Volts podcast: Saul Griffith and Arch Rao on electrifying your house

In this episode, Saul Griffith (co-founder of Rewiring America)
and Arch Rao (founder and CEO of Span, which makes smart
electrical panels) discuss the need to electrify US homes, the
challenges standing in the way, the kinds of solutions that will
ease the process, and much more.


Full transcript of Volts podcast featuring Saul Griffith and Arch
Rao, June 28, 2021 


(PDF version)


David Roberts:


Those of you who have been reading or listening to Volts for a
while know that I am fairly obsessed with clean electrification,
which involves shifting all the things we do now with fossil
fuels over to electric equivalents (while cleaning up electricity
supply).


One important nexus of electrification is the residential sector.
US homeowners are in a position to electrify their power supply
(with solar panels), their heating and cooling (with heat pumps),
and their transportation (with electric vehicles). How can we
induce millions of them to make the decision to electrify,
starting today? How can we make it cheaper and easier for
them? 


To discuss that and related issues, I was excited to connect with
two of the smartest people working in this space. The first is
analyst, inventor, tinkerer, and entrepreneur Saul Griffith, who
will be familiar to longtime readers — I've cited his work
numerous times, especially his most recent work with Rewiring
America, which advocates for rapid electrification. There is
probably no one on earth with a better understanding of the US
energy system. (He’s got a book on electrification coming
out in October.)


Griffith is a backer of and investor in a startup called Span,
which makes smart electrical panels that offer homeowners
fine-grained control over all their individual appliances,
lights, and devices (via an app on their phones, of course). The
founder and CEO of Span, my other guest, is Arch Rao. Rao was the
project lead for Tesla's Powerwall home battery before leaving to
start Span, so it goes without saying that he is intimately
familiar with the technical and economic challenges of home
electrification.


Welcome to Volts, Saul and Arch! Saul, I want to start with you.
We're going to talk about home electrification today, and just by
way of setting context — it's pretty easy to make the case that
home electrification is fun, it's cool. But what is the case that
it is necessary, and not only necessary, but necessary quickly?
Set the bigger picture for us.


Saul Griffith:


There's a few components to that. Let's start with the climate
component: the urgency.


There's a concept called committed emissions — that is the
emissions that a machine that exists today will emit while it
lives out its lifetime. So if you bought a petrol or gasoline car
last year, it'll keep burning gasoline for another 20 years; if
you bought a natural gas furnace last year, it'll keep burning
natural gas for 25 years; a hot water heater, 15 years; an oven
burning natural gas, another 12 years. So those are committed
emissions, the same as a new coal plant opening last year would
go on operating for another 50 years. We now know that if all of
the machines that exist on the planet today live out their
natural life, the committed emissions of those machines take us
to about 1.8 degrees Celsius, over three degrees Fahrenheit of
warming. So the practical reality is every time any of our
machines fails or needs to be replaced, we need to upgrade it
with a zero-carbon option. And the only real zero-carbon option
that has emerged is electrification, and that's electrification
of our heat with heat pumps, of our vehicles with electric
vehicles, and then tying that all together and balancing the
grid.


David Roberts:


Right. And what chunk of emissions comes from residential? 


Saul Griffith:


Historically, we put emissions into sectors: residential,
commercial, industrial, and transportation. The residential
sector is responsible for 10 or 15 percent of total emissions, by
that measure, but it's actually much higher than that because in
reality, you make the decision about your car and your home. And
when we electrify our cars, they're going to be charged at home.
And then today, as it stands, a huge amount of our economy in the
U.S. — close to 10% — is used to find, mine and refine fossil
fuels, so that's the pipelines and the trains moving coal. And
that's all filed under industrial emissions. So if you wrap up
your pro rata share of that in your household, you wrap up the
electrification of your vehicles, the decisions you make around
your kitchen table are actually about 40 or 42 percent of our
total emissions. In our small businesses and offices, what's
traditionally known as the commercial sector, it's about another
20 percent. 


As I like to say now, there's two types of emissions. There's a
small number of big machines, and there's a large number of small
machines. The small number of big machines is a few hundred coal
plants and a few hundred LNG terminals and a few hundred oil
tankers, but the real game in town is the 200 million vehicles,
the 128 million households, the 70 million natural gas furnaces,
etc. That's the large number of small machines, which is what we
need to electrify when we electrify the household.


David Roberts:


And it’s individuals in charge of those decisions.


One objection I hear to home electrification is that, from an
household point of view, the boring stuff like insulation and
weather-sealing is a better value. What's your general response
to that? 


Saul Griffith:


I don't think that's true. It’s empirically wrong. Retrofits like
the envelope and ceiling can be very, very expensive, because you
have to remove walls, you have to stuff new insulation in those
walls.


I just got a quote on doing that for my house, which is in a mild
climate but is nevertheless freezing. It was about $28,000. That
would give me a small efficiency win in this house, of maybe 20
percent less energy use, whereas buying the heat pumps to heat
the house is about a $2,500 project. They will lower my energy
for heating the house by two-thirds compared to how it's
currently heated.


So the big efficiency win in this house is the heat
pump.  


Arch Rao:


Just to expand on that, we have to be looking at technologies
that change the outlook for us, not just looking back, but
looking ahead. Things like fundamentally changing how we heat our
homes or how we think about cooking and heating our water supply
are the big game changer here.


David Roberts:


Following up on that: Span makes these smart electrical panels.
What's the pitch that intelligence is important, or a necessary
component of this, versus just dumb-appliance replacement?


Arch Rao:


That's a very good question. Often people have to be walked
through the second-order effects that a solution like the Span
panel can have for your home and your carbon footprint.


A very useful analog, perhaps, is: in order to enable faster
adoption of electric vehicles, we have to think about building
charging networks, where we are working to deploy a large number
of charges around the country and around the world. It's kind of
similar.


