A tool that enables solar-first home electrification

California homeowners face a complex puzzle in decarbonizing
their homes: electrification without rooftop solar could increase
bills due to expensive electricity, while installing solar first
risks oversizing or underutilizing the system. Balto Energy, a
startup founded by James Quazi, uses AI to analyze utility bills
and recommend the most cost-effective clean energy strategy. In
this episode, we discuss Balto's tool, its potential to empower
contractors, and what California's situation reveals about the
future of clean energy policy nationwide.


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transcript)


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Text transcript:


David Roberts


Hello everyone. This is Volts for September 13, 2024, "A tool
that enables solar first home electrification." I'm your host,
David Roberts. Californians who want to decarbonize their homes
face something of a conundrum. If they electrify their cars and
appliances without getting rooftop solar, they could end up
paying higher overall bills thanks to California's notoriously
expensive electricity and cheap natural gas.


If they install rooftop solar before electrifying their cars and
appliances, they could either undersize the system for their
eventual needs or oversize it and over-produce and export solar
power to the California grid. Thanks to California's recent NEM
3.0 decision on rooftop solar compensation, utilities pay much
less for that exported rooftop solar power than they used to.


The most economical strategy for most homeowners is likely to be
some mix of electrification, batteries, and rooftop solar. The
more a California homeowner stores and consumes their own cheap
rooftop solar power, the more value they get out of that solar
and the lower their total bills. It is a complex calculation,
though, that most homeowners are in no position to make. That's
where the startup Balto Energy comes in. Founder James Quazi, a
longtime energy modeler and entrepreneur, has built a tool that
can use a home's utility bills to create a model of its
consumption patterns, predict what they will be as appliances are
electrified, and recommend the maximally economical approach.


It's part of a larger effort to help contractors and solar
companies navigate a post-net-metering world. I'm excited to talk
to Quazi about why his tool is needed and how it works, how it
will empower contractors, and what California's present says
about the future of clean energy policy in the rest of the
country.


With no further ado, James Quazi, welcome to Volts. Thank you so
much for coming.


James Quazi


Thank you for having me. That was a great intro.


David Roberts


Thanks. So, you know, I sort of went over it a little quickly in
the intro there. But let's talk a little bit about this conundrum
for Californians who are trying to decarbonize. So, just by
background — I don't even know if everyone's been following the
California rooftop solar wars, I kind of assume everybody has —
but just by way of background, California recently basically
issued a new policy on rooftop solar, and the long and short of
it is that they're going to compensate homeowners much less. It
used to be that basically you could get paid the retail rate for
your excess solar, and now they're just going to pay much, much
less than that.


On the surface, this really damages the economical case for solar
for homeowners, they'll get compensated much less. This has
resulted in a huge blow to the solar industry in California.
There are solar companies shutting down, jobs being lost,
etcetera, etcetera. So, talk a little bit about the conundrum and
how you think about solving it.


James Quazi


Yeah, so about a year ago, the net energy metering policy in
California changed from NEM 2.0 to NEM 3.0, now called Net
Billing Tariff. The difference is, as you mentioned, that now
customers get paid on a schedule. Each hour per year is a
different rate. But generally, you can think of it as between
like $0.05 and $0.08 for exported energy, while imported energy
for me in San Diego is between $0.38 and $0.52 an hour. So it
degrades the value proposition for residential solar for a
homeowner. For contractors, it's also proven really difficult. So
in the past, it was really easy to have rule of thumb sizing or
heuristics, or if you took annual energy over the last twelve
months and you designed a system that produced around that same
amount of energy, it was generally going to be a good value
proposition for the homeowner.


But now, what you need to understand is, like, how much of that
solar production is actually coincident with the load on the
house, because the export of energy is devalued.


David Roberts


Right. So, the economics now have shifted to make it so that, I
mean, maybe this was true already, but more true now that the
ideal thing for Californians with rooftop solar to do is to
consume as much of the generated power as conceivably possible.


James Quazi


That's absolutely correct. So, if you can think of it as, and I'm
sure your listeners are familiar with the terminology, like LCOE.
So, the cost of solar, residential rooftop solar, is somewhere
between, let's say, $0.10 and $0.12 a kilowatt-hour to produce,
whereas the retail rate is much higher depending on the IOU that
you're a part of. To the extent that you can consume cheap
on-site electricity, you are hugely benefited as a customer.


David Roberts


Right. So then the question becomes, well, there's a bunch of
different ways of approaching this question, but from this sort
of like, if I'm trying to sell solar, right, I need a little bit
of a new pitch, right? Because before, with full retail
compensation, it's kind of a no-brainer, you could make a lot of
money, but now you can make a lot less money. So this changes the
value proposition for solar. So, explain exactly how the sort of
calculation shifts.


