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Balto Energy Sees Economic Opportunity In The Chaotic Policies Of The California PUC

Balto Energy Sees Economic Opportunity In The Chaotic Policies Of The California Puc

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Adversity often opens the door to new economic opportunities. In California, Balto Energy has just announced a new program designed to meet the challenges created by the California Public Utilities Commission this year. The CPUC has gutted the rooftop solar industry with a series of new policy initiatives that slashed net metering rates by 75% and put new restrictions on community solar programs. Why the CPUC would do that except to please the politically powerful investor owned utilities in the state is a mystery to most observers.

The long term effect of the new policies may be to incentivize homeowners and small businesses to become less dependent on electricity from utility companies and more likely to manage their own needs for electricity through a combination of rooftop solar panels, behind-the-meter residential storage batteries, and electrification of heating, cooling, and other household systems. It sounds easy to say that, but making it happen requires mountains of data, and that is where Balto Energy says it will shine.

What Balto Energy does is more than just computing how much electricity a home uses today and sizing systems accordingly. It starts there and then goes further to predict what the energy usage will be in the future when the air conditioning system, hot water heater, and dryer are heat pumps, cooking is done on an induction stove, and various energy efficiency upgrades have been completed. Switching to an electric car is part of the equation as well.

Why is all that important? Because those things lower total energy usage so the system today can be sized for future needs. As a result, Balto gives homeowners an extra financial incentive to transition to an energy efficient, all electric home. It also unlocks financing options that make the transition possible.

Balto Energy Unveils New Electrification Tool

This week, Balto Energy unveiled a software suite called the Solar-Led Electrification Design (SLED) tool, which is designed to make all the necessary data collection and analysis possible. The company is already putting its software’s capabilities to use with Northern Pacific Power Systems, a large solar contractor in Northern California.

Balto’s software combines data on home energy characteristics, home efficiency upgrade impacts, solar production forecasts, battery algorithms, utility tariff engines, and manufacturers’ data on appliance performance to assess each household. It then models how a variety of different combinations of products and projects will alter a household’s energy usage patterns and costs for years to come.

“The idea is, how do you calculate all the various solutions that are possible, and then allow a homeowner to search that space for the thing that makes the most sense to them?” Balto founder James Quazi told Canary Media his company’s software includes user interfaces for contractors and homeowners, as well as a measurement and verification layer that is valuable for the key step of financing projects.

James Quazi Has Decades Of Experience

Quazi has decades of experience in complex energy modeling. Building Solutions, a home energy modeling startup he co-founded, was acquired by SolarCity in 2010. Quazi served as its energy efficiency operations director until 2014, then launched Dandelion Energy, a home geothermal heating and cooling provider from X, Google’s​ “moonshot factory,” in 2017. This is someone who knows his way around the energy business.

What attracted Balto Energy to California is the state’s history of volatile pricing for electricity on its grid from hour to hour. Being able to predict movements in the market creates opportunities for profits. Predicting years of costs and benefits based on these hourly shifts is complicated but necessary, said Andrew Krause, CEO of Northern Pacific Power.

For Quazi, the solution to a slowdown in the rooftop solar industry caused by the NEM 3.0 rules put in place by the CPUC is for installers to think outside just solar panels and residential storage batteries. He believes they should also consider electrification projects like electric vehicle chargers, heat pumps, and heat pump water heaters. “We found that some of those contractors are interested in doing other portions of the work,” he said.

Because most solar companies have not started offering those other alternatives, Quazi told TechCrunch, homeowners have been forced to become de facto general contractors, managing each part of the process themselves. “We still don’t have a great tool that coaches homeowners through what that experience would be. There isn’t a holistic view of it.” He hopes that Balto Energy is that tool.

Balto functions as a decision tree for homeowners to help them decide where they’d like to start and which projects they’d like to tackle and when. Are they only interested in saving money? Then a relatively simple solar-plus-battery installation with an EV charger might be the answer. Do they want resiliency during extreme weather or natural disasters? In that case, they might want to electrify more of their home, including heating and cooling, hot water, and even cooking. “You have to help people understand what the options are and what’s the best one for them,” Quasi said. To provide recommendations that make sense, Balto models energy usage for a home using customer-provided utility data.

Balto Energy Thinks Outside The Box On Financing

All those projects can be expensive. Quazi thinks he can ease the financial burden by offering a form of financing that he said is not a loan. “For a residential project that’s financed through a loan, a lot of benefits actually fall on the ground. There’s a bunch of trailing things that we think we can monetize,” he said, including depreciation and renewable energy credits that it can sell to other companies.

Balto would own the solar assets for a period of time, making it the entity that receives the credits. Some of its revenue would come from that revenue stream, and it would direct another portion of it toward reducing the interest rate on the financial instrument it offers customers. “While you might take out a loan today [for solar], and if that loan is 20 years, the interest rate could be 12%. We’re looking at half that or less,” Quazi said.

“More and more accuracy is becoming more and more important, but we want to do that with as little work as possible,” said Jeff Friesen, CTO and co-founder of Radiant Labs, a startup that makes modeling software being used by Balto Energy. ​“That’s where utility bills come in.” Quazi said that for the level of accuracy that Balto Energy is after, ​“utility bills are a requirement.” With utility billing data in hand, ​“we can calibrate that model of the house to what’s actually happening, taking into account weather and the characteristics of the house and occupant behavior, and then show you what’s going to happen when you put in a heat pump. Post-install, there are a lot of things we can do with smart charging for EVs, controls, and feedback from heat pumps — you can calibrate and control the differential accuracy over time, and start to drive to the outcome you want,” Quasi said.

Not every household will find that the combination of solar and electrification will pencil out, but Balto Energy has some preliminary data indicating its approach can work for many of them. Doing the work to determine what combination of investments now will yield the optimal long term benefits is much more complicated than the calculations that most solar installers and HVAC contractors do today, Friesen said. “But that kind of analysis is needed if we’re going to be able to hit a significant number of homes and get them electrified,” he said. Today, of the roughly 115 million US homes that must switch from fossil fuels to electric heating and appliances to meet national emissions reductions goals, fewer than 1% are undertaking those retrofits every year. ​“Our goal is 10 million a year.”

Altering The Financial Picture For Homeowners

More certainty into the future value of solar electrification could give lenders the confidence to invest in home electrification projects or bring down the cost of loans. Balto plans to build financing into its business model, Quazi said. “Verifying the savings — and verifying the accuracy — is the important next step,” he said. Instead of homeowners arranging their own financing on a case by case basis, the certainty that Balto makes possible can attract larger institutional investors, lowering costs for everyone.

Solar developers have been able to ​“securitize” portfolios of home solar projects financed under third-party ownership models and through rooftop solar loans and sell them to investors, driving down the costs involved. Finding ways to do that with home efficiency and electrification, or for the installation of batteries, EV chargers, and remote-controllable appliances that can turn homes into ​“virtual power plants,” is seen as an important next step for those sectors. But for that to happen, investors will need a lot more data that has proven to be accurate. Eventually, Quazi envisions the company earning money from software-as-a-service subscription fees, as well as from the role it can play in driving down the financing costs of the projects it enables.

The Takeaway

James Quazi has an attitude that should make him immediately welcome by CleanTechnica readers. He’s hoping that when full electrification of our homes, apartments, condos, and businesses takes place, the “infrastructure that pumps combustible gases in the people’s homes” will fall out of favor. “It’s one of the things we’ll look back and be like, ‘That was crazy. We shouldn’t have done that.’” Gotta love a guy like that!


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