The electrical panel has a critical place in the electrical grid
infrastructure, especially for your home. Without thinking about
data controls and intelligence flowing in and out of it, it is
very hard to envision a future state where switching over to
electric appliances is practical or inexpensive.


Anecdotally, when you think about replacing your water heater or
your home heating system, it doesn't happen outside of an event.
You have equipment failing, then you think about upgrading it,
and when that decision point arrives, the cost and the timeline
for upgrading your electrical system is often not compelling.
It’s too much for any homeowner to take on, so they end up
adopting the easiest solution, which is often calling somebody on
Yelp and saying, “Hey, please replace the water heater with
another natural gas water heater.” They're then locked into those
committed emissions, like Saul said, for the next decade or more.
So that's one part of the problem. 


The other part of the problem is, when you think about the
continued adoption of electric appliances — be it electric
vehicles, electric induction cooktops, or self-generation storage
solutions like solar and batteries — the electrical panel, which
is what everything connects into, is insufficient from a capacity
standpoint.


What we're allowing for is a smarter electrical panel that gives
you controls and visibility down to every appliance and makes it
easier to lock in these electric appliances and also potentially
avoid the cost of upgrading your incoming service.


David Roberts:


The idea is that Span will juggle the loads and the timing, to
smooth out the demand curve so you don't have these spikes where
you might need bigger hardware.


Saul Griffith:


So the average US household today has two cars in the garage that
burn petrol or gasoline or diesel, and it has natural gas
heating, and it uses about 25 kilowatt-hours per day of
electrical energy. If you electrify both of the vehicles in that
household, you'll add about another 25 kilowatt-hours per day to
the load of that house. And if you electrify the heat, you'll add
about another 20 kilowatt-hours.


For the majority of U.S. homes — and this is true around the
world, when we electrify for purposes of decarbonizing, or for
purposes of having a quieter, cleaner car, or because you're
trying to improve the respiratory health of your children,
because you don't want to burn fossil fuels inside your house —
you're going to double or triple the loads in that house. 


The other phenomenon that is happening — and where I'm dialing in
from today, in Australia, is an incredible example of this —
rooftop solar is now providing 5 cent per kilowatt-hour
electricity in Australia. Australia got the right mix of
regulatory environment, politics, financing, that there is no way
the grid will ever provide electricity to you as cheaply as
solar.


That will be true in the US — it is starting to be true, but it's
going to be very, very true by 2022 or 2023. And then you're
going to want to run your hot tub when the sun is shining, and
you're going to want to charge your car battery when the sun is
shining. That needs coordination, and it needs a computer, and a
brain.


What we're trying to avoid is having both cars on a type-two
charger running at the same time as your oven, at the same time
as your stove, at the same time as your hot tub. And with a small
amount of intelligence coordinating those loads, there's actually
quite a big economic win — it means that the total retrofit that
we need to do is much smaller.


Arch Rao:


Thinking about it from the bottom up as well, the home electrical
grid is built very much like traditional electrical
infrastructure. You think about the worst case scenario, you try
to build out capacity to support a very low likelihood scenario
of these EV chargers, the heat pumps, your induction cooktop, and
all of the different appliances in your home being powered on at
the same time.


That rarely ever happens, or in fact never happens, right? To be
able to manage these, you need a solution that sits at the nerve
center of your electrical system. That's really what Span does.


David Roberts:


It’s quite analogous on the household level to the larger grid:
you're just peak shaving. You're installing some intelligence to
avoid big peaks and valleys, right?


Arch Rao:


There’s an elegant comparison to be made here with fractals.
We're moving into systems where your edge of grid looks more and
more like the grid — you have generation, storage, you have
different types of loads.


So all these things we talked about, in terms of energy
efficiency — reducing your consumption, which is a concept that's
existed for decades now — is just not going to buck the curve
quickly enough. If people want to continue to have the
conveniences they have today, the solution is to electrify, to
power it with known, available, increasingly lower-cost
renewables.


David Roberts:


A lot of the promise of intelligence or software in buildings is
that grid managers will be able to interface with the grid edge
and coordinate and co-optimize it with central generation, so
that everything works well together.


A lot of what Span offers is: here's what you the owner can do;
you can set this, or if this happens, you can turn this down, and
turn this up. Over the years, I have picked up a real skepticism
about how much we can expect people to do. Even if it's directly
in their self-interest and super easy, people generally, as a
behavioral matter, will not do things.


In thinking about Span, what's the balance of user control versus
what’s automated? Do you think about that a lot? 


Arch Rao:


We do think about that a lot, actually. At the homeowner level,
what we've zeroed in on is, monitoring without controls is not
valuable. We're not just offering customers information and
hoping that they'll change.


Alongside that, controls without intelligence is not scalable. Ao
we have to work toward solutions that take the human out of the
loop, which means doing nuanced but subtle things within a home
that don't impact your everyday life, but at the same time, are
the right thing to do in terms of power flow management.


So the solution is at the home level, but you want to take the
homeowner out of the everyday decision-making process. 


The second part of it is, as we deploy more and more of our
systems, we are seeing the benefit of the fleet level. In fact,
we've already signed on a few utility partners that are looking
to give this away to their customers or significantly rebate it,
because the panel, given where it sits, is the natural
intersection point between the grid operator and the home.
Everything that you source power from, sink power into and store
power in, all naturally connects, which means you can have a
single gateway, so to speak, that can monitor and control
everything at a fleet level as well.


Whether it's an EV charger, from any brand, make, model, or
company, or whether it's a smart thermostat, all of these can be
monitored and controlled to a single gateway.


David Roberts:


To what extent are grid managers controlling things through Span
now? Or does that need some sort of extra signoff from the
homeowner?


Arch Rao:


Te're thinking about this as an opt-out model. We recently
announced a program with Green Mountain Power, and another one
with Silicon Valley Clean Energy here in California, where the
customers are by design enrolled into some form of load
monitoring and demand management. This doesn't preclude them from
overriding those requests, but now the utility is given access to
a piece of technology that allows them to control water heaters
and EV chargers and space heaters, etc.