James Quazi


Sure, I would actually reframe it a little bit in terms of, like,
I believe so in the previous net metering paradigm. We often saw
simple solar paybacks in the five to seven years. I believe that
those paybacks are still available to homeowners, but it's just a
different set of products and services than simply rooftop solar
on the roof. So, I think our goal is to help retool the solar
industries, to help look at a house as a whole, maybe converting
a lot of the energy on site that we previously ignored, whether
that's natural gas or gasoline, and then power that all with
cheap onsite renewables, and that will drive the value
proposition for that homeowner.


David Roberts


Right. It's still worthwhile getting solar, even maybe still a
comparable payoff period, but a different approach. And
basically, it's going to be a little bit more of a complicated
approach. Right? Like, it's one thing just to stick solar on the
roof. Like, how much energy do I use, let's stick that much solar
on the roof. Pretty easy. Once you bring in the whole home, just
the combinatorial, you know what I mean? Just the calculations
get a lot more complicated.


James Quazi


For sure. So, like, I think in two respects. One, it's more
complicated for the contractor to feel confident in the system
that they're proposing and the financial outcome for the
homeowner. And then two, from a homeowner's perspective, it's
more complicated to understand and digest and comprehend a suite
of services that might include solar and a battery and a heat
pump and an EV, than it is simply like panels on a roof. Our goal
at Balto Energy is to sort of do the modeling and ingest the
complexity and then deliver it in a way that's consumable for
both a contractor and a homeowner.


David Roberts


Right. So, talk briefly about what your tool does. What is the
outcome supposed to be? What is it trying to accomplish?


James Quazi


Yeah, so our perspective on it is that oftentimes in the past, if
you asked for a solar quote, you would get maybe one option, two
options, or three options, max. Really, like, if I take my own
house as an example, so I live in San Diego, I can fit up to 30
panels on the roof, which is constrained by roof geometry, area
shading, what have you. So let's call it maybe 20 to 30 different
flavors of solar systems that I could possibly engage in. If I
layer on batteries, I could have 1, 2, 3, 4 batteries. And then
EVs, one or two EVs, and heat pump or not heat pump, water heater
or not water heater.


And our first step in the process is to ingest an address and
then interval bill data. So, we need hourly electric reads and
daily gas.


David Roberts


And that, just to be clear, this is the sort of raw information
that's going into the model?


James Quazi


Yeah, that's correct.


David Roberts


It's utility bills. And this, these are available from the
utility. There's no, it's not difficult to get this information.


James Quazi


Somewhat loaded question. It should be available. I just finished
listening to your podcast on "Free the energy data." I have —


David Roberts


That's why I ask. I'm wondering how straightforward it is to get
the raw data that you need.


James Quazi


I would say that having been in this industry for 20 years, it's
much easier now than it has ever been before. That being the
case, there are still hurdles. There's a lot of missing
intervals. There's patchwork to be done. There are services that
provide synthetic intervals. It's not as clean of a dataset as I
would ideally like, but it's generally like the authorization,
and there are a couple of third-party companies now that do it
and are making it easier.


David Roberts


Is it notably easier in California than it is in other states?
Different in California than in other states? Or is this just a
utility by utility thing across the country?


James Quazi


Our focus is in California right now. So, I have the most depth
and experience there for this problem. Even within California and
the IOUs, it is utility by utility.


David Roberts


So are you restricted geographically where you can sell your
product based on the utilities, whether you can get these to
utility information or not?


James Quazi


Our position is that to accurately model a home's energy use and
consumption profiles, you need two things. One is you need a
physics-based model of the building, and then you need to be able
to calibrate that with what is actually happening in the home.
I've done a lot of energy modeling, auditing, that sort of thing.
I think the one definitive thing that I've learned is that the
best site observed data is actually bills. It will help you
ferret out how people use their home, what their preferences are,
and is actually the ground truth data.


So, our position as a company is because we want to be able to
confidently project — like, let's say if I converted a gas
furnace to a heat pump, and I want to know on an hourly basis,
what is the energy input to that system. To do that accurately, I
believe that you need interval data.


David Roberts


So you are in some sense beholden to utilities here or dependent
on utilities to be forthcoming?


James Quazi


Yeah, I think, unfortunately. And then to "Free the energy data"
podcast. Yes, this is true, and it is being in some ways held
hostage, and that's not great for the industry. I would say that
our success rate right now is like, it's significant enough that
we see this as somewhat of a hurdle, but not a deal breaker.


