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Why Solar and Battery Storage Is Now More Valuable Than Solar Alone · Clean Power Hour

• 0:50
  Jay Marhoefer: The whole point of the value stack is not the value they provide. It's how is it monetized, right? And so what you're going to see with longer duration batteries that have that price point is, you know, you're going to see value associated with dealing with ramping, for solar and that type of stuff, for having, you know, the ability to say, solar and wind and that type of stuff, you've got battery backup to make sure you meet commitments in terms of power supplied and that type of stuff, you're going to have both transmission and distribution deferral, which now can be monetized, and say, Yeah, we have to build another, another, you know, 35 kV line, because we've got a bunch of batteries here at the end of the line here, and they're taking care of it for us, sure, and thus, you know, that's going to be just something that augments the value stack.
• 1:41
  intro: Are you speeding the energy transition here at the Clean Power Hour, our host Tim Montague, bring you the best in solar batteries and clean technologies every week. Want to go deeper into decarbonization.
• 1:51
  intro: We do too. We're here to help you understand and command the commercial, residential and utility, solar, wind and storage industries. So let's get to it together. We can speed the energy transition
• 2:08
  Tim Montague: today on the Clean Power Hour, earn, save, protect, maximizing the value of solar plus storage for C&I customers, takes a combination of advanced technology, strategic operation and continuous system optimization. My guest today is an expert in this, and literally wrote the book. He's the founder and CEO of intelligent generation, a software of a software as a service company in Chicago, and He's author of re energizing America, a common sense approach to achieving US energy independence. Welcome.
• 2:41
  Tim Montague: Jay Marhoefer, it's an honor and a privilege to have you on the show.
• 2:48
  Jay Marhoefer: Well, Tim, I think the honor is mine, and it's long overdue that we meet, but I'm really, really excited to be here today.
• 2:56
  Tim Montague: Well, thank you. I really appreciate you making time. You know you are a extremely early adopter, right?
• 3:04
  Tim Montague: You got interested in so in solar plus storage back in the mid 2000s and here we are in 2025 and things are finally really heating up. But Jay, give our listeners a little background on yourself. You've got an interesting background.
• 3:22
  Tim Montague: And what was the seed for intelligent generation?
• 3:27
  Jay Marhoefer: Well, all right, we do have 45 minutes. I'll try not to take all that time. But, you know, intelligent generation was really the synthesis of three careers of mine and and it was also the result of seeing certain trends and evolutions and technology that I knew would repeat themselves in, you know, in the energy and the clean energy, in the clean energy markets. So the very first job I had out of college, I was an actuary for three years. And this was the 1980 and this is when the when the PC was just starting to emerge, everything was in mainframe. I mean, you know, all the coding was in Fortran. I eventually learned cobalt. But, but being an actuary is applied, is higher level mathematics applied to the insurance business. And so a lot of stuff related to optimization models, you know, best fits, I mean, these types of things, that was the background of an actuary. Now, you know, that got to be kind of tedious in a hurry, although it was paid well. So I thought, well, I want to do something else. And at that time, the thing that was starting to emerge were these big projects being done by consulting firms like at the time it was, it was the consulting division of Arthur Andersen, which became Anderson Consulting, and which became Accenture. And so I left my job as an actuary because they were hiring everyone back in those days. I mean, you had people who had backgrounds in engineering and science and math. I think they even hired somebody in animal behavior, and that person, I think, eventually went into HR, but the notion of Accenture was, you know, Anderson Consulting, world class training, big projects, everything done in cobalt, big mainframe systems. And so who are the who were the users of big mainframe systems back then?
• 5:19
  Jay Marhoefer: Well, the US government was, was another one. Were public utilities. And so I did a lot of work in those seven years. And then I eventually left Anderson went to Price Waterhouse. Same thing, predominantly in the electric utility sector. And so I learned that business, and it was kind of a throwing business, but we were putting in big customer information systems and, you know, vocational systems and all these types of things. And after about 11 years of that, you know, software development process. Project management, public utility sector. I'm like, Okay, this is I want to do something else. So I went and worked for a series of startups, young companies, in the consulting frame. And again, project management, you know, PeopleSoft, Oracle implementations, ERP was a thing in the 90s because we were preparing for y, 2k and during this time, I met the woman who became my wife. She was an attorney. And somehow I got inspired to go to law school and and so I thought, well, you know, marriage, and then, you know, mortgage kids on the way, I went to law school at night to Chicago, Kent, and it was actually there in 2002 with a class called Emerging Technologies, where we were all charged with saying, okay, the idea was the law can both accelerate and slow down the evolution of new technologies.
• 6:44
  Jay Marhoefer: And so choose a technology, and kind of, you know, talk about how this going to happen. And of course, the case study that we had was, was a telecommunications sector. And we had the Telecommunications Act of 1996 which basically, you know, added fuel to the whole internet fire, which, of course, melted down after y 2k was over, because no one knew how to deal with the last mile in terms of, you had big fiber networks, and they're transporting, you know, broadband internet, but you know, you had plenty of telephone service to get to, to get to the last mile of the house. So how do you solve that?