David Roberts:


Is Green Mountain giving them away? 


Arch Rao:


That's right, the first part of their program is, they're
offering 100 systems to customers in their territory — some that
have batteries, some that have EV chargers, some that are just
getting a panel up because they're getting an electric appliance
— to understand what the benefit will be. The plan is, as we
demonstrate successfully that this has value to both the
homeowner and the grid operator, to scale this up. They have
around 200,000 homeowners.


There's another interesting benefit to this, which is that there
are still a number of utilities in the US that are filing for
rate cases to adopt smart meters — but frankly, smart meters are
not really that smart. They’re communication radios. Our panel
gives the energy company or the utility a lot more visibility at
the whole home level and at the circuit level.


So imagine by design being able to monitor the consumption of
EVs, the production of solar, the major appliances, etc. and the
controls. There's a very strong case for how this can be offered
nationally through existing utility companies and potentially
even being rebated by the government to enable
electrification. 


David Roberts:


So just slotting these in where smart meters are now? It sounds
like a better technology, but for the same general purposes.


Arch Rao:


That's right, this takes the place of an existing smart meter.
Our product is revenue-grade metering at the home level and at
the circuit level.


David Roberts:


There’s another complaint I often hear about home
electrification, and I'm curious what both of you have to say
about this. Whenever I bring it up online, one thing I hear is
that electrification would raise homeowners’ costs quite a bit.
And it's true, probably, in places where electricity is more
expensive than natural gas per therm — which is, I think, a lot
of places.


So I'm curious what percentage of homeowners can save money by
doing this now, by virtue of existing economics, versus those who
need some sort of incentive?


Saul Griffith:


I’ve spent my whole year answering this question, with Rewiring
America, which is an organization founded not only to answer that
question, but to make the economics better and better and better.


One thing we looked at was, at what point in the future the
household economics will be positive for everyone. That point is
when the US achieves Australia's cost of solar installation, at
$1 per watt on the roof, when we've electrified our heat, when we
get batteries installed for under $200 per kilowatt-hour at the
household, and when we get EVs to cost parity with gasoline.


That moment is about 2024. At that point, every American
household saves more than $2,000 per year on their energy bills.


We're actually getting closer and closer on EVs — a lot of the
savings are driven by EVs. Just for perspective: 10 cent per
kilowatt-hour electric vehicle versus $3 gallon gasoline; three
or four cents a mile for the electric versus 20-plus cents per
mile for the gasoline. Carrier, an American heating and cooling
company, just created a variable-speed heat pump that's got a COP
of 4. 


So the technology is there. If you can install these things in
the household without too much headache, then households will
realize savings.


I admit we're not quite there today. One of the reasons is that
we haven't trained enough HVAC technicians, we don't have enough
electricians, there's a lot of excess permitting that needs to be
done, there's just challenges to the practical reality on the
ground. But they're falling day by day, and there's more and more
contractors that will do a heat pump and not recommend a natural
gas heater.


The economics are flipping right now. But I do agree that the
challenge is, we've got to design and build for the future that's
going to happen in 2024, and have to sell it in 2021.


That means there are ZIP codes where it works. We just did a
study trying to help the White House on how many low- and
middle-income households would already save by flipping off
natural gas, and it's tens of millions of homes. You can pick the
ZIP codes in the country where it's most favorable, where it's a
reality already.


David Roberts:


What's the differentiating feature of those areas?


Saul Griffith:


For heating specifically, it's either because there's high
natural gas prices or because there's low retail electricity
prices in that location, or because the climate is mild. So
across the South and Southeast, there's a lot of homes in the
money, across the Southwest and the West Coast there's a lot of
homes in the money. It gets a little bit harder in the middle and
up at the top of the country, but honestly, every year we're
gaining 5 degrees of latitude in heat pump performance. 


David Roberts:


Arch, you must have to deal with the question of upfront costs.


Arch Rao:


Saul provides a really useful macro perspective, through the
longer-term horizon, for us to enable this for every home.
Expanding on one of the points he made: how do you get to that
dollar-per-watt solar? How do you get to the
sub-$200-a-kilowatt-hour storage?


I think we're coming at it from an inside-out perspective of
affordability. That's what's driving our product design and
innovation. When you think about the cost of delivered,
behind-the-meter solar today, to homeowners here in the US, a lot
of the cost is operational costs, installation cost that stem
from design complexity and customization on site.


That's part of what we're trying to solve here: there is too much
design complexity, and there's too much design customization, for
this to get to a low enough cost to become affordable for every
household. 


If you don't have to worry about relocating nodes, if you don't
have to worry about changing the ideal size of the solar that
goes on your roof, because you're not as constrained by how much
capacity the service has, it makes it that much easier for us to
reach more customers at a lower dollar per watt. That's what
we're solving.


When we think about storage — and this is actually a very debated
topic for us internally — resiliency is arguably more of a need
for low- and medium-income households than it is for larger, more
affluent households. But in order to get your whole home backed
up, or your essential loads backed up, most folks cannot afford
to have two or three batteries. Part of what we can offer is to
combine a single small battery with the Span panel, and
effectively you can manage everything in your home.


Again, it goes back to the same point of affordability: lower
capex, lower opex. That's how we're going to move closer to a
smaller carbon footprint, but also closer to enabling these
customers to take that next step towards electrifying their
appliances. 


David Roberts:


Spell that out a little bit, why a Span panel plus a small
battery can do the same work as two or three big batteries. What
exactly is the magic there?


Arch Rao:


There's two pieces to it. One is, when you think about backing up
an entire home, you're having to place a large bank of batteries
to meet what your maximum load could be. And you have to wire it
up such that you're placing this bank of batteries upstream of
all of your circuits, or all of your loads.


