Rethinking the Grid with Dan Schnitzer, CEO of SparkMeter

Dan Schnitzer is CEO of SparkMeter, the leading provider of smart metering systems that enable utilities to implement pre-paid billing and real-time monitoring and control on micro-grids and central grids alike. He has served as a consultant to the United Nations Office for Project Services in Haiti, and for the World Bank. From 2014 to 2015, he was the Chair of the United Nations SE4All Practitioner Network Microgrid Working Group, and he was named to the Forbes 30 under 30 for energy list in 2012. Dan received his Ph.D. from Carnegie Mellon University in the Department of Engineering & Public Policy in October 2014, where his research focused on energy access in developing countries.  Dan was formerly employed by KEMA, Inc. (now DNV GL) as an energy analyst, where he worked on utility energy efficiency programs and renewable energy policy analysis and engineering in the US electricity sector. Dan received his bachelor’s degree from the University of Chicago in 2007, where he triple-majored in Physics, Economics and Environmental Studies.

Dan joined us on episode 148 of the Bigger Than Us podcast to discuss how SparkMeter uses an IoT approach to make energy monitoring a user-friendly experience, the future of microgrids, and his intrinsic interest in energy.

By improving energy access and bringing flexibility to the grid we all rely on, Dan is having an effect that is Bigger Than Us.

Take me to the podcast.

The Project That Inspired An Energy Career

Excerpts from the Bigger Than Us podcast. These quotes have been edited for brevity and readability.

I got into energy and environmental policy as a result of my eighth-grade science fair project. So I’ve been an energy nerd for over 20 years.

For my project, I fermented apple peels. And then I made a stovetop using my grandma’s pressure cooker, some plastic tubing, and a coffee can. I triple-distilled my fermented mash of apple peels into pure ethanol or nearly pure ethanol. Then I burned my ethanol in a kerosene lamp. And I compared it to a couple of fossil fuels, including kerosene. And something clicked where I saw that. My homemade fuel created this flame — created energy just as well as these industrial fossil fuels.

I knew at that time that fossil fuels were problematic and things about the way that we produced and consumed our energy were bad for the planet, were harmful to human health and that there were some intrinsic problems with our systems of energy. So there was just something that clicked, and I had this realization of, wait a minute, I’m a child. And I just made this perfectly good fuel out of apple peels, which could be considered a waste product of some process. So this is what I maybe want to spend my life working on.

I just have an intrinsic interest in energy. I see energy as this enabler of opportunity and energy — if I have access to clean, reliable electricity, in particular, that means that I am going to be much more empowered and have many more opportunities as an individual on the planet than if I didn’t. And so I think that there is that thread of viewing energy as this vehicle for delivering opportunity and freedom for people around the world.

SparkMeter’s Origin Story

SparkMeter is a company that sells smart electricity meters and software to utilities in developing countries and emerging markets.

Smart meters can essentially act as sensors and provide the utility with information that has nothing to do with what we traditionally think of as belonging to the domain of metering for billing and payment. We’re looking to make sure that if you’re a customer of ours, and using our smart metering system, that we’re providing you with the software out of the box that’s giving you additional value into these other operating areas of your utility.

It goes back to when I was working in Haiti. I started a nonprofit organization called Earth Spark International, about 10 years ago. It was founded to work on energy access and providing models, financial tools, for people to be able to get access to solar home systems and solar-powered lamps.

We built the first solar-powered microgrid in Haiti. And along the way, my business partner, Allison Archambault, and I both had backgrounds in the US electric utility sector and realized from the get-go that for this microgrid to work, we would need a smart metering system. But the smart meters that are used by utilities in the United States and Western Europe were part of this system, which is called AMI, or advanced metering infrastructure, which is not designed to scale down.

So we set out to take our own approach to do smart metering. And we had this realization as we were developing the technology that this has broader applicability beyond our little project in Haiti. This could be something that we could spin off as its own company, and we could sell this product to utilities in other parts of the world that have similar characteristics.

Bye-Bye AMI: The Novel IoT Approach to Smart Metering in Microgrids

The IT systems that AMI is predicated on are where you essentially have a flawless IT implementation. You have a whole ecosystem of vendors, you’ve got Dell providing you or HP providing you with hardware. You’ve got Oracle providing you with databases, you have other vendors who are providing you with networking equipment and networking expertise. Everything is rigorously planned, costs a fortune, but it’s executed. And it has extremely high levels of reliability, in terms of bringing the data from the meters to the utilities’ on-site servers.