• 7:22
  Jay Marhoefer: Eventually, of course, it was solved. And anyway, the technology I chose was, this is around the time when George W Bush, who was president, and this whole thing about hydrogen fuel cells, he said, he said, Now just think, in 2020, you'll be able to drive this car, and its only emission will be water vapor, which was true. And I thought, well, this is kind of cool. Fuel cells are kind of a cool thing. And I looked, and of course, I realized, you know, it's not a renewable technology, because there's no such thing as a hydrogen mine. But certainly all the way back to my days as an actuary, became a really cool optimization problem. The idea was that you could extract hydrogen in two ways. You could either electrolyze water, or you could reform methane, you know, CH four, and you could use it for three things. You could use it for electricity, you could use it for thermal energy, and you use it for transportation in the fuel cell. And so that was the basis of actually creating a first patent. And a first patent was on the optimization of, you know, sources and uses using fuel cells. And around 2005 I realized, you know, and of course, I was writing the book re energizing America. It was all based on fuel cells, but I kind of realized the books that fuel cells ain't going to happen because it would be trillions of dollars to create a hydrogen infrastructure. But what is going to happen because we already have the infrastructure for it, or batteries, and thus there was a shift. And of course, you know what better time to start a company? Because at this time, I was a lawyer practicing law at a big, top 10 law firm. And I won't mention the firm, I'll just say that with the exception of one pro bono case I worked on, I absolutely hated it, because working for a big law firm is basically shifting money from one very well, Montague institution to another, right one wealthy group to another.
• 9:19
  Jay Marhoefer: And I had no passion for that, but I didn't learn a lot. And thus, you know, here I was with the synthesis of public utility work, this passion for, you know, the optimization of distributed energy, software development and the law, and then that's really the basis of intelligent generation. Was creating a business plan and all that. And and I had the good fortune of starting a company in the depths of the Great Recession, in March of 2009 and energy storage was nothing but a gleam in the eye of the Department of Energy, right?
• 9:58
  Jay Marhoefer: There was no such thing as a Tesla back then. These were all science projects funded by the DOE as part of the Recovery Act.
• 10:05
  Jay Marhoefer: But I had seen this picture before. We'd seen it with we'd seen it with PCs. We'd seen it with the Internet. We were starting to see it with solar, where, once you reached economies of scale, it just made sense. And the whole notion of intelligent generation, the block, you know, re energizing America was that energy, just like telecommunications, just like computing power, was going to be democratized, we were going to move into more of a distributed realm, and to do that, you needed energy storage.
• 10:33
  Jay Marhoefer: And of course, batteries, having the infrastructure set up, were a perfect means of solving the optimization problem. So we figured that out in 2009 of course, you know, as a wise venture capitalist. One who actually had a heart once said to me, said, Jay, you know, I've never been wrong, but I've been early, and we were at least six years
• 11:00
  Tim Montague: deal with this.
• 11:00
  Tim Montague: Yeah. I mean, timing is everything in tech startups, right? You can have the best technology in the world, but if your timing is off, it's going to be a tough road. So how did you stay alive being so early?
• 11:15
  Jay Marhoefer: Well, I was fortunate, because I was by myself with this company for the first year, and then I brought Mark thrum took a look at it. He was employed one, and Mark was a, was a. He's both a mechanical electrical engineer. And, you know, graduate of instead business school in Paris, right?
• 11:37
  Jay Marhoefer: So, very smart guy, and pure a pure engineering mindset. And he really liked what he saw. And Mark and I kind of CO created the culture of intelligent generation and but it was tough, right? I mean, our initial few years were pilot projects, one of which was funded by comed. It was eating, as Mark would say, it was eating a lot of ramen and beans and that type of stuff.
• 12:01
  Jay Marhoefer: There really weren't that many revenues. And then what finally happened was that you had fur quarter 755, which mandated the fast response frequency regulation market for which batteries were uniquely capable.
• 12:13
  Jay Marhoefer: Now, batteries are still expensive, and the batteries doing this for typically utility scale, but we thought, you know, this is something we can do.
• 12:22
  Jay Marhoefer: This is this is something and, of course, at this time, we had patented the value stack, right?
• 12:25
  Jay Marhoefer: We and this is back in 2010 where we basically said, you know, the battery is like a Swiss army knife, and it can produce a whole bunch of different benefits on both the retail and the wholesale side of the of the energy business. And it can produce, sometimes, it can produce these results simultaneously, and that's what the value stack was. So it was very it was very slow. It was very slow going in the first five to 10 years of the business, where we get, maybe get a project a year, we had our first paying customer in the frequency regulation market in 2014 added maybe a project a year, until, you know, 2019 20.
• 13:07
  Jay Marhoefer: And then things started to, started to move much more of the favor where costs had come down, electricity prices were going up, and people stopped thinking that batteries were going to catch on fire, right? So once we had enough of a base, a customer base, where they were doing the selling for us, rather than us trying to convince people of this, the business started to take off.