David Roberts


Right, right. So, I mean, getting utility bills seems
straightforward enough. You just ask the homeowner and they give
them to you. But when you say a physics-based model of the house,
you have to go do that in person. Can you construct that from
publicly available data?


James Quazi


Yes, you can. We've done this in several iterations in the past.
So, the background engine that does this is an NREL product
called EnergyPlus. And it has, let's say, a full set of data
requirements, which you can imagine has a lot of physical
attributes of the specific house. And what we do ourselves and
through partners, is comb, let's say, permit record databases and
MLS listings. And we can get close enough with that set of
information to build the first model. And then it's really, in
comparing that model to the billing data, what's actually
happening on an hourly basis, that allows us to calibrate it.


David Roberts


Interesting. So, you don't have to do a site visit to do any of
this, really. You could theoretically do all of this modeling
remotely?


James Quazi


Yep. Everything like roof geometry, shading, building modeling,
tariff engines, all the things that are sort of the processes to
get to an output, can be done remotely.


David Roberts


All right. And so, you put all this information into the model,
and then what is the model supposed to do? And here's a question
I had also: Am I the homeowner, interacting with this model in
any way, or is the model a tool for contractors?


James Quazi


Our plan, at the very start, we're working with a set of
contractors, and we're in Napa and Sonoma to start, most notably
Northern Pacific. Our plan is to deliver a tool to a solar
contractor that they can use to propose a wide range of solutions
that a homeowner might want. I think that this will become a
customer-facing tool or exploratory tool in the future, but we
are definitely starting with solar contractors.


David Roberts


Interesting. Yeah, because one of the questions I had about this
is just that I'm sure I'm not telling you anything as someone
who's worked in energy for a long time, but just like, people are
pretty lazy, and the way people make decisions about appliances
and stuff like that is generally to ignore it until it breaks and
then go to Home Depot. So, like this comprehensive, long-term,
holistic planning, I'm just like, wondering, like, how many
homeowners are really that committed?


James Quazi


So, let me give you an idea of, like, what the output of the tool
is, then where I see this going. So, you know, back to my house,
30 panels, batteries, EV's, all the things. What we want to do is
expand the solution set for all possible outcomes for that house.
So, if I permutate those things, it ends up being a set of maybe
like a couple hundred to a thousand different individual
pathways. It could be 28 panels —


David Roberts


And these are like mixes of the number of panels, the number of
batteries, what kind of appliances, that kind of thing.


James Quazi


That's absolutely correct. And then what we've created is sort of
a decision-making framework that allows you to search that space
for the thing that's right for you. At first, contextualized in
one of three goal seeks. So the first one being a very standard
solar approach, which is "Deliver me the best financial outcome."
The second one, which we're seeing a sort of increasing adoption
around, is like, "Yeah, I want a great financial outcome, but I
also want to power this set of critical loads or my entire house
through an outage of this duration. And I'm not cost-sensitive
around that."


So, like, if I need to add a battery or two batteries and it
provides that service, that's fine. And then the third one is a
sort of immersion. Ten years ago, when I was in the solar
industry, it was like there was a time when we thought we had to
deliver day one savings to get adoption. And it turned out there
was a segment of the population, mostly retirees or people that
were about to retire, who, let's say, had a $150 utility bill.
And they're like, "You know, saving money isn't as important to
me as, you know, I experienced the grid cost is volatile, but
always volatile in the upward direction.


And if you are going to put on the system and it has a 20-year
lifespan, can you lock in this $150 for 20 years? And I don't
experience any increase in costs." So those are starting points.
I will say that I think there's more out there. So, there are a
segment of customers that could be interested in just like the
environmental outcome, and there's ways to calculate that based
on grid dynamics. That's where we're starting, and I think we'll
kind of learn our way into the solution.


David Roberts


Right, so you can tweak the model depending on what your goals
are, depending on what your aims are. And I guess one of the
questions I had about it is, like, in California at least, grid
electricity is so expensive and natural gas is so cheap, and
solar compensation is now so low, that it seems like the most
economical outcome for homeowners is always going to be to
electrify all your appliances and put a bunch of rooftop solar to
power your appliances. It seems like that's always going to be
the cheapest outcome, is it not? And that's also always going to
be the most environmentally preferable outcome, right?


Because it's zero carbon. In other words, what if I, as a
contractor, just came to you and said, "Look, I can do all these
complicated calculations, but trust me, you want to electrify all
your appliances and put rooftop solar on your roof. That's what
it's going to end up showing you." Does it ever show otherwise?