Now, nothing about that makes sense when you’re talking about an environment, in Haiti, or India, or in lots of parts of sub-Saharan Africa, where the internet might virtually nonexistent, might be edge cellular networks out in the rural areas, and where the availability of electricity is also intermittent.

You have big companies like Deloitte, Accenture, and IBM that work with very large utilities that are serving hundreds of thousands, or even millions of customers like PG&E and ConEd to do these AMI smart metering projects. And obviously, that model of smart metering isn’t going to work if you’re a utility that has a small number of customers, or serving low-income customers, or where you as a utility don’t have a lot of internal IT capability, and, and resources.

No provider of smart metering technology that sells to utilities in the US or Europe is going to talk to you if you’re building a microgrid for 500 households, that’s just not how their system works.

The benefit of our system is that there isn’t any traditional IT and networking that the utility needs to do. That’s because our meters, with the grid edge management unit, come with their own mesh network that’s plug and play. So there’s no configuration, there’s no networking, the utility installs the meters, they install the management unit, they turn it on, and it immediately just starts communicating.

And then the other big shift for the utility industry that we’re pushing on is instead of having in-house servers, databases that you have to maintain, and IT systems that are running those databases, and are integrated with their other systems, it’s all software-as-a-service. It’s all in the cloud. And it’s super easy to just create new instances when necessary or use standard, well-documented APIs to get the data out and to put it into other systems. And that’s much more of this IoT kind of approach, instead of that traditional networking, IT approach.

How Pay-as-You-Go Gives Value to Utility and Small Communities

One issue that I had come across when I was doing my research in grad school was that some of these microgrid operators or utilities were simply charging their customers a fixed fee every month, based on how many rooms they had in their house, or how many light bulbs were in their house.

What then happens if you go to a customer at the end of the billing period, which might be monthly or every three months, and the customer says, “I can’t pay?” At the end of the day, what ends up happening is a lot of these microgrids end up failing, because they’re not able to collect enough money for them to be able to continue to operate the service. Why build this microgrid to begin with if you’re not able to operate it sustainably for the next 10 to 20 years?

That’s really where, at a very basic level, metering, especially prepaid metering, or as we’ve taken to call it, pay-as-you-go metering, really helps. Maybe if you’re in the agricultural sector, it’s harvest season, so you have money. So you can put a bunch of money into your pay-as-you-go account. And that way you can continue to use electricity. And then in another part of the year, when you aren’t as liquid, and you don’t have cash, you can put less into your account, or maybe you’re able to tide over from what you put in your account earlier in the year.

We’ve also designed the system to be as easy to use and as agnostic towards payment types as possible. So pay-as-you-go ends up being this extremely useful principle that’s enabled by technology.

Where Microgrid Technology is Headed

2030 is the target for global universal access to electricity. As of a few years ago, the expectation is that the most economical means of connecting the roughly 1 billion people who don’t have electricity whatsoever to electricity would be roughly divided equally between extending an existing grid, solar home systems — small scale distributed solar home systems that provide a relatively small amount of electricity for basic needs, like lighting — and then the remaining third through microgrids.

You’re talking about something on the order of 100 million new grid connections over the next 10 years. And we’re hoping that about half of those at least will come from microgrids, which is really exciting.

Smart meters should be the cornerstone of that. That’s the system that we’re building today is, we provide utilities with a smart metering system. And then we use that data, combined with information about the utility system, to produce grid analytics. And then the grid analytics would help inform a strategy for DERs — distributed energy resources — to potentially be used as virtual power plants at the grid edge because the grid analytics would tell you exactly at what location, what amount, and at what price grid services from those distributed resources would provide value to the grid and the customer.

That’s the other in-ten-years part of the equation is that SparkMeter is not just selling meters, but we’re doing full utility digitalization through grid analytics, and enabling new business models like virtual power plants.

Our hope is that our technology is what enables that smarter grid, especially at the edge of the grid, for utilities in emerging markets and developing countries.

THE TRANSCRIPT: BIGGER THAN US EPISODE 148

This transcript has been lightly edited.

Host Raj Daniels  00:23

So, Dan, I like to open the show by asking my guests the following question. If you were asked to share something interesting about yourself, what would it be?

Dan Schnitzer  02:37

Something interesting. I guess it’s quite possible that if it hadn’t been for my interest in energy, which––I really got into energy and environmental policy as a result of my eighth-grade science fair project. So I’ve been an energy nerd for over 20 years––I probably would have ended up going to culinary school. I was seriously contemplating, in college, becoming a chef as a career. I worked my senior year at a French restaurant in Chicago called La Petite Folie and had a great time. And I learned a ton. One of the things that I learned was that maybe the lifestyle of being a chef wasn’t quite something I wanted to sign up for, but was still something that I would maintain as a passionate hobby.