• 13:31
  Tim Montague: How did you and Mark meet?
• 13:34
  Jay Marhoefer: We met through common friends. So it was actually a birthday party for a friend of mine who was part of the family of the initial angel investors in IG and this was, and it was the sort of thing, you know, I won't mention names and all that, but she basically said, you know, the two of you guys should meet, because Mark was working at Whirlpool, but he kind of had it with a corporate, you know, the world and that type of stuff. And so he was looking to move to something else, and that was, we just hit it off, obviously. And I will say this too, you know, our founding. My co founder was a gentleman named Paul gazzolo who did not really work for IG full time. He was one of the best executives. You know, I knew CEO of like World Book and these companies. And Paul was a great pragmatist, and Mark was a typical French skeptic, and I was a dreamer. And so, you know, I think Paul, we were sitting around it at a dinner one time he said, Well, every great venture has three people, a pragmatist, a dreamer and a skeptic. And I'm like, well, here we are and so and it's we've held fast and true ever since.
• 14:47
  Tim Montague: That's great. So for my listeners, you can learn more about intelligent generation from several previous interviews. The most recent one was with David Braun episode 195 and David comes from the utility space. And then I had mark on the show a couple of times when the show was called the solar podcast. And then before that, solar works for Illinois, so you have to go to CESnrg.com or their YouTube channel to find those interviews with Mark.
• 15:19
  Tim Montague: Thrum, but I really so I cut my teeth on C&I solar and storage working for Continental energy solutions. Who's a big partner of yours at intelligent generation. Got to know Mark, I started running these cash flows with, you know, my C&I customers. And not every one of them, you know, popped penciled, so to speak. But when it penciled, it was an eye popping increase on the ROI, sometimes three, four. Or five, even six times the ROI of solar alone.
• 15:55
  Tim Montague: And so I quickly was like, okay, mind blown. Batteries are everything here. We got to lean in. And of course, you guys and convergence and continental have been doing that, and rinsing, washing, repeating. And you know, there really is no other major player in the software as a service space for solar and storage in PJM, like you really have capitalized on that. And the value stack is very unique, geographically, right? The PJM value stack is different than the CAISO or the ERCOT or the ISO northeast, etc, etc, etc.
• 16:33
  Tim Montague: But Jay, tell us a little more.
• 16:38
  Tim Montague: I guess about like this vision, because you have to be, you have to have been extremely tenacious about creating the stack and and this, earn, save, protect. That moniker is just awesome. I love it. I say it regularly on the show, and I always credit intelligent generation, right?
• 16:57
  Tim Montague: You earn from grid services, you save by attacking demand and capacity charges, mostly capacity charges here in Illinois and PJM, and you protect with resiliency from grid outages or ride through in the case of industrial companies, they're not going to achieve usually significant hours of off grid operation, but enough to have a controlled shutdown, for example, which is a huge savings for manufacturers. But tell us a little more, I guess, Jay about how you really flesh this out?
• 17:36
  Tim Montague: Because it really is quite visionary.
• 17:40
  Jay Marhoefer: Well, well, Thanks, Tim. I mean, so the one thing, one thing about electricity, and I think the one thing about the culture at IG electricity, is it is an extremely complex business. It's a very arcane business. There are layers and layers and layers upon the tapestry of this. And then it's not for everyone, right? So you start with the fact that you have retail versus wholesale, right? You've got you've got your electric distribution company. Sometimes it's vertically integrated, where they have generation.
• 18:13
  Jay Marhoefer: Sometimes it's like comed, where it's wires and meters, and then that's that's governed by the state, right? And then you have federal FERC stuff. That's the wholesale markets. The idea of what FERC can regulate is that which crosses state lines is interstate commerce. And so that's interesting. So you've got that aspect of it from a regulatory standpoint, how does this work? And you got to understand both sides of that, and it will vary from zone to zone. Then you have investor owned utilities, you have co ops, you have munis, you have federal power things. So it's like, what's the ownership model of the utility going to look like? You know, I mentioned the fact that you have sometimes vertically integrated and sometimes it's competitive, right? And so what does that look like in terms of what you're doing? And this is what's fun about it, is it's been a non stop evolution where the first thing we do is frequency regulation, right? And that was all the rage because it was the idea of frequency regulation with a battery, is that you could basically get an hour's worth of revenue that you would get in the energy markets for maybe 20% of actual throughput, because it was all based on power. Wasn't based on on energy. And of course, power is energy or energy power over time. So we saw that, and then we realized that for the C&I market, and you know this too Tim that in a lot of jurisdictions within PJM, customers were being charged line items for capacity and transmission based on their five hours of peak usage during the summer. So it was, it was, it was almost kind of crazy, right?