James Quazi


So, if we were to implement generalized or rules of thumb, I
think that would be a good one. What I have seen is there are
time when your're roof constrained, so you might not have the
roof capacity to power all the things, and then you'd want to
make better decisions. To the extent that you have vast plains of
south-facing, west-facing roof area, we want to make sure that
we're installing the right amount of solar and batteries. So, I
think that there's an optimization problem there. But, I think
you're right in the sense that to the extent that you can
self-consume a ton of energy that you generated on-site, that
will be the best outcome for you.


David Roberts


So then, if I'm a homeowner and I run this model, or a contractor
comes to me and runs this model, and the outcome of the model is
the most economical approach for you, the homeowner, is to buy a
heat pump, buy a heat pump water heater, buy an induction stove,
et cetera, buy a bunch of batteries and put a bunch of rooftop
solar on the roof. On the one hand, I might believe, I might find
it perfectly plausible that that is the end state that will yield
the lowest ongoing operating costs for my house. But on the other
hand, that's a daunting upfront investment. Do you know what I
mean?


In a sense, if I'm a homeowner and a contractor comes to me, he's
like, "I'm selling solar. And by the way, I have this fancy tool
that shows me that you also need to buy a bunch of other stuff
from me." I guess I'm just a little suspicious.


James Quazi


I think the intent of the tool is to allow a homeowner to make
the best decision for them. To the extent that the best decision
is, in fact, a larger PV system, more batteries, maybe a heat
pump, and all of those things in aggregate end up being expensive
directionally , but have great payback. I think that hits on like
sort of the second vein of Balto. So the first is like, how do we
create a decision framework and compute engine to give you the
scenarios and help you make a decision? Once you've made a
decision —


David Roberts


Will the model also crank out a preferred order of operations for
that? You know what I mean? Not just like an end state that would
be best, but like, what steps in what order are economical?


James Quazi


This is getting back to the solar-led electrification vision for
this. Our position is that solar and storage should lead always ,
and we should be building 20 or 25-year products for the future
energy consumption. The tool is there to say, can we share a
vision of the future and what applies and things you'll be
engaged in, whether that's EVs or heat pumps or whatever. Once we
have that, can we build 25-year renewable infrastructure on site
to support those things over time? We think that there are
interesting ways. And I'll touch on the financing in a little bit
about how to transact this and make it consistent.


David Roberts


Yeah, I want to get to the financing in a minute, but before I
leave this question. So, why always solar and batteries first? Or
put it this way, why shouldn't I put a little bit of solar and
batteries on, enough to power my current appliances? And then,
you know, when I switch out my furnace for a heat pump, just
stick a couple more solar panels on the roof. Why not do it
incrementally like that?


James Quazi


Yes, I myself have a background, and then we've got some deep
partnerships with contractors. They are not a fan of that
approach for a number of reasons. One is if I take a
five-kilowatt system and then I append a three-kilowatt system on
later, that is not the cost of an eight-kilowatt system. It's
much more costly.


David Roberts


Because just coming out to the site again and all—


James Quazi


Redesign, permitting. Yeah, all the things. And then separately,
depending on the time lag between system one and system two,
there are at times, compatibility issues with modules that make
it more difficult. I think solar's gotten inexpensive enough
where if you were going to engage in one of maybe the three big
electrification projects, which would be EV, heat pump, heat pump
water heater, I mean, you should be sizing for at bare minimum
that. And I would argue for the whole thing if that's what you
intend to do, on day one. And then if you're doing other things,
let's say that have a more de minimis impact on your meter or
your electrical consumption, like a stove, then maybe it's fine
to wait.


But to the extent that, like, you're considering solar and
storage and one of the other things, I think it makes a lot of
sense to size appropriately for future loads.


David Roberts


So, you would say to any homeowner contemplating solar that the
financially smartest thing to do is to size a system for your
projected total need in the future, not your current need.


James Quazi


Yeah, no, I feel strongly that that is the case. I will take
myself as an example again. I have an EV. I am considering a heat
pump. I have a tankless hot water heater that is in a closet and
is not easily replaceable with a heat pump water heater given
form factor. But given those things, I did size the PV to the
anticipated heat pump. Even if that doesn't happen on day one, it
might happen on year one, three, five, or seven, right?


David Roberts


So, are you not then, while you have the solar that's oversized
for your current needs, are you not sort of financially losing
out in the interim, in the meantime?


James Quazi


So, I think that again, the export value for solar today
directionally is much lower. So, there is some value, it's not a
lot. I would categorize it as you're not optimizing the system
today.


David Roberts


Suboptimal, then let's see.


James Quazi


But I think that what you're really doing is putting together the
infrastructure to adopt more products in the future.


