rich because even if you manage to put solar on every roof, which is not possible on most roofs or which is not possible on most homes with limited interconnection, it doesn't change the fact that the appliances that fuel your life are actually powered by natural gas.
And there's no magic way to supplant those gas molecules with electrons, even if they were free. So, if you look at it through the lens of, let's say again, societal good, what we really want to do is decarbonize end consumption.
David Roberts
Electrify everything, in other words.
Arch Rao
Electrify everything. Which goes back to our 2021 conversation with Saul Griffith. That is the goal. That should be the goal. And then you can have an objective conversation about "Where is the best place to put solar?" It might not even be in a distributed manner. It might be community solar. It might be in the middle of nowhere where it's more abundantly available and you can build transmission faster or whatever the case might be. And it's most cost-effective. There are pockets in the network, but it might make sense for the utility to own some solutions. I know folks that are working on substation connected energy storage, for example, in fact.
David Roberts
Yes! I'm so interested in that. To me, like the lowest lift, obvious benefit grid-wide is just putting a giant battery attached to every substation. Like boom. You've solved like 80% of grid problems with that alone.
Arch Rao
Potentially, yeah. Especially if the power electronics and the battery can do very useful power quality management. Right. So, I think, again, there is a valid conversation that we should have as an industry. I think the opponents of that point, if you just to play out the — I'm borrowing from the recent podcasts of Lex Friedman and Ezra Klein here on presenting the Steel man and the Anti Steel man — the historical formation of the utility and sort of the oligopolistic nature of utilities in the US creates sort of a purpose, incentive for utilities to own large amounts of CapEx investments, et cetera, et cetera.
Isn't there a more egalitarian, democratic model over there? I don't think we have time to solve that. I think we haven't —
David Roberts
That's a little bit Pier's point of view. He's just like, "We need to do this very fast. We need some kind of giant, big coordinating institutions to do it. And look, we've got some. Here they are. They're not perfect, they're not great, but they're built. It would be crazy to throw them away and try to start from scratch when we're under this time constraint."
Arch Rao
And I'll bring that back to the very first topic of your conversation, like why our expansion/pivot, if you will, to utilities. I think the utilities are positioned to be the single most influential, impactful channel to help us decarbonize, to give customers agency. And so, our solutions have just evolved to graft, to host.
David Roberts
Yeah, yeah. This is the way Pier puts it: the transition from sort of phase two of the renewable revolution to phase three. Phase two is the consumer-led phase, which is what we've been in, which is like persuading consumers to voluntarily adopt these things. And he says we need to make the switch to phase three, which is an infrastructure perspective. We need to think of this as infrastructure. And this is why your product grabbed me. I was like, "Here's an actual individual company doing that very switch. From customer-led to infrastructure-led."
Arch Rao
Yeah, and I will leave you with something that is taking that one step further. Let's just say you and everybody listening to this is bound by some mutual trust and confidentiality here because we are not ready to talk about this. But I'm excited by this conversation, and I think it's useful to point out. Right, I think it's inarguable that we're going to be investing a ton of money in infrastructure. Also, it's going to be driven by the vast amount of compute demand. But if you strip it down, compute demand is really electric demand.
It's just another form of load. We just talked about how the distribution network has a lot of underutilized capacity. Specifically, I just told you how 92% of the homes that we serve today have 40 amps or 10 kilowatts of unused capacity. What if I can distribute compute and that's also a utility service?
David Roberts
Wait, hold on, I think I missed that. The actual computing is distributed. Wait, where? How? What? Say again?
Arch Rao
We're going to have to find another hour at some point in the next few quarters to talk about this. I think I'm just leaving to you that there's a way to solve a lot of what we see today as being a heavily constrained optimization problem, which in some ways it is under the set of parameters or constraints we've established for ourselves. What if we can think of it slightly differently? What if we can use existing infrastructure better, not just for the electrification of our homes and our everyday appliances, but also potentially think about utilizing that excess capacity for micro data centers?
David Roberts
Interesting. Yeah, distributed data centers. That's a thought. Well, I mean, even shy of that, I mean, I've been saying on every pod, people are probably sick of hearing it by now. But like, we need all this new power, for some reason their first instinct is like, "Let's go find a nuclear plant." But like, of course, you're going to run dry of those pretty quick. And then like, "Okay, well, gas." Well, gas, the supply chain is choked. It's impossible to build a gas plant before 2030, no matter how much money you have. Just because you can't get the parts.
So then, well, wind and solar is faster than that. But what's the only power source faster than solar? And that is existing power capacity in residential homes. Coordinating existing residential capacity. There is no faster way to access new capacity than that. And I just feel like the logic of that is inexorable. And eventually, all these hyperscalers are going to realize that, like, "If you want it fast, that's how you got to do it."
Arch Rao
That's right. And today, I'd like to announce that we've solved that problem. In some ways, we have, and we should talk about it. And there's a lot to talk about there. But I think this reminds me actually of a pearl of wisdom or a point of logic that I've heard many times. I've now shamelessly adopted for myself from Patti Poppe, who's one of my favorite utility CEOs. If you think about the concern of rising energy costs, it's a pretty simple equation. I have to reduce the amount of dollars I'm investing into CapEx, OpEx, etc. That's a numerator. And I have to increase the kilowatt hours consumed, that is the denominator. Solutions like Span can unlock both.
David Roberts
Yeah, I mean, it's just all about making use of the grid we already built. I mean, it seems like just the obvious place to start. Arch, this has been fascinating. I love tracing this stuff. I can't wait to see what utilities do with your widget. It's going to be cool to watch. So, maybe we'll reconnect in a few quarters and see what else is happening.
Arch Rao
Sounds great. David, always a pleasure speaking with you.
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.
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