• 19:55
  Jay Marhoefer: It was saying. It was saying, Well, if you can figure out a way to shave that peak for those five hours, and it wasn't the five hours of the of the site's highest use, it was, it was what the site was using during the five highest hours for comed, the zones usage, and that's transmission, and then the highest five hours of PJM, the 13 state regional grid for capacity. And you know, for the notion where the battery is perfect for that you put a battery in, you nail those peaks. You're not going to just use battery five or 10 hours. I mean, you may have to use it 20 or 30 hours, but out of 8760 hours a year, that's pretty good. And capacity and transmission for a C&I customer, depending on the year, could be a third to a half of the bill, right? So, so you put that, and that's that, that's a save, right? For your. See, regulation is an earn and now you've got this thing and saying, Well, you know, you got these other hours where, if you want resilience and that type of stuff, you've got the battery for that purpose as well. So, I mean, the bread and butter for IG for a year for the last, let's say, I don't know, seven years, as we've been doing the five CP reduction for seven years now, and done it very successfully, but it has been frequency regulation. It's been capacity, has been transmission. And now what we've realized, and again, this is what's joyful about the whole thing, is now you're ending the world of AI, right? And AI figuring this stuff out. So my challenge, and my team, and I'm not going to disclose any trade secrets here, but my challenge to my team is this is saying, you know, we've gone from having three projects up and going to being, you know, on the path having 30 projects up and going, and the next couple of years will be up to 100 projects up and going. And this is not easy, right? I mean, to get these projects, you know, sold commission, you know, in the fleet and all that stuff. It's not like somebody can just suddenly say, hey, I want to get in this business too and flip a switch and throw a bunch of money at it. They're there. It takes years to do this type of thing. So the challenge to the team in now the AI generation is, how do we extract every dollar possible out of the value stack in the air and protect model from these assets? In other words, it's a real competitive advantage to be managing this suite of distributed assets out there, because it's not easily replicated, and there's more out there, in addition to five CP and frequency regulation, that we can get value for without putting a lot of wear and turn on the battery. So that's the next evolution of the company that we're looking at right now, continuing to grow the fleet and continuing to augment the value stack.
• 23:42
  Tim Montague: Yeah, and just for my listeners, five CP stands for five coincident peaks in PJM, they base your capacity charges on the five one hour periods during a 12 month period that were that you were putting the most load on the grid. And so what you do with the battery is you attack those peaks. You get a signal from the from PJM the day before that. Okay, tomorrow, two o'clock is going to be a peak load period for our grid.
• 24:16
  Tim Montague: And you can help us, Mr.
• 24:16
  Tim Montague: Customer, by reducing your load right? And so you can do things like pre cool your building, dim the lights, and crank the battery for a couple of hours right and attack those demand charges or those capacity charges, excuse me, so capacity charges are a cousin to demand charges. They're very similar, but capacity charges are unique, and like you said, this can be 30% of a customer's bill. These charges are major charges, so we're talking 10s or hundreds of 1000s of dollars for industrial customers that you can shave off. So it's a for you can think of it as a form of peak shaving.
• 25:00
  Tim Montague: I have a question, though, Jay, in the greater scheme of things, okay, when you're shifting from, let's say, five years ago to 2025 now, where we have much more sophisticated AI technology and and there's, and I'm sure there's many subtleties to how you can use The battery more dynamically. How do you see this benefiting IG and your customers? You know, this emergence of super intelligence, which we're watching before our eyes?
• 25:34
  Jay Marhoefer: Well, they're really there are only two sides of that equation.
• 25:39
  Jay Marhoefer: The first side, of course, is the cost side of it. So you know, I'll give you an example.
• 25:43
  Jay Marhoefer: We have a good relationship with comed, and that wasn't always that way, but we've certainly grown into that. And there is a, there's certainly a cooperative spirit in terms of what we the things that we try to do with them. Right now, comrade will tell you that their peak load for the combat zone, which is greater Chicago area, and all the way to, you know, all the way to, like, Quad Cities and all that, the peak load for combat is about somewhere in the low 20 gigawatts, right? So the hottest summer day was 100 105 degrees on a weekday, and that type of stuff, four o'clock in the afternoon. They've got to make sure they have enough generation capacity to crank out 20 gigawatts, right? 20,000 megawatts, right? And so think of each of our batteries as being like a one megawatt battery. It gives you a sense of how big that is. In the comed queue, there have been requests to put data centers totaling 26 gigawatts. And then, yeah, you look. Some of these data centers, they're like, they're like, half the size of the island of Manhattan, right? I mean, they're, they're enormous.
• 26:47
  Jay Marhoefer: It's just a different thing. So what you're seeing as a result of this move towards data centers, and of course, they're not going to get on 26th and combat, because they may be going in other places and all that, but you were seeing a drastic increase in costs for capacity right now. So right now, the value of an hour of a megawatt reduction in PGM for capacity in the next couple of years is over $100,000 a year.