David Roberts


Right. A contractor comes to me as a homeowner, says, "Let's look
at how much solar you will need once you've electrified your
home," basically, and install that amount. Do you envision these
same contractors who are trying to sell solar, selling these
other things to homeowners as well? Sort of like offering, like
moving beyond solar to offer kind of total home electrification
packages type of things.


James Quazi


I think there's going to be a couple of different flavors, and
we'll see what sorts out. In San Diego, one of the biggest
residential installers actually has historically had a heat pump
division of their company. That's probably not the norm. I do see
a lot of solar installers — I mean, certainly, a solar installer
is now installing storage by default. A lot of them install EV
chargers. I've seen some interest in heat pump water heaters as
the installation is quite a bit easier than heat pumps, HVAC. So,
I think that we'll see some adoption of product over time.


I do believe that the heat pump is probably the one thing that is
a set of expertise that is probably different than what solar
providers have in-house. What they can do, and we anticipate
doing, is a lot of pre-wiring work. It's taken as an industry
axiom that HVAC products get replaced when they break. To the
extent that that infrastructure, whether it's a 240 circuit to
the existing furnace location, is not in place, it's very likely
that the existing thing gets replaced with something very
similar, and then we're locked into this pattern for 15 years.


So, we're very interested in, again, sizing appropriately, but
then also doing some of the pre-work that allows these things to
be adopted.


David Roberts


Trey, interesting. And so, from your perspective, you're going to
put the tool in the hands of contractors, and then to some
extent, the contractors are going to figure out exactly how best
to use it and what kind of packages to offer and stuff like that.
Is Balto out being a contractor, like running this, interacting
with homeowners?


James Quazi


No, we are not. So, what we're doing is providing a toolset,
which is computational tools, finance tools that allow existing
contractors today to be more effective.


David Roberts


Got it. And so, talk about the financial side of this. So, I'm
guessing I'm borderline illiterate when it comes to money issues.
But I'm guessing that part of the promise of this is that if you
can more accurately and reliably project future energy needs in a
home, you're going to have an easier time financing the sort of
oversized solar system that you want in anticipation of those
loads. Is that right? Part of this is like giving confidence to
financial institutions to finance these things, right?


James Quazi


Yeah, that's exactly right. So, I would say that the first step
is having a shared vision of what the future of this home looks
like. So, what are the appliances that are on the list and off
the list? EVs, whatever the case is. And then, from past
learnings at Solar City and Dandelion, really what you have to do
is package it in a way that people can experience the savings at
the same rate as they chunk off the capital cost of these
projects. And then, in terms of energy savings over time and
confidence, I think the goal there is, and we could think of it
as if you were getting a loan.


One factor in the loan might be your debt-to-income ratio. How
much debt do you have, and can you actually service this loan
over time? And our position is, to the extent that these suite of
products actually lowers your obligations to pay, so your utility
bills, that should be factored into any financial product as
well. Does that make sense?


David Roberts


Yeah. So, it's almost like future income increases, almost like.


James Quazi


Yeah, so if I had, like, if my obligations to pay a loan provider
were $1,000 a month, just randomly, and I made x amount of
income, if the obligation was less, if it was $500 a month, given
all these energy savings, I would have a greater ability to pay
back that loan, and that should be factored in.


David Roberts


Oh, I see, I see. So, is the idea here just for this tool you've
created to give confidence to homeowners who are going to banks
and stuff, or are you getting in the finance game at all?


James Quazi


Our intention is to provide the financing for it as well. I mean,
like, I think any time we're trying to make the process as
seamless as possible. So, it's sort of like a one-stop shop in
terms of assessing what's right, what's the best fit for you in
terms of these projects, and then packaging it in a way that —
we're hoping it incentivizes people to do more sooner, but to the
extent that they want to do things over time, it is also like a
flexible facility that allows you to adopt a heat pump water
heater in year three, if that's what you want.


David Roberts


So the contractors are the ones offering the homeowners this sort
of financing package?


James Quazi


Yep, that's correct.


David Roberts


Right. And the contractors are able to do it because they have
this information from your tool that gives them confidence?


James Quazi


Hand in glove.


David Roberts


Right. So, just having gone over all this, let's rewind and just
imagine I'm a homeowner, and a contractor knocks on my door. What
do you envision the contractor sort of like, what is the
homeowner facing pitch from the contractor? Because there's a lot
of complicated stuff going on behind the scenes for the
contractor. What is the homeowner hearing? What is the pitch to
the homeowner?


James Quazi


Yeah, we see it as a stepwise process. So, because our go-to
market is through solar contractors, the first step is to say, if
I were any other solar contractor, and you called me for a solar
and potentially storage system, what I would have done is looked
at your current electrical bills and size the system this way,
and this is what... "You want a five kilowatt solar array and one
battery, 110 kilowatt hour battery." The next step is to say,
"Hey, listen, we're actually in that world. We're only looking at
one of probably three silos of energy that you're using."