In some places, like California, that requires quite a bit of
installation labor, because you're having to disconnect the
meter, move all your circuits and loads into a separate
critical-loads panel, etc.


With the Span panel, we are a one-for-one replacement for your
panel — or it can also serve as a sub-panel or critical-loads
panel. And it takes in all the circuits that you already have in
your home, with all of the existing breakers, so there is no
on-site customization required.


Once installed, we are able to see and manage your load such that
you can get more outage protection with a single battery than you
can with two batteries, because you're aware of what's consuming
power during an outage. One surprisingly common piece of feedback
we got from customers when installing home batteries for Tesla
was that they inadvertently discharged their home battery into
their car during an outage, because they didn't know any better.
They didn't know they were experiencing an outage.


We can solve the problem for some people by giving them more
batteries, but I think we can solve the problem for all people by
giving them a more controllable and dynamically managed
load-control panel. 


David Roberts:


So in the event of a brownout or a blackout, your Span panel can
turn off or turn down inessential loads. It can prioritize.


Arch Rao:


Yeah. Today, the interface is very simple. It is designed for
anybody to use, where it says, here are my must-have loads, here
are my nice-to-have loads, and here my non-essential loads. It
all goes to the Span app.


Depending on the state of charge of your battery, or more
importantly, how many hours and minutes of backup you have left,
based on your load profile, we will shed those non-essential
loads first. When you approach, let's say, half of the capacity
of the battery, it will shed those low-priority or nice-to-have
loads and send you a notification saying, “Hey, David, so you
know you have another five hours of battery remaining, would you
like to share anything else?”


That's what we can do today. Where we are headed, because of the
massive amount of compute and communication we have built into
our panel, is the ability to talk to your appliances. We will
change the set-point of your thermostat; we will change the
frequency of your compressor turning on or off inside your
refrigerator. We can get a lot more out of the same number of
kilowatt-hours than you would if you were just blindly
discharging it into your home.


David Roberts:


Explain that a little bit. Today, it can basically turn up or
down the amount of power going to the appliance. You're saying
it'll have more fine-grained control over appliances in the
future?


Arch Rao:


That's right. Today we turn off circuits — which is a harsh sort
of customer experience. Very soon, we will have the ability to
interfere, to change, let's say, the rate of charge of your EV,
or change the set-point of your thermostat. And in the future,
we're working towards capabilities where we can control most if
not all the devices in your home. 


David Roberts:


Is that going to require any change in the devices, or is it more
intelligence on the Span side?


Arch Rao:


It’s just more over-the-air software updates that we can release.
And as long as your device is “smart,” meaning it has WiFi, we
should be able to talk to it. 


David Roberts:


Is this also true of fossil fuel appliances, like if my Span is
connected to my natural gas furnace? Or is this an all-electric
type of thing?


Arch Rao:


It works with any appliance that has a digital interface. So if
you had a fossil-based heating system for your home, but if it
was controlled through a Nest thermostat, then we will soon be
able to talk to the Nest thermostat and ask it to turn off or go
to a higher setpoint. So that's possible today, but
directionally, where we of course want to get to is a place where
the heating device itself is electric, and we're talking directly
to it. 


David Roberts:


Let's turn to another big topic, which I know Saul has burned a
lot of brain cycles on. We need to do all of this home
electrification quickly, and the main thing we need to do to make
that happen is to fund it. That's always the choke point —
funding and financing by the customer. There are the appliances,
there's the smart management software, there's the rewiring of
the home electrical system to be ready for 220-volt appliances,
and all of that costs money.


With customers, we know it's legendarily true that even if the
lifetime cost of ownership of something is much lower, the
upfront costs scare people off. Basically, people don't like
upfront costs. So what are the right new mechanisms or tools to
fund these things such that we can get them going, quickly, at
scale?


Saul Griffith:


It's a great question. It matters a lot which part of the market
you're in. The good news is, we have historically low global
interest rates. So the set of goodies that we're describing are
things that people buy every decade, and there's a lot of
evidence to show that most likely, you're doing any one of these
things either because you just moved house, or you're refinancing
your house, or you've just bought a car, or, the new entrant in
this game is, you've just put solar on your roof.


At any one of these interventions in your life, most households
typically will do a couple of things at the same time, and at
those points we need mechanisms that tie the financing of these
things to the refinancing of your mortgage, and do it at the
lowest possible interest rate. Certainly if you could apply
mortgage-level interest rates to all of these items, that helps
enormously with the financing of it.


There are about eight things we're talking about — the heat-pump
water heater, the heat-pump space heater, the two electric
vehicles in the garage, the two vehicle chargers in your garage,
the Span load center that connects all of them and has the brain,
and the induction stove and induction oven in your kitchen.


There is a good argument that we should declare this national
infrastructure, because there will be a date in the future where
my solar panel is running your cooktop, because I'm out of the
house, and there'll be a time where your home battery is
supplying my car with some electrons, because that's the nature
of electricity — how this is all going to get connected together
and balanced.


There's actually precedent for financing the suburbs and homes as
infrastructure. FDR created Fannie Mae in 1936 under the Federal
Housing Authority, and the government stepped in and provided
guaranteed infrastructure-quality financing to build out the
American suburbs. We will make this project collectively cheaper
for the nation if we do something similar for this bag of
goodies.


And if we recognize that if you install any two of these things
at the same time, it's cheaper than installing two of them
individually. So there's a discount if we're smart about how we
do it.


That's a pretty good story for people who are homeowners, in the
top 50 percent of homes.


The other thing we really need to recognize is that half of
American homes are struggling to find $800 and have credit rating
problems. This was before COVID, in the economic disaster that
was 2020. So I think we've got to be more honest with ourselves,
providing tax write-offs for building these things is not enough
— we need point-of-purchase rebates. We know that when people buy
hot water heaters or air conditioners, more than half of the time
it's under financial duress — your wife is pregnant, your partner
is ill, if the water heater fails, you need a hot shower
tomorrow, right? You go to the store and they say, well, the
natural gas one will cost you $100 less, and I've got a
contractor ready to go. That's why people make that
decision. 