Host Raj Daniels  03:38

I guess food is also some kind of energy, right?

Dan Schnitzer  03:41

It certainly is, yeah. A great class that I took in college was called the hungry planet, which is all about the different transfers and transformations of energy, including in our food system.

Host Raj Daniels  03:56

What was your eighth-grade project?

Dan Schnitzer  04:00

In my eighth-grade science fair project, I fermented apple peels. And then I made a stovetop still using my grandma’s pressure cooker, some plastic tubing, and a coffee can. And I triple-distilled my fermented mash of apple peels into pure ethanol or nearly pure ethanol. And then I burned my ethanol in a kerosene lamp. And I compared it to a couple of fossil fuels, including kerosene. And something clicked where I saw that. My homemade fuel created this flame, created energy just as well as these industrial fossil fuels. And I knew at that time that fossil fuels were problematic and things about the way that we produced and consumed our energy were bad for the planet, were harmful to human health and that there were some intrinsic problems with our systems of energy. So there was just something that clicked, and I had this realization of, wait a minute, I’m a child. And I just made this perfectly good fuel out of apple peels, which could be considered a waste product of some process. So this is what I maybe want to spend my life working on.

Host Raj Daniels  05:35

That is amazing. And for a moment there, I thought you were going to go in another direction when you mentioned the still. But then I realized that you weren’t interviewing me, and I won’t share my story about making homemade wine and then drinking it.

Dan Schnitzer  05:50

Yeah, I would be interested in that sometime.

Host Raj Daniels  05:54

Around the same age, I think I was 12, 13, 14 years old. One of our science teachers decided to teach us how to make homemade wine. I grew up in London, we had this perfect Harry Potter closet under the stairs: dark and damp. I made homemade wine. My parents didn’t know I put it under there, I think for a week or two fermented. And they didn’t even know I drank it at the time, but it caused a terrible headache, let me tell you that.

Dan Schnitzer  06:17

Wow. Okay, so you did the fermentation into wine, but you didn’t then distill it into brandy.

Host Raj Daniels  06:23

Yeah, I was just looking to drink it.

Dan Schnitzer  06:25

Got it.

Host Raj Daniels  06:28

Well, it’s an interesting start. And that leads me to my next question. Regarding SparkMeter. Can you give the audience an overview of SparkMeter and your role at the organization?

Dan Schnitzer  06:37

Sure, yes, I’m one of the co-founders, and I’m the CEO. And SparkMeter is a company that sells smart electricity meters and software to utilities in developing countries and emerging markets. And basically, the way that we got started, which––would you like me to get into the origin story of SparkMeter or more of what we do?

Host Raj Daniels  07:07

I would love to hear the origin story.

Dan Schnitzer  07:09

Okay. So it goes back to when I was working in Haiti. So I started a nonprofit organization called Earth Spark International, about 10 years ago, or I guess, more than that now. And Earth Spark was founded to really work on energy access and providing models, financial tools, for people to be able to get access to solar home systems and solar-powered lamps. And we then had the opportunity to work with a town called Les Anglais, to build a full microgrid. So the electricity infrastructure in Haiti, like in many developing countries, especially those in Sub-Saharan Africa, have very limited infrastructure when it comes to the electrical, the power system infrastructure doesn’t really exist outside of the largest cities. So there are dozens of towns in Haiti that have no electrical infrastructure whatsoever.

And so we had the opportunity to work with this town, to set up a microgrid and essentially put in poles and wires and build a solar generation system to provide the entire town with 24-hour clean electricity from a solar generation system. And so we were able to secure some funding from donors, including USAID, and National Geographic. And we built the first solar-powered microgrid in Haiti. And this was now several years ago. And we worked very closely with the government of Haiti, on putting in the right policy and regulatory framework to enable us to do that legally, or to at least give the right level of visibility to the government. And I think that’s something I’m particularly proud of us doing. And something that I’ve seen many, many failed, quote-unquote, development projects in developing countries where some people with good intentions go to a village or a town with people who have dire needs, and then they just kind of go in and they put in a project, and then they leave and then within a year or two or maybe longer, at some point, the project fails.