So, we're ignoring the natural gas side of the bill. We're
ignoring everything that's happening at the pump. But, if we look
at your energy spend holistically, here are a suite of options
that are available to you. And this is the differential sort of
financial outcome versus just a solar system, versus, like,
resiliency versus bill stability kind of thing.


David Roberts


So, the idea here is, I go to the contractor and say, "Hey, I've
been thinking about solar and battery," and the contractor says
to me, "Well, hey, what about this larger package? You could have
even bigger savings, and you could have resilience," and stuff
like this. So, it's a little bit like an upsell for a contractor.


James Quazi


Yeah, I mean, I would think of it as like, being able to more
holistically address energy spend. Like, that's our goal, is to
say, "It's not just one flavor that we're dealing with. We're
looking at the entire house and things, and we want the best
solution for you."


David Roberts


It makes me wonder how long it will be before homeowners think
that way, or if they ever will. Because homeowners just think of
products as separate products. I don't know that a lot of
homeowners, especially outside our world, even sort of think of
the home as a system, right? With certain energetic inputs and
outputs that should be dealt with as a holistic system. Like,
that's just — I'm not even sure homeowners are at all accustomed
to thinking that way.


James Quazi


I wonder if I myself am, like, blinded by sort of a friend group
or whatever the case is. But I would say that, like, I don't know
of a lot of people that aren't at least considering an EV, right?
Even if they're not, like, actively join in. But it's like, "Hey,
listen, this is actually a real option." I don't think that heat
pumps are very far behind that curve. It's interesting, like when
people, like historically, when people inquire about solar, we
often times have thought of that as they want bill savings. But I
am not entirely sure that that is the reason.


David Roberts


Do we know? Have we done surveys and polls? I'm so curious. I
would also assume, just out of a sort of, I guess, a low, like a
background degree of cynicism, that that's going to be the
dominant motivation. But is it? Like, I don't feel confident
about that at all.


James Quazi


Well, I don't either. My belief is that bill savings are part of
a decision-making process, but probably very rarely the primary
driver. And that is the thing. And even if you look at, like, the
funnel conversion metrics of, like, the solar industry as a
whole, it's just like, for every hundred people that inquire,
single-digit people actually do the things. And our perspective
is like, you know, they're getting stuck somewhere in the
process. And it's oftentimes with questions that cannot be
answered, and that's when they stall out. And that is our reason
for expanding the set to everything that's possible in your home
and letting you search that, because we think we'll figure out
what are the motivations. I think that there's a strong cohort of
people that are just anti-utility.


David Roberts


That's a piece of it. There's an environmental piece of it.
There's a sort of independence, anti-utility piece of it. There's
a vague mix. There's just social contagion, there's just peer
pressure. You see it around you. It's the whole stew of
motivations. I'd love to understand that better. So, I mean, it
kind of seems like what you'd want is for your tool to be in the
hands of everybody involved in any of those products. Do you know
what I mean? Like, if I want an EV and I go to the car
dealership, you know, it'd be cool if the car dealer could say to
me, "Hey, you know, save even more money if you threw in a heat
pump with this and a solar panel."


You know, like if, or the heat pump, people are like, "Hey, throw
in an EV and solar panels." Like, it'd be nice if homeowners
confronted the idea of total electrification everywhere they
looked, right? I mean, that'd be ideal.


James Quazi


Yeah, 100%. I really think that's the vision, and that's where
we're going. I think the entry point into a lot of this stuff
will be varied. Like, it will be through an EV at the start, or a
broken furnace that gets replaced by a heat pump or whatever the
case is. I think our goal is to engage homeowners in a way where
we have a persistent bill connection. I think that this is why
that episode resonated so much with me. If we have an address and
a persistent daily, hourly, monthly, whatever the case is, bill
connection, you can drive insights over time to a homeowner at
very meaningful times to intercept them.


Right now, I think this business, like solar in general, is very
transactional. We think of it as like, we get leads in the top of
the funnel, we set them at this rate, we convert them at this
rate, we install them. It's a 30% gross margin, and then that's
the end. Whereas, I don't believe that that's the way the
products will be adopted and people will have to, I mean,
internally we call it energy literacy. Like, how do I start to
understand the problem and the solutions?


David Roberts


Right. So, in the same way, you sort of have a financial advisor,
you could have like a home advisor, basically. A home energy
advisor.