• 27:18
  Jay Marhoefer: And transmission is going up to, I mean, not at that rate, but it's got, you got to build lines that basically serve all this stuff. So So AI is driving improved economics for what we're providing with the value stack. So that's one thing. Now let's flip to the other side of how do you use it when it comes to this? And I think a few things come to mind. Number One is you're going to reach a point when in a zonal zone of five coincident peak. So that'd be transmission, right? You know, PJM has got a total coincident peak of about 150 or 160 gigawatts and comments about 20.
• 27:57
  Jay Marhoefer: So combat is roughly, you know, 1/8 of the entirety of PJM and all that and fluctuations. Let's say other ones are getting smart about this, because you got to nail the hour exactly right. Now you have a battery. That's a four hour battery, and so you're going to have maybe a three hour spread right? So you're going to have a shoulder. You're going to have a shoulders, if you don't hit that peak. But you get the one before the one after. You're doing well, but a couple of big players in com Ed, at 20 megawatts, can shift that peak, or 20 gigawatts, I'm sorry, can shift that peak from, let's say, four to five, or five to six, and so you're going to AI is going to be helpful in terms of saying, What can we anticipate, in terms of choosing the right hour. So because normally our prediction would say four o'clock, but now you've got other players in there, you may want to be shifting it and saying we're going to we're going to really decrease at the same hour, and now all of a sudden, that four o'clock is not your peak anymore. It's going to shift to five or something. So it's going to be important to basically take a look at a lot of factors that the AI will be able to do much quicker than just, you know, human human divination, if you will, to say this is going to be a better predictor of five of the five CP the Magic Hour, as we'll say, and, and that's just one use that we see going forward, but it's going to be an important one.
• 29:21
  Tim Montague: The Clean Power Hour is brought to you by CPS America, maker of North America's number one three phase string inverter with over 10 gigawatts shipped in the US. The CPS product lineup includes string inverters ranging from 25 kW to 350 kW, their flagship inverter, the CPS 350 KW is designed to work with solar plants ranging from two megawatts to two gigawatts. CPS is the world's most bankable inverter brand, and is America's number one choice for solar plants now offering solutions for commercial utility ESS and balance of system requirements go to Chint power systems. Com or call 855-584-7168, to find out more. Yeah, so let's talk about the future of virtual power plants and resilience. You know, in the book that I'm writing on micro grids and batteries, I've identified what I call the resilience gap. And you know, we have this phenomenon as you've identified that the load on the grid is growing. Meanwhile, we have climate chaos, which is causing chaos on the grid and but you know the value as the value of batteries goes up for just peak shaving, right you you then also have potential value from resiliency and providing customers the ability to operate off grid. What do you see happening, both in, you know, in com Ed, but also more widely, because now you're working in a bigger geography. Just tell us a little bit about how you see the future and the importance of VPPs.
• 31:21
  Jay Marhoefer: Well, I think, I think we have to look at a couple things, and then we kind of play into how that's going to work. So what are kind of the macro trends that we're looking at? Certainly, you're seeing load growth, which was not forecasted even five years ago.
• 31:33
  Jay Marhoefer: You're seeing 3% load growth a year. That was unheard of. We were we were looking at declines because of efficiency and that type of stuff. Yeah. And in my experience, what happens is things never go according to plan, right? So I think two things are going to happen when it comes to this growth, which is all being driven by data centers, to a lesser extent, by crypto and by cannabis and all things but, but data centers are the big they're the big boy in the block. So a couple things are going to happen with data centers. Number one is you are going to see algorithmic improvements where they're not going to require as much energy to do the same things. It's just, it's just the way it's going to be. There's going to be some, there's going to be some improvements in terms of of how things, you know, compute, so that the number of megawatts that go into a typical chat, GPT, you know, query or prompt is going to be reduced by 30% somebody is going to figure this out, because they're just going to have to. Otherwise, there's no way you can keep up with this growth of demand, or the generation is going to match it.
• 32:40
  Jay Marhoefer: The other thing you're going to see happening with data centers is going to be given that AI is a, is a is a global phenomenon.