So we need to think about this, not as tax incentives for the top
households, but point-of-purchase rebates for all households to
do it? How do we do clever on-bill financing? How does the
utility play a role in building out this infrastructure? Quite
frankly, given the time frame required, every single possible
mechanism that lowers the cost and lowers the brain damage of
doing it at that point of purchase is what we have to do.


Arch Rao:


Mechanisms like the investment tax credit already exist and
products like Span already qualify for it, because when you
install a solar system or a battery system, the new measure
allows for standalone storage to also take incentives with the 26
percent tax credit. They are good and they are in place
now. 


But I agree with Saul 100 percent that moving toward a model
where we think about products like Span, home-electrification
products, EV charging, as part of your home infrastructure and
potentially part of the grid infrastructure, allows us to go a
lot farther in terms of what types of financing we offer.


Even before we brought Saul on board as an advisor to Span, he
and I were independently thinking about the idea of
mortgage-based financing for improvements to your home. We see a
path towards offering solutions like this to every home through
mortgage lenders and insurance providers.


David Roberts:


And is there anything interesting to say about renters and
landlords? This is another thing I hear whenever I talk about
this online: “I'm a renter, I have such limited control.” What
kind of problems does that raise?


Saul Griffith:


I don't think any of us, if we're honest, have a satisfying
answer to that question yet. Somebody will figure out the
business model innovation or the piece of policy that will help.
I think what we can do is describe the world we'd like to get to.


That $2,000 or $3,000 per household in savings is $300 billion a
year in the US, and there's a lot of options of where that money
could go. Those savings could go to the bank that wants to
finance you and make it in the interest rate, it could go to a
company like Tesla or Sunrun who'd like to somehow benefit from
selling the grid services, it could go to the utility.


I think we should go with a guiding principle that we should
always choose regulations where we return as much of that money
as possible to the household, then try to figure out how to make
that happen. In this case, you'd like to figure out the
mechanisms and the regulatory environment that would motivate the
renter or the landlord to both do these things and to pass some
portion of those savings along to the household.


Arch Rao:


There's a combination of thinking about this problem from a
technology standpoint, which is primarily what we're doing, and
thinking about the regulatory policy standpoint, which is a big
part of what Saul and his team are doing. The alignment with the
economic incentives, be it the landlord, the homeowner, the bank,
the solar installer, etc. — I think there isn't one form that
fits all here. 


Going back to your original question, David, about funding,
there's one piece I think deserves just as much attention as the
rest, which is building out the workforce that can scale this up,
by offering vocational training to a larger number of Americans
so that we can actually get these deployed at a scale and pace
that will have an impact. There's about 60,000 licensed
electricians in the US now, and that's woefully inadequate if you
want to electrify every home in the next decade.


David Roberts:


Right. I was gonna return to that in just a sec. 


One more thing about the barriers for homeowners: it's pretty
well known at this point that, the closer you get to home and
hearth, the less you're talking about economics, the less
rational interest maximizing you have, and the more time
constraints and psychological constraints come in — which is to
say that electrifying a whole home today is, aside from the cost,
a huge pain in the ass.


So even in places like California, which you’d think would be
cutting edge on this, I hear, “I had to talk to six different
contractors and their permitting boards, and there's different
vendors, trying to coordinate, trying to figure out which piece
to do first, and how to finance one piece with another piece…” So
the transaction costs seem enormous right now. And I can say from
my own point of view, I would pay a lot of money to have to think
about this s**t less.


So how do you reduce those transaction costs? Is there a future
where I can just call somebody and say, here's my check, please
do all my stuff, and then that's the last I have to think about
it? 


Saul Griffith:


I think you've led yourself to the correct answer here. That's
already emerging, and it is one business model innovation away
from being able to do it.


There's a company in Australia called Brighte that has
similarities to a company in the US called Mosaic. They offer the
financing; they have contractor networks. There's a whole lot of
companies starting to do that. They’ll be able to afford to pay
full-time lobbyists to help change the laws and the regulations.


Rewiring America is focused on this, because we've got to fix the
rooftop-solar regulations in America. In Australia, there’s
suburbs with greater than 50 percent solar on their roof, all
enjoying electricity that's a third the price that the grid can
offer. Yet in America, we still have less than 2 percent of homes
with solar on their roof, because it's still too expensive. And
we have a prevailing wage of $35 an hour in Australia, so it's
not because of minimum wage.


This is red tape. We've red-taped the future out of existence.
There's been 120 years for fossil fuels to build regulations and
nurture workforces that work for it. 


So I think it will need some combination of regulatory change and
organizations lobbying for those changes, with some
business-model innovation. This is going to be true not just in
one affluent ZIP code, but every ZIP code.


We're really at the inflection point. There's a famous photograph
of New York City with 200 horse-drawn carriages in the foreground
and one car, in like 1908, and then they show you a photograph
taken from the same point 10 years later and there's 199 cars and
one horse. We’re at that 1908 moment, with one electric house and
200 non-electric houses, and it's all going to change this
decade. It will take a lot of contributions, like what Span is
doing, to enable that. No one exactly knows the answer, we're all
feeling our way forward here, but we're doing that with a fair
amount of intelligence about what needs to happen. 


Arch Rao:


I recently wrote a blog about this being our decade to
decarbonize. If you think about the growth in the adoption of
solar over the last decade and a half, if you look at just the
rate at which EV adoption has grown in the last half a decade,
I'm strongly a believer and a proponent of the fact that this
decade is going to be about electrifying many things in your
home. 


To your question about home electrification companies, I don't
think there's going to be one — there's going to be many
companies offering a combination of products that allow you to
choose electric over gas, to the point where it truly does become
as easy to adopt these as it is to get a home appliance.