James Quazi


And we also think it's got to be low impact, so it can't be like,
"Hey, you've got to go do this detailed sort of appliance audit
or whatever the case is." So it's bills and address, and then,
you know, this is a great state of change problem where utility
rates are constantly changing, prices of products are changing,
incentives are changing, and there's always a chance to message.
I very viscerally feel this in the sense that, like, when I took
four years off and then reengaged with the industry, I was like,
"Wow, we like, crossed the threshold, like, the point of no
return, where electrification now makes sense for everyone," and
I had missed it, and this is the only thing I'd ever done.


David Roberts


Yeah, I mean, it's moving so quickly. I will say, though, one
thing I hear from, you know, and there's been articles written
about this. It's just like, it's all out there from people who
have tried to do this total electrification thing. It's just
incredibly difficult, just incredibly difficult to synchronize
everything and arrange everything. And so, in that context, the
idea of having a kind of home advisor where, like, your hot water
heater breaks and you just call your home advisor, you figure
out, like, what's the right approach here, what's the economical
approach, where to look, what kind of thing to get?


A lot of people would very much welcome having one of those, I
feel like.


James Quazi


And I think that this speaks to the general funnel conversion in
the industry, but generally, a lead comes in, and then what we're
trying to do is furiously convert them to a sale and install as
quickly as possible, hopefully within 30 days, hopefully in one
set. And I just don't believe that that's the way that people
will consume products. It will be through a bunch of different
experiences over time. And I think that's a meaningful
difference. Like, you know, we're in such a rush to do all the
things. Like, I'm in a rush to do all the things at once, but I
think we have to also meet people where they are and, like,
engage them in some way over time so they can make a decision, so
they can make another decision.


David Roberts


I hope it changes because, honestly, like, you know, I've thought
about solar. Ten years ago, we did one of those sort of, like,
online audit things, and it was like, "No, you're too shaded."
But I think it's just changed since then. Uh, just like, what's
possible. But, like, I know that if I got a solar contractor and
sat down at a table with that person, that they would just be
sweaty and desperate, you know what I mean? To sell me just like
it, exactly like I feel at the auto dealership, which is just
like, "Ew," kind of uncomfortable, you know what I mean?


And rushed and don't feel like I have a full sense of all the
pieces in play, and that I can't trust the person I'm talking to,
to help me out, you know what I mean? I'm sort of, like,
adversarial. I hate that whole model, you know what I mean? And
just like, I would be, I don't know how representative I am, but
I'd be inclined to spend more money if I just had a person who
was like, had the big picture, had the model, had the data in
hand, said, "You know, like whenever you're ready, this is the
right first step."


Just like a better environment for homeowners to deal with these
things and think about these things.


James Quazi


Yeah, no, I get it. I feel very similarly. I totally understand
from the other perspective, like solar sales reps are expensive
and they're hired to do one thing. I just don't know that it's
the way that most people want to adopt the things.


David Roberts


Yeah, I can't believe that it's going to go to truly, truly mass
penetration running on this model. It's going to have to evolve
into something else. As we near the end here, let's pull the
camera back a little bit and talk about the Agile Electrification
project. My understanding basically is that the NEM 3.0 decision
in California threw the solar contracting world into a bit of a
tizzy. And there are efforts now to organize and figure out how
to move forward and how to help contractors and what the right
approach for contractors is in this new world.


So, tell us a little bit about what the Agile Electrification
project is.


James Quazi


It is an industry-sponsored project that's hosted at the Design
and Innovation Center at UCSD. The genesis of it was a lot of,
quite honestly, hammering around NEM 3.0. It was like if you read
Canary or any of these publications, a lot of it is doom and
gloom. This industry is down 70%.


David Roberts


Yeah, there's a lot of "sky is falling" sentiment flying around.


James Quazi


Yeah, I think there have been. And you know, a lot of people are
like, "Hey, listen, a lot of the bad actors are going to get
flushed out with this," which I believe. I also believe a lot of
some good actors will go out of business. So this is like a real
issue. In times of turmoil, there's oftentimes opportunity and
there's a group of people, contractors, manufacturers, investors,
who have come together in this venue where sometimes it would be
competitive or driven by business interests and they're coming
together to solve problems for the industry. So right now it's a
series of three projects to expand from there.


One is like energy modeling for the entire state of California.
It's something that everyone needs. We want to do it and open
source it. Another one that we touched on earlier is
understanding customer motivations and understanding where they
got stuck and how to unstick them, because our general sense is
they want to save money. And I don't know if that's the primary
motivation. And then the third one is around incentives and
rebates and how to, like, it's a constantly evolving landscape
and just staying on top of it is like a challenge and maybe a
full-time job.