• 32:49
  Jay Marhoefer: You're going to see time shifting in terms of data centers, in terms of the fact that data centers, you would think of for the most part as base load, right? Or they're going to be treated as base load because of the fact that we'll be able to use the off peak data centers in Ireland or in the EU or in or in India, you know, for our peak time, when it's their off peak time, and it's gonna be providing that stuff. And so somebody's gonna figure out algorithmically, how to do that, right? How to basically, say you're basically going to be circumnavigating the globe in terms of data center output, in terms of who needs it the most when. And that's going to make sense too. But overall, you're going to see, you're going to see you're going to see low growth. So what does that come down to? Let's kind of put current politics aside for a second and realize that even though wind is certainly taken a bigger hit than solar, solar is going to continue to do what's doing. I mean, you look at what the Chinese have done just this year, they've installed, they installed more solar last year than the entire solar capacity of the United States in one year, right? And the reason they're doing that is because it's the it is the least cost form of energy that is quickly deployable. So you can, you can look at the fact that you have, you perhaps you can put in, you know, smaller nuclear and that type of stuff, but that's still a 12 year proposition. So where you can turn around, implement within 18 months, if you have the wherewithal to do it, and the fact that you have the incentives of stuff going away does not change the fact that it's still a relatively inexpensive energy technology, especially compared to the fact that you can't get a gas turbine for four years, right? I mean, it's kind of the way to go. So the whole notion of solar plus storage, is it? Is? It is an excellent pair. And in the one thing I know to be true about storage, and I've made this point over the years and all that, I said, when you get to a point where energy storage, you have an eight hour battery that's a buck a lot, and you basically have a replacement for natural gas power plants, because it's that eight hour window between 11am and 7pm where a battery has to be able to provide for those peak periods and that type of stuff that basically now gives you the chance for transmission capacity coincident peak. You know calculations, you have total coverage at this point. And the notion of an eight hour battery two is that you also now have something where you can stagger these so that, because of the fact that, you know, daily demand, looks pretty much like a sign sine wave right where it peaks at four in the afternoon, and it's, it's lowest at four in the morning, and that type of stuff and kind of follows all that is, you know, solar tends to lag peak demand by a couple of hours. So, like, a solar peak is either at noon or one, depending on whether your day like savings time or not. And you know your your your demand peak is simply going to be a four o'clock. But now you've got storage in such a way set up so that if you're charging in the morning, when you're getting up to those things, you have what you need.
• 36:15
  Jay Marhoefer: You have leftover of an eight hour battery to basically provide in the nighttime hours when solar isn't there, and that's the resiliency that comes from, let's just say, continued, continued installation of solar on a large scale, the fact that you're going to get to a point in the next two to three years where in an hour, battery is a buck a. Lot now you've got something that's set up in such a way where, I wouldn't quite call it base load, because you could have, like we've had here in Florida, you know, 10 days of rain, and you're not getting a whole lot of solar during that, that period of that type of stuff. So you're always going to need, you're always going to need some type of fossil backup for those rare events, but that becomes your true capacity, you know at that point when you need that.
• 37:10
  Jay Marhoefer: But you know it's going to be, it's going to be question, which business model works better, what they're doing in China right now, and what we're doing in the US by this retrenchment to fossil and I think we all kind of know the answer to that.
• 37:26
  Tim Montague: So where you know if, if a tipping point, in some way, is $1 a watt, where are we today?
• 37:38
  Jay Marhoefer: 20 a lot for a four hour battery today? And thus, you know, it's just a question of continued economies of scale and in continued demand for batteries. And of course, demand is going to drive up cost, right? And that type of stuff, so you have to have the supply capacity do it. It doesn't help. You have FIAC, you know, in the current legislation, which is basically saying we can't do anything with Chinese stuff and all that type of stuff. But stuff, but people will adapt, right? And, and I'll put it this way. I mean, the only thing, the only thing that from a supply cost, you're not far from a buckle off right now for eight hour battery. And of course, the beauty of an hour battery is back in the day when I started, when we really started going with this in frequency regulation. It was, you know, getting a bucket watt for a half hour battery. Was, was, you know, was kind of what it was to make frequency regulation on its own, yeah, you know, valuable. And then we started getting the two hour and four hour batteries, where you're now, you're close to a bucket watt for a four hour battery, and that's what makes five CP a really attractive proposition in a place that doesn't have, you know, incentives, the way Illinois does and that type of thing, but it still has high capacity and transmission costs. And now the beauty of the eight hours it takes the eight hour batteries, it takes the risks out of the equation, because you can still miss one of those five peaks, right? Battery, you're not going to miss
• 39:07
  Tim Montague: anything well, and it increases the value of resiliency, right? The or the ability of the battery to attack resiliency,
• 39:16
  Jay Marhoefer: that's right. I mean, the whole point of the value stack is, is, is not the is not the value they provide.
• 39:21
  Jay Marhoefer: Is, how is it monetized? Right?
• 39:21
  Jay Marhoefer: And so what you're going to see with longer duration batteries that have that price point is, you know, you're going to see value associated with dealing with ramping, for solar and that type of stuff, for having, you know, the ability to say solar and wind and that type of stuff you've got battery backup to make sure you meet commitments in terms of power supplied, and that type of stuff, you're going to have both transmission and distribution deferral, which now can be monetized. And say, Yeah, we have to build another, another, you know, 35 kV line, because we've got a bunch of batteries here at the end of the line here, and they're taking care of it for us, sure, and thus, you know that's going to be just something that augments the value stack.
• 40:09
  Tim Montague: So where do you see the technology going like today for stationary storage, lithium iron phosphate, lithium iron phosphate, LFP is the standard is that going to change in the next five years?
• 40:29
  Jay Marhoefer: I don't think you're going to see a shift away from lithium generally over the next five years. I and you've had, you know, you've had other technologies, like different flow, you know, batteries and that type of stuff. They've been in the works for 15 years, right? I mean, I remember back in 2010 when we were an incubator at IIT and they got a DOE grant, they put a flow battery in there, which, unfortunately, I don't think they really ever did much with, and that type of thing. The lithium is still going to dominate for the next five years, because it's the mineral itself is fairly ubiquitous, right? I mean, it's not scarce.
