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23 November 2022

Swell has cash to chase 26,000 US VPP homes

We have highlighted in the past the way in which Swell Energy has grabbed hold of the (Virtual Power Plant) VPP conversation in the US by partnering with utilities, now it has added $120 million of investment to lift its 14,000 VPP households up towards 26,000 homes and 600 MWh of battery.

Think of Swell Energy as a software company which until now had only $32 million of funding to get off the ground before this deal, and yet it has a business model that has managed to attract to 6,000 Hawaiian homes, and then got the go ahead from Southern California Edison (SCE) to recruit another 8,000 from among its customers. It may not yet have 14,000 homes connected to its VPPs but it will be well on the way to it.

Most VPP efforts around the world happen “in spite of” the local utility, not in cooperation with them, and this is Swell’s original idea here, with the cost of convincing thousands of homes to convert to its VPP being incredibly low, because it targets mostly only homes that already have solar and a Tesla Powerwall or other battery. There is no cost to join, but homes can earn close to $10,000 a year for making their electricity available back to their utility, instead of it buying energy from gas peaking plants. Existing commercial batteries in California in particular have already proven how effective batteries are at offering peaking power.

This new funding is what Swell calculates to bring its installed base up to 26,000 home energy storage systems, and the money came from

SoftBank’s Vision Fund 2 and Greenbacker Development Opportunities Fund I leading the round with participation from an Ares Infrastructure Opportunities fund and Ontario Power Generation Pension Fund.

Swell’s VPP programs help reduce the use of fossil fuel peaker plants by utilities and provide other important grid services by integrating solar, energy storage, and electric vehicle charging with the utility to provide a more reliable and carbon-neutral grid.

In March this year Swell widened its approach to include EVs through a partnership with Nuvve Holdings, so now Swell will be able to borrow electricity from parked EVs at home which are in the process of charging too.

There is an enormous opportunity in both Europe and the US, for utilities to offer up their customers access to distributed energy resources, and if small, but smart companies offer the right toolsets for this, they could leverage utility firepower to considerably accelerate their growth.

Swell’s original skill is in including AI and machine learning elements in VPP software. Now it appears that more people in the US will be able to take part in the scheme.

Here’s the equation as we see it – the utility does not want to lose ownership of the electricity grid customer, but right now most of them are terrified to pay for the installation of any kind of lithium ion battery, because of the dangers of thermal runaway.

So what Swell offers instead is a deal where if you already see the need to pay for a solar plus storage installation, to protect you when the grid is down or switched off to avoid setting wild fires –  it can help you earn straight forward credits if you will take part in a VPP which it is close to. That way the CRM of the utility can support identification of the right customers.

Already there are many finance companies in the US which will finance your home solar plus storage investment, so Swell does not have to get involved in that as a cost, just the cost of facilitating its VPP, and neither does the utility – instead the utility itself becomes the automatic first in line off-taker in the event of a stressed grid.

The funding announced today will support Swell’s development of 600 MWh of VPPs through the deployment and aggregation of 26,000 energy storage systems located at homes and businesses across the United States.

Now Swell’s VPPs can provide power in New York as well as California and Hawaii, aiding utilities to reduce the grid’s dependence on fossil fuel peaker plants.

The beauty of this is that there may well be a trend of utilities not wanting to offer full priced Net Metering to solar homes, but instead they will buy from a VPP at the going wholesale price – often a lot higher than what they offer their net metering customers.

Swell creates VPPs by linking utilities, customers, and third-party service providers together, and by aggregating and co-optimizing distributed energy resources through Swell’s GridAmp software platform.

“By coordinating distributed energy resources across the grid to intelligently meet fluctuating demand, Swell’s AI- and machine learning-driven platform helps address a major challenge of the energy transition, while also lowering customers’ bills,” said Ben Parton, Director at SoftBank Group. “We are excited to support Swell’s team as they accelerate clean energy adoption.”

Swell said it works with multiple California utilities to help expand residential participation in capacity bidding programs.

“Utilities and investors have understood the importance of virtual power plants for some time now; this funding further signals that the capital markets see tremendous value in this new asset class,” said Suleman Khan, CEO of Swell Energy. “Virtual power plants are the key to a cleaner energy future at scale. Through the use of our GridAmp software, we are dedicated to enabling an accelerated transition to a carbon-neutral future compatible with the needs of both utilities and the communities they serve.”