So, it's how to open-source that aspect of it, and how to qualify
people for rebates and make sure that they're up to date, make
sure they're not over-allocated, and deliver that information to
the people on the ground that are actually installing the
systems.


David Roberts


Right. And so, I'm stuck on this point. I just wanted to
reiterate one more time. So, it's your belief that, because I
think this sort of popular belief is that the NEM 3.0 decision
has radically reduced homeowner incentives to get solar power,
that it's just not as worth it anymore to get solar power. What
you're saying is, with the right holistic approach, solar power
is as valuable as ever and just as worth getting as ever. Is that
your position?


James Quazi


That is my position, yes.


David Roberts


Do you think that that is widely, like solar contractors believe
that, or are you having to sort of buck them up and convince them
of that?


James Quazi


Well, I think we're in a stage right now where, I mean, we set up
the simplest possible website, have done very little marketing.
We've had directionally 75 to 100 contractors sign up and say
they're interested. I believe that the contractors are looking
for solutions. For sure. That is definitively true. I think they
should believe this because it is true that there is a great
value proposition in homeowners. I think the issue here, maybe
the persistent issue that's undeniable, is that it's more
complex. Describing the value proposition has become more
complex. For sure. There's no way around that.


So, we're trying to find ways to — I mean, the back-end compute
engine is great. The real challenge is finding ways to deliver
that information to customers in a way that's actionable.


David Roberts


For sure. Final question then. A lot of this seems very
Californian. The fears and the solutions and all of it seems sort
of very customized to California's current circumstances. How
applicable is all of this, do you think, outside of California?
Would your model be helpful to a homeowner in, I don't know, like
Arkansas?


James Quazi


Yeah. So, I would take it in two flavors. One is, I think there's
the expectation, for good reason, that these policies in
California will get exported to other states. So, it will become
hugely relevant soon.


David Roberts


You mean rooftop solar compensation getting cut way back? It's
already happened in a couple of other states. I mean, it's
definitely a trend.


James Quazi


Yeah. So, that's true. NEM 3.0, or like the difference between
export energy valuation and import and parity, does not have to
be true for this general value proposition to hold true. So, to
that extent, I would say that it's portable anywhere. We chose to
start in California because it is by far the biggest solar
market. It accounts for about 50% of solar and there was a
demonstrated need. I will say that it's a very complex problem to
solve and it has geographic sides to it. So, as you move
location, utilities change and their tariffs change and the way
that they charge and weather changes.


David Roberts


The information they make available.


James Quazi


Exactly, exactly. So, we've tactically started it in California
for those reasons and constrained it. But there's no reason why
this shouldn't be applicable to, like, any other place.


David Roberts


Right. It's sort of interesting. The big fear, or I guess the
thing that solar people used to say to utilities when warning
them away from NEM 3.0, is like, "Look, if you cut compensation
too much, we're just going to self-consume and then install more
electric appliances and then slowly wean ourselves off the grid
and then not need the grid anymore. And then you're losing
customers." The much-fabled death spiral. It seems like you're
organizing to make that real, to make that happen.


James Quazi


I have some thoughts on this. I really do think, and I don't know
the answer, but at some point down the road, we're going to have
a fork. That fork will be either we find a way to use essentially
distribution resources to cooperate, and I think that is the best
societal outcome, or we find that we can't cooperate and everyone
has to be their own, like a little micro picogrid, and that we
have to build the infrastructure to do it. And, you know, I think
that it's probably more likely that that's going to happen, which
is unfortunate, but I do think that, as always, the affluent will
serve themselves first and make good decisions and the rest of
the costs will be pushed on to everyone else. And actually, in my
heart of hearts, what I think will happen is we'll find a way to
cooperate, but only after we've sort of incurred a huge amount of
pain.


David Roberts


That sounds like the American approach that I know and love.
We'll stumble through some disasters and then eventually get our
act together.


James Quazi


Yeah, you end up doing the right thing when you're forced to. So,
I think that that's the way I see it happening.


David Roberts


All right, well, cool. James, this is really interesting. I've
been meaning to look into solar in California, how they're
dealing with all this. And this is a really interesting approach.
I mean, it's never funny. Until I sort of read about this, it
never occurred to me, even though it's really obvious, that like,
of course, electrifying your appliances and getting your battery
and getting your solar panels are — that's like the same thing.
You know what I mean? Like, that's all one. That's all one thing.
Like I said, it's like a switch that kind of flips in your mind.


You're like, "Oh, like, it's a holistic system." It would be
interesting to try to train homeowners to think that way more.
Thank you so much, James. Thanks for taking the time.


James Quazi


Thank you. Appreciate it.


David Roberts


Thank you for listening to Volts. It takes a village to make this
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