If you compare the shopping experience between getting a
washer/dryer installed in your home versus getting an EV charger
or a battery system installed, the latter is an order of
magnitude more complex, because of all the red tape we just
talked about. The path to simplifying that is from the top down —
improving regulation, simplifying standards, moving toward
policies like we have in California, where we have solar mandates
and EV mandates and soon hopefully an electrification mandate —
but also from the bottom up, which is how do you build pieces of
technology that become the new standard for every home, that
truly make it as easy to adopt a home battery or an electric
appliance as it is to get a refrigerator delivered to your home
from Home Depot. 


Saul Griffith:


Just think about the events of the last month: Joe Biden driving
an electric F-150, which in and of itself is amazing. The F-150
is the most produced car in the history of mankind — 42 million
F-150s have been built so far, double second place, which was the
ubiquitous Volkswagen Beetle. So this really matters.


What was not nearly as much in the headline, but I thought was
fascinating and really interesting, is that Sunrun is partnering
with Ford. So they might say, “You can make the installation
easier, while you're financing your car, let us just suggest that
it might be a great time to finance the solar installation and
this battery and this upgrade as well.” These things are
happening and they are about to happen at lightning speed and
enormous scale.


David Roberts:


I did a podcast with Lynn Jurich, the CEO of Sunrun, a couple of
weeks ago in which she discussed that, among other things.


Arch Rao:


Sunrun is a good example of a company that grows up to become a
home electrification company — much like I think many other
companies will. Tthey have to, because just being a solar
installer or a solar financier is not going to cut it.


David Roberts:


Are you thinking a lot about, not just the technology of the Span
box and how to make it better, but business models and
partnerships? How to package things and ease the transaction
costs?


Arch Rao:


Absolutely. We're thinking about three pieces.


We're thinking about how we generate demand through channels that
haven't been the primary focus. So today, I think most green
energy solutions start with a conversation around the coffee
table about solar. That's a missed opportunity, because you can
be thinking about a panel upgrade along with adopting an electric
heater or an EV charger, or even just a battery without a solar
system for your home. That's what we're seeing happen more and
more often.


These are all technologies that can be installed with any
electrical contractor, so we're seeing electrical contractors as
a key channel. We're working with mortgage lenders and financiers
to make it as easy as giving away a Span solution as part of your
refi, because that now makes your home that much closer to being
a clean energy home, and an entry point to offering better
products or more products in the future.


The second pillar for us is the fulfillment side, how do we build
a network of qualified service providers like electricians that
can install the system for us, but at the same time, provide
ongoing service to the customers.


The third is technology partners — thinking about any product
that we're going to build ourselves or we're going to partner
with OEMs. That's where we're headed.


David Roberts:


On the regulatory front, Lynn said this as well, about Sunrun,
that her mantra now is soft costs, dumb regulations, red tape.
It's close to being conventional wisdom now in the US, at least
in energy circles, that this is the big barrier at this point. So
is Span getting involved at all in lobbying for specific
regulatory changes or laws? What's your top priority there?


Arch Rao:


Well, there are a couple of things. There are big-picture
opportunities, like the work that we're doing around Rewiring
[America], asking for or setting up programs that can rebate the
adoption of upgraded electrical panels. Then there are more
nuanced but specific things like helping define standards with
NFC or UL, that really help us rethink our arcane model of
distributed electricity grids. We think about building electric
conductors and circuit panels with oversized capacity for that
larger load to come on.


So it's across that whole gamut, but I think the biggest levers
for us are going to be better financing and, like Saul talked
about, upfront rebates. 


David Roberts:


Saul, do you have any particular regulatory targets that are top
of your list?


Saul Griffith:


This is how extraordinary the soft-cost problem is for solar:
your cost of solar modules now is 25 cents per watt, yet the cost
of installed solar on an American rooftop is $3 a watt. So let's
just dispense with the belief that this has anything to do with
the cost of the solar [panels].


Of that $3 in the US, about 75 cents is the cost of the sale.
Because American rooftop solar is slightly more expensive than
the grid, you gotta spend a lot of money to sell it — it's as
much for the cost of the sale as the cost of the hardware. It’s
crazy.


There's another 50 cents to $1 in the costs of permitting
inspection and those regulatory soft costs. So we’ve just got to
get to the binary flip where you get over that, getting rid of
that sale cost because you lower the cost of electricity. That's
huge.


Pretty much in every ZIP code, when it gets to $2 a watt
installed, it's cheaper than the grid. That's the rule of thumb.
Just making bigger systems, so that the people that are putting
it on your roof can install eight kilowatts instead of four
kilowatts, is enough to pretty much get you to $2.


We're really on the cusp of a very exciting moment. A wonderful
guy called Andrew Birch has done a lot of work to do a solar app,
which is an online portal that's going to make the application
for the permits much more streamlined and easy. That's
important. Every utility in every state has a slightly
dysfunctional relationship with time-of-use billing and reverse
metering.


We need a future of what I would call grid neutrality, meaning
any generation resource is treated equally, any storage resource
is treated equally, any opportunity for demand response is
treated equally — so that homeowners are motivated to put the
maximum amount of solar and the maximum amount of [electric]
vehicles in their garage, and benefit from participating in all
of these transactions to balance the grid.


The utilities traditionally resist this because they also sell
natural gas, but the reality is, we're going to double or triple
the load in every household and rooftops aren't big enough to
meet all of that so the electric utilities are going to see load
growth. They win no matter how they play here, and we just have
to kill off the protection of the natural gas part of the
business component and move towards grid neutrality, which will
be hard-fought regulatory changes. 


The Federal Energy Regulatory Commission is debating a bunch of
issues right now that are super important, that will determine
the future. We know where the North Star is, it is grid
neutrality, where everyone gets to play and benefit from the
resources that they install, and that is also going to bring down
the cost and maximize the savings.


David Roberts:


What country is farthest along the pathway toward grid
neutrality?