• 41:08
  Jay Marhoefer: And the notion is going to be, can you get away from rare earth metals and lithium batteries to make that work? Now, do you have other types of technologies that are going to make inroads for certain applications? And then the answer is yes. One reason for that is that the fact that lithium is so well suited for vehicular transportation and electric vehicles does not necessarily mean it's the best technology for something where you're going to have a value stack consisting of short power cycles and long term. Operation events like five CP and that type of stuff that could be something different, but like anything, anything that's new that's going to challenge Lithium has to achieve its own point of economies of scale in terms of production and find the demand that's out there. I certainly think within 10 years, you will have viable grid based economic alternatives to lithium ion only because of the fact that it's its highest and best use will continue to be in EVs.
• 42:16
  Jay Marhoefer: But it doesn't mean that. It doesn't, you know, it doesn't work for what we're doing here.
• 42:23
  Tim Montague: Well, in one of your one of your projects, G and W, who's also an investor, I understand now, in intelligent generation, installed a big flow battery. How's that going?
• 42:35
  Jay Marhoefer: It's going well.
• 42:35
  Jay Marhoefer: I mean, G and W is a terrific partner for us, and they are constant source of learning. And one reason for that is that their typical customer base, well, their their predominant customer base, or electric utilities, yeah, and what G and W thinks about is what their customers think about. And a utility customer at G and W, and then John Mueller would tell us is they have a 50 Year mindset, right? They're going to put in something. If Con Ed puts in something any one of their utility customers, something they expect it to last for 50 years. And so GM W's mindset in terms of putting in a flow battery was a similar mindset.
• 43:17
  Jay Marhoefer: They were looking at the at the 20 year, 20 year, cost of operations of that battery, as opposed to year to year, what it was going to be. So yes, the flow battery was more expensive upfront than a lithium battery would have been, but over the course of time, number one is going to last longer. Number two is they anticipate lower maintenance costs for it. And so number three, the total, the total life cycle owner, life cycle cost that battery is something that they anticipate is going to be lower over 20 years. And the batteries performed well in terms of his applications of frequency regulation, five CP and backup.
• 43:51
  Jay Marhoefer: At this point, it's done. It's done just fine.
• 43:56
  Tim Montague: And what about sodium? Because C, A, T, L is now rolling out. So do sodium, albeit at a at a small, relatively small scale, but again, super abundant element. I don't know how efficient it is relative to lithium. It's not as efficient as LFP, I know on a power to weight ratio, right, right?
• 44:18
  Jay Marhoefer: I mean, one thing about lithium that is advantageous, and you know this from the fact that you've got, you know what, 180 Well, what do you typically have? 100 100 megawatt hour battery, not a megawatt hour, kilowatt hour battery in a car, right? Is lithium tends to have great energy density and works well in relatively small footprints. And thus the other technologies, like sodium, or some flow technologies, you see with G and W may take, may require up to four times the footprint that you're looking at. And so if you have the space, it's an alternative. If you don't, then it becomes more challenging. And the question is, will that change over time. I mean, we're looking at everything right now.
• 45:07
  Jay Marhoefer: From our standpoint, it's a question of one also has to look at number one from an from IGS perspective, one reason we were doing one project a year, from 2014 2028 every project was essentially a science project, right? It was a different vendor, a different battery technology, a different integrator. You know, I know that continental with our partner on some of these things, and we're all pulling our hair out, and you kind of look at a point of saying, Well, you don't want to just have one provider, because Tesla makes an excellent product, and it's completely integrated product, and they stand behind their product that product. That's good. You want to have some diversity of supply. You don't want every project to be a science project unless there, unless there appears to be, you know, a good opportunity for replication as you go forward.
• 45:59
  Tim Montague: So what else is in the cards for intelligent generation? Paint us a picture for where you're going, because you are, you are now starting to grow and grab on to bigger geography, right?
• 46:11
  Jay Marhoefer: We are, I mean, so some stuff, obviously, is, you know, quite confidential, and I can't talk about that, but it is pretty exciting. But what I can say is that we are expanding our geographic reach.
• 46:22
  Jay Marhoefer: So we, you know, we, all of our projects have been in Illinois, and we had the first project in miso, which is coming live, and that's, you know, down, down in Ameren territory. But we landed a big deal, our first big deal in Ohio, and that's with the mcco, the medical center, a company of Cleveland and. Um, have a great partner there, MC king. And thus, you know, that's the Ohio market in terms of what we're doing there. And again, it's a matter of taking a look at where are the opportunities, because so much of it has to do with, what are the transmission costs of the zone, and how are things rated? Is it a 24 hour demand. You know, charge assessment. Is it just a nine to six? Is it 30,000 bucks, megawatt year for transmission?
