The tectonic shift underway right now in the energy sector is unlocking the capacity of Distributed Energy Resources (DERs) to power much of our economy. This is exciting because the more DERs are deployed, the cleaner, more resilient our energy systems become. If the next generation of data centers is powered by distributed solar, storage, and energy efficiency (as Rewiring America and ACEEE have shown is possible), we will have succeeded in advancing the energy transition more in the next couple of years than we have in the past few decades.
If tapping into DERs happens at scale, the focus will inevitably shift to markets. To date, markets for demand-side energy resources have mostly been limited to 1) ESCO agreements, in which a company offers to install new energy saving equipment in exchange for a share of the bill savings; 2) utility or wholesale energy market programs where a third party aggregator delivers resources to a single buyer (in economics, this is called a monopsony).
In a world in which data centers and other large loads are buying demand flexibility capacity from other DERs, a new wrinkle is introduced to existing markets. Suddenly you have multiple buyers in the market at the same time, and you may have the same DER sell to more than one buyer at a time. For example, if I have a battery that can dispatch daily, I may have one buyer that needs my capacity twice a year, and other that needs it twice a month, and yet another that needs it twice a week. I should be able to sell to each of them, but not at the same time.
Emerging DER markets need standardized Measurement and Verification (M&V) - we need to know how much was delivered; and a System of Record - we need to make sure that the same capacity isn’t being sold to multiple different offtakers at the same time. Standardized M&V means that we are measuring DERs using a consistent, transparent set of methodologies; a system of record means that we need to assign a unique serial number to each watt-hour that is transacted. The serial number must match up to the source and to the M&V. This is the settlement layer that DERs need to be able to scale to meet the moment.
Our Big Product Announcement
Since performance-based contracts were introduced in the late 1980s, M&V has always been tacked on as an engineering exercise that was performed periodically to validate the models used to estimate potential savings. This months-long exercise required data collection, an agreement on methodology, various bespoke adjustments, and if the numbers didn’t add up, it would often end up in a lawsuit. Companies like Recurve figured out how to perform M&V at scale, but being able to perform M&V on-demand has heretofore remained impossible.
When we launched Aristotle AI back in April, we got close to this goal. And over the past few months, as we’ve refined the platform, it has become more and more a reality.
Here’s why it’s important to be able to do M&V on demand. If you are a DER developer, the thing that’s most important for you is the performance of your asset. And if you are trying to close a customer, get financing, or sell your capacity to an offtaker, there is nothing more powerful than being able to point to independent, revenue-grade M&V that shows exactly what your assets are delivering.
The challenge - to date - has been a chicken and egg problem. Historically, this M&V has been expensive. Again, it’s been something that engineers do, and never at scale. If you’ve deployed a hundred DERs, you might end up spending tens of thousands of dollars on third party audits before you are able to sign an offtake agreement. (As an aside, this is how the carbon offset world works and part of the reason why it is so broken).
Because Aristotle AI is now able to provide end-to-end, automated M&V for any DER asset, we are extremely excited to announce that we can offer FREE M&V for any company that needs to prove the value of their energy resources.
We believe that the motive force of decarbonization will come from unlocking markets for DERs. As the “assayers” of the energy transition, WattCarbon is uniquely positioned to enable the thousands of companies who are creating, financing, and deploying the energy assets that will be foundational to the energy transition. Providing them with a way to prove their worth will be the most impactful thing we can do as a company.
If you give away your M&V for free, how will you make money?
I know what you’re thinking, and it’s a good question. We lay out the answer on our pricing page, but to save you a click, the short answer is that many of our customers use our API outputs in their own tools and others want custom reports based on the savings results. Additionally, we provide a settlement-grade Registry (WEATS) that’s used for transactions. In our view, it’s fine if all you want to do is show off your impacts. Once you want to use that data for official purposes, it’s seamless to make the transition.
Most companies take inspiration from previous innovators (aka, the “X for X”). We don’t see a direct antecedent to WattCarbon in that regard, but there is a similarity between the rise of DERs and the way that e-commerce emerged in the early 2010s. Where once PayPal and Braintree stood as innovators, Stripe allowed e-commerce to be programmed directly into an app. Today, ESCOs and market aggregators plug DERs into legacy systems the same way that PayPal and Braintree did for early e-commerce companies. Automated M&V changes the value proposition of DERs the way that programmable financial infrastructure changed e-commerce. You can now directly program your DER to enable it with revenue-grade M&V and a settlement-grade system of record. The potential is limitless. This is an exciting time and WattCarbon is looking forward to working with those companies on the vanguard of the energy transition.