Arch Rao:


The countries that I've seen as the most forward-leaning when it
comes to understanding the need for and supporting the adoption
of distributed energy and grid neutrality are Germany, the
Netherlands, and Australia. Now, this is a blanket statement,
they each have their own deficiencies in terms of how these
programs are implemented, but I think they're certainly farther
along than the U.S. right now, where red tape is really
delivering a crushing blow to the rate at which we can and should
be adopting rooftop solar, batteries, electric vehicles, etc.


Saul Griffith:


I’m going to give you two different answers, both of which might
be funny. I think the unregulated markets in Africa and Malaysia
and smaller countries in Southeast Asia are being very innovative
precisely because they have so little infrastructure, they can
write new rules as they go. I wouldn't look to any Western nation
to be perfect here.


Australia is having to face up to this reality first, and that is
because they got to very cheap rooftop solar first, they go to
very high penetrations — 50-plus percent — first, but Australia
is dysfunctional in its own unique way.


What you really want is a country that has Australian rooftop
solar policy, Californian or Norwegian electric vehicle policy,
and South Korean or German heat-pump adoption. That's the country
where the economics are very positive for the household. So we
know how to do this, we just don't know how to do it in one
place.


David Roberts:


Are there, in the US or in the world, places that are too hot or
too cold to fully electrify a home?


Saul Griffith:


Very cold places are difficult, although heat pumps are getting
better and better. But places that are cold enough generally are
also quite wooded so there is a good opportunity for wood pellets
or just traditional wood stoves. So there are places in the world
where a wood stove is still going to be the cheapest way to heat
your house, and it can be renewable.


In Australia, there are states like Tasmania, where that
wood-fired heat supplements the electrification of the rest of
the house. They're already a 100 percent renewable grid with
hydro. There are other places in the world, such as Arizona, or
Queensland in Australia, where the biggest mismatch between
electricity generation and load is the peak summertime
air-conditioning hours. So the solar peak is at two o'clock in
the afternoon and the afternoon peak is at 6 pm, and we've got to
match that.


The ones where that is the case for heat, you know, small amounts
of storage, whether it's thermal storage or electrical storage,
can bridge that four-hour gap and you're in good stead. There are
technologies that we're working on, thermal storage technology
that can bridge the 16-hour gap between the solid generation
periods and when you want heat at 4 am. So that's the heating
problem.


There will always be a few small ZIP codes where there are
exceptions, but I think now everyone can squint and see that we
have answers for nearly all of these cases.


David Roberts:


Arch, you're selling all over the country?


Arch Rao:


We are selling nationally,, across the US. We've now deployed, I
want to say, in over 18 states across the country, and the
efficiency of heating or cooling hasn't been a barrier to
adoption of Span panels or adjacent technologies for an electric
home.


David Roberts:


And are Span customers saving money now? Are you tracking usage
or trying to get data on usage and finding out what actual
results on the ground are?


Arch Rao:


We certainly are. The metrics we are most closely tracking are,
are they getting empirically this benefit of going with fewer
batteries? We're seeing that with a Span panel you get roughly
1.65 to 1.7x value per kilowatt-hour available, because of how we
can manage the loads. That's quantifiable value.


The other metric that we often look for is, what is the reduced
time to install and cost of installation labor? That then
directly translates into a lower dollar per watt or dollar per
kilowatt-hour to customer, and we're seeing that play out more
and more significantly, especially right now, for a couple of
reasons.


The electric panel as we have it designed is a Ul 67 box. What
that means is, it's an over-the-counter permit, so the permitting
for a product like Span is, by design, a lot shorter than the
permitting for a rooftop solar system or battery system. We're
able to help our installation partners get projects going very
quickly.


Right now, because of global supply-chain constraints, we're
seeing that there's a significant supply shortage of lithium-ion
batteries. especially in those cases, as we approach summer here
in the Northern Hemisphere, we have installers that are able to
go back to their customers and offer them a Span panel plus, say,
one battery, as opposed to the previously designed two- or
three-battery solution, and help them move to a more
self-sustainable lifestyle.


David Roberts:


Air-source heat pumps versus ground-source — how far do you think
ground-source is going to get? Or do you think air-source heat
pumps are going to get good enough to do everything?  


Saul Griffith:


So ground-source heat pumps, for everyone's benefit, are where
you use the temperature of the ground as the input to your heat
pump. The ground about four feet down, around the country, is
about 55 degrees Fahrenheit all year round. An air-source heat
pump just takes the outside air. 


Ground-source heat pumps require something like an enema for your
front yard or your back yard. It's a lot of drilling equipment;
it's a very high capital item. If you're doing a new-build home
in New England, or you have large acreage in New England, it's a
no-brainer to go with ground-source. For any milder climate, the
ease of installation of air-source looks like it will be the
answer.


As with nearly everything on climate, electrification, and
energy, these are giant markets where there's room for both
players, and the details will be around local regulations, local
geography, local climate, so the answer is yes and/or both.


If I was picking the market share in 2036, I'd say 80 percent
air-source, 20 percent ground-source is ambitious for
ground-source. Unless we get robots that can drill holes really
well and take all the headache out. But you still need the
physical space to drill the hole, and most people don't have
enough land under their house to sink the heat.


David Roberts:


Especially if you're building new developments — if you're doing
a common ground-source heat pump for multiple buildings, that's
probably the most efficient way.


Saul Griffith:


This is the decade for change, so don't rule out unexpected
solutions. We've got to do something with the 4.4 million miles
of natural gas pipelines in the country. Why don't we use that as
a collective ground source? It's not impossible to think there
might be a solution in lane three that helps solve this, but I
think ease of installation and low cost of capital certainly
favors air.


David Roberts:


I recently found out that the battery in the new Ford pickup is
bigger than a Powerwall, bigger than a home battery. So in terms
of home power backup, what percentage, in 10 years, will come
from home batteries versus connected EV batteries?