• 47:11
  Jay Marhoefer: Is it 100,000 bucks a megawatt year for transmission? But did they use a site five CP? These are the assessment we're making.
• 47:18
  Jay Marhoefer: But I think for us, what I can safely tell you is that we are looking to expand our footprint throughout PJM. And so in PJM, of course, extends from Chicago all the way to the Atlantic Ocean, with, you know, Pennsylvania Jersey, and it stands for Pennsylvania jersey, Maryland, right? So, so that's where you're going, all the way down to Virginia, and it's 13 states. And thus, you know, given the fact that we have the reputation that we have, and given the fact that, you know, people will tell us we're the only ones who kind of figured out how to monetize PJM certainly, what I can say is that with with the sort of channel partners, potential channel partners, that we're meeting, and with the desire to do these types of things. In fact, the economics are really good, even without the kinds of incentives Illinois has that certainly in the works for IG is to continue to move and permeate PJM, and then at that point, you know, we, at the same time, we're looking at other transmission organizations in terms of where our business model makes sense. So it's a it's an exciting time for us.
• 48:29
  Tim Montague: What else do you have to say to installers, developers and asset owners about the future of virtual power plants and micro grids?
• 48:44
  Jay Marhoefer: Well, you know, when I wrote, it's kind of fun to come full circle. I mean, one of the, one of the things I wrote way back when in the book re energizing America, which I think was published in 2007 so it's, it's at its time, and I look back, and it was amazing how many things I got right 15 years ahead of its time. And of course, I got a few things colossally wrong too. But the whole notion of micro grids, and, you know, renewables and energy storage and all that is that it is, you know, it's important to develop a measure of independence from the grid. I would not say total independence. I wouldn't, I would not advocate anyone to go off grid, because the electric grid, you know, rated by the National Academy of scientists, was the greatest technological achievement of the 20th century, even more than the moon landing, right? I mean, it's a phenomenal piece of work, enormously complicated. And you know, yet, from my perspective, just it just yields one opportunity after the other. So I believe, you know, G and W is a great example of what's doing this mag and glove app, these are all, you know, iG, customers who are not looking to be completely independent of the grid, but the grid goes down. And you know, if you're a company that gages in injection molding and that type of stuff, and the grid goes down. And even if you have typical generators that aren't going to kick in for three or four seconds, you've got half a million dollars worth of goo sitting on your plan for and you've got a half days work to clean that stuff out, unless you have something to carry through in the form of energy storage.
• 50:30
  Jay Marhoefer: What's going to do that from resilience standpoint? So when you think about what the value of a micro grid is, micro grids, you know, if there, if money were no object, of course, everyone would have a micro grid to carry through outages in the events of having sensitive electronic equipment in the C&I space that you know, you would not want to have disrupted in that type of stuff. The beauty of what the value stack provides is a way to have that as a base, you know, table stakes, if you will, because the grid is always going to have outages for a whole bunch of different reasons, whether climate change sabotage. I mean, you know, see, you know different types of ways of going at it. And now, with the value stack, you have a way to basically take what would be a cost center, turn it into an asset, and you know, that's, that's what you got. So that's it. The future is bright, and I think the economics make it a very compelling investment.
• 51:34
  Tim Montague: Hey, guys, are you a residential solar installer doing light commercial, but wanting to scale into large C&I solar? I'm Tim Montague. I've developed over 150 megawatts of commercial solar, and I've solved the problem that you're having you don't know what tools and technologies you need in order to successfully close 100 KW to megawatt scale projects.
• 51:58
  Tim Montague: I've developed a commercial solar accelerator to help installers exactly like you.
• 52:02
  Tim Montague: Just go to cleanpowerhour.com click on strategy and book a call today. It's totally free with no obligation. Thanks for being a listener. I really appreciate you listening to the pod, and I'm Tim Montague. Let's grow solar and storage. Go to clean power hour and click strategy today. Thanks so much.
• 52:22
  Tim Montague: Well, that's a good place to stop. I want to thank Jay Marhoefer, founder and CEO of intelligent generation, Intelgen.com, is the URL. We'll put some links in the show notes as well. Check out all of our content at cleanpowerhour.com please tell a friend about the show. That's the best thing you can do to help others find this content and give us a rating and a review on Apple or Spotify.
• 52:51
  Tim Montague: Subscribe to our YouTube channel and reach out to me on LinkedIn.
• 52:55
  Tim Montague: I love hearing from my listeners. Jay, how can our listeners find you?
• 53:01
  Jay Marhoefer: You can always pop into my LinkedIn page. And, of course, intelgent.com is a good way to do that. I And then every now and then, I'll pop up at a conference myself. So you know, it's but to me, it's always about IG, it's not about me. So so just come check us out if this is of interest to you.
• 53:21
  Jay Marhoefer: And thanks, Tim, I do appreciate the opportunity.
• 53:26
  Tim Montague: I'm Tim Montague, let's grow solar and storage.
• 53:28
  Tim Montague: Have a great day. Thanks, Tim.
• 53:28
  Tim Montague: You.