Saul Griffith:


Overwhelmingly electric vehicles. Any electric vehicle is going
to do 250-plus miles, which is basically where real range anxiety
just goes away. The battery in a sedan that does that is going to
be 60-plus kilowatt-hours and for a truck it's going to be
100-plus kilowatt-hours. So that's four days of your current
electrical load in your house. There's 1.88 cars in every
driveway in America, so that's like a week's backup.


The Powerwalls and LG batteries that people bring in the side of
the house, they're like five to ten kilowatt hours. That's a
very, very small fraction. I'm working on thermal storage
technology, as are other people — being able to turn your space
heating, your water heat, and your vehicles into storage is a big
opportunity.


Those two batteries dwarf any other battery that will be on the
grid 10 years from now.  


David Roberts:


So what's the case for home batteries then? 


Saul Griffith:


Well occasionally, both cars are out of the house and you still
want to play your Xbox.


David Roberts:


So, backup for the backup.


Arch Rao:


Actually, I quite disagree. I think that the vehicle-to-home
concept is a powerful one. The size of the battery in your car is
roughly 10x or at least 5x the size of a home stationary storage
battery, but the emotional choice for a homeowner to say, I'm
going to take the energy available in my car's battery to power
my home, I think it's a difficult one. It's kind of analogous to
saying I have a large power generator in my car with my petrol
engine, and I'm going to use that as a genset for my home,
right? 


David Roberts:


But if you're in the middle of a blackout?


Saul Griffith:


Honestly, we're not even disagreeing. It's just that this is a
huge battery. There are so few time periods in the year where
you're gonna want these things. This is not even an argument.
There's a huge number of reasons to have a small battery in the
home. But you really just need to understand that our car
batteries are enormous. Even if we put those batteries in 200
million cars, the whole grid for the whole U.S. can run off our
cars for days at a time. But that never happens, because you
still have solar, you still have wind, you still have all of
these things happening. But the anxiety we have about storage
goes away as we deploy batteries in vehicles, batteries in homes
and batteries in our thermal systems.


Arch Rao:


And the cost of stationary batteries comes down as we continue to
adopt more electric vehicles and batteries in your home as well,
which makes room for not just thinking about storage as being a
backup to a backup type of solution, but instead a device that
can provide you with energy management — being able to charge
when you have excess solar, etc., benefits to it that aren't
provided by vehicles, where the primary use is actually to get
around.


The second part of it that I think has spun up a lot of
conversation since the F-150 announcement is, how does it
actually power your loads, because it's a giant battery, but you
still need a whole host of electronics and grid-connect and
grid-disconnect devices.


David Roberts:


That's what Sunrun is trying to sell alongside the pickup truck;
that’s the piece they're trying to provide.


Arch Rao:


Yes, they're going to be installing those solutions. But to
generalize the problem statement, there are going to be millions
of electric vehicles, not just F-150s, so what is the ideal
solution for being able to “island” your home and power it off of
your vehicle battery? I think those are the kinds of products and
solutions that we're thinking about here at Span — within our
panel, we already have a grid-disconnect built in. 


David Roberts:


So you can island if you have a Span panel?


Arch Rao:


That's right. Our main breaker has its own control system built
into it, where it's monitoring the health of the grid, and if it
determines the grid is sagging, or it's out of spec from a
frequency or voltage standpoint, we automatically, safely
disconnect and bring up your battery as the main power source for
the home.


It can then orchestrate your solar and your loads as needed, to
then manage that “off-grid” home. And then when it's safe, it
rejoins the grid, making sure it doesn't cause issues on the grid
— you want to be careful about frequency when you rejoin the
grid, you want to be careful about how much power you push back
into the grid, etc.


That's all built into our current generation product. But as we
think about future products, the types of things we spend a lot
of time thinking about are exactly the question that you're
asking, David, which is: can cars provide power, not just when
off-grid, but even when your on power from the grid? Does it make
sense for us to use vehicles as a day-to-day thing?


And what are the types of technologies you need built into the
nerve center of your home, i.e., a load panel or an EV charger,
that allow you to do this in a seamless way, without having to go
through a complex design process and having a smorgasbord of
stuff on your garage wall just to be able to use that expensive
battery in your car?  


David Roberts:


If you could create this theoretical country with all the best
distributed energy policies together, do you guys seriously think
that we can decarbonize 100 percent of US homes by 2035, which is
the 100 percent clean grid target year? 


I think people get daunted because it's so distributed, the work
itself is so distributed, the use cases are so distributed and so
various, and there are so many different kinds of homes and
owners. It just seems so daunting. 


Arch Rao:


Yes. The alternative scenario is a bleak one. We have to align
products and policies and people to move toward at least
decarbonized homes (decarbonizing industry is a whole other can
of worms). I would say, yes, it's possible, and we need to be
working toward doing that. 


Saul Griffith:


We need to make it possible. It is physically and technically
possible, and the more things you electrify, the easier you make
it to electrify everything. We will electrify steel making, we
will electrify the manufacturing of aluminum, we will electrify a
huge amount of industry. Then you dial industry up and down,
there’s huge inertia in those machines, and so they will be a
great asset, just like your car batteries and just like our home
heating systems, they will be critical to balancing the grid.
People really don't appreciate that.


It'll be about the same amount of wire that's distributing
electricity to the grid, but three times as much electricity will
go over it. More than half of your utility bill cost is the cost
of that distribution network. So if we're putting two or three
times as much electricity over it, the price of that distribution
cost is going to come down. The more we electrify, the cheaper it
gets to electrify everything, the easier it gets to electrify
everything.


So this is possible. Yes, it is heroic. Yes, the timeline is now.
A good climate outcome is, we do this in 15 to 20 years, a
terrible climate outcome is, we drag our feet and we take 40 or
50. 


David Roberts:


Well, there's an appropriate call to arms to end with. Thanks,
guys, for taking all this time. Appreciate it. 


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