I know I’m kind of going on a tangent here, but this idea of participatory development. So this idea of bringing in people as stakeholders, the beneficiaries as stakeholders to design the project and design the program, and then to also bring In the government and make sure that you’re working within the policy and regulatory framework of the government, is I think something that is crucial and is really what separates someone from simply having good intentions to someone who actually wants to produce systemic change. And that’s really what we set out to do. So we successfully built this microgrid. And along the way, my business partner, Allison Archambault, and I both had backgrounds in the US electric utility sector and realized from the get-go that for this microgrid to work, we would need a smart metering system, but that the smart meters that are used by utilities in the United States and Western Europe really were part of this system, which is called AMI, or advanced metering infrastructure, which is not designed to scale down. No provider of smart metering technology that sells to utilities in the US or Europe is going to talk to you if you’re building a microgrid for 500 households, that’s just not how their system works.

So we set out to take our own approach to do smart metering. That’s much more of an IoT––Internet of Things–– approach to the problem, rather than what AMI is, which is really IT: information technology. And I like to refer to AMI, sometimes as a pre-iPhone technology, which it really is. And that’s why you have big companies like Deloitte and Accenture and IBM, that work with very large utilities that are serving hundreds of thousands, or even millions of customers like PG&E and ConEd to do these AMI smart metering projects. And obviously, that model of smart metering isn’t going to work if you’re a utility that has a small number of customers, or serving low-income customers, or where you as a utility don’t really have a lot of internal IT capability, and, and resources.

And so that’s why we took this different direction. And we had this realization as we were developing the technology. And that’s where I brought in my co-founders was that, oh, this actually has broader applicability, beyond our little project in Haiti. And this could be something that we could spin off as its own company, and actually sell this product to utilities in other parts of the world that have similar characteristics.

Host Raj Daniels  12:30

So in my research, I believe I came across a video where you mentioned meter as actually being one of the hurdles for electricity providers of getting power to the small communities. Is that correct?

Dan Schnitzer  12:45

Yeah, I mean, the meters are certainly part of it. But the meters need to serve some kind of a business function or operational function for the utility. But yeah, you certainly do need some way of being able to charge your customers for the electricity that they’re using. One issue that I had come across when I was doing my research in grad school, which we ended up writing a report that the UN Foundation published several years ago, on case studies and best practices of microgrids in developing countries. And one sort of poor practice that we found was that some of these microgrid operators, microgrid utilities, were simply charging their customers a fixed fee every month, based on how many rooms they had in their house, or how many light bulbs were in their house. And so what ends up happening is you can have your two households that are right next door to each other, that kind of look the same.

But you know, one might be using 10 times more electricity than the other. And yet, they’re receiving the same electricity bill every month, because there’s no way of measuring the electricity that’s being used. And so you run into all sorts of challenges around how to charge your customers, and then also how to collect payment when you have that sort of model. So what then happens if you go to a customer at the end of the billing period, which might be monthly or every three months, and the customer says, I can’t pay? Do you physically remove their connection? Do you give some sort of grace period? And at the end of the day, what ends up happening is a lot of these microgrids end up failing, because they’re not able to collect enough money for them to be able to continue to operate the service.

And that’s the last thing that anybody wants to see happen because now you’ve effectively just wasted a bunch of resources. Why build this microgrid to begin with, if you’re not able to operate it sustainably for the next 10 to 20 years? Unfortunately, that’s what we found was happening in several different geographies. So the utility needs to be able to collect payments to be able to continue operating, even if it’s a nonprofit, even if it’s run by an NGO, and so that’s really where, at a very basic level, metering, especially prepaid metering, or as we’ve taken to call it pay-as-you-go metering, really helps. There’s a great economics paper called The Economic Lives of the Poor by Duflo and Banerjee, that was published quite a few years ago. Duflo at least, and maybe also Banerjee, received the Nobel Prize in Economics very recently, for their work on characterizing economic livelihoods, especially among the world’s poor, and the evidence-based approaches that they take to that. And that paper, I think, does a great job of characterizing the sort of lumpiness of the income of many of the world’s poor, who would benefit from better energy access. And that highlights the role of pay-as-you-go, where if during a particular time of year, you’re sort of in the money, maybe if you’re in the agricultural sector, it’s harvest season, so you have money.

So you can put a bunch of money into your pay-as-you-go account. And that way you can continue to use electricity. And then in another part of the year, when you aren’t as liquid, and you don’t have cash, you can put in less into your account, or maybe you’re able to tide over from what you put in your account earlier in the year. So pay-as-you-go ends up being this extremely useful principle that’s enabled by technology, compared to just showing up at the person’s house once a month, and saying, okay, you owe me this much.

Host Raj Daniels  16:43

So it’s a very interesting model, if I’m understanding correctly, can the consumer login to the meter using their cell phone and currently see their usage and pay over their cell phone? Is that how it works?

Dan Schnitzer  16:56

Yeah, they don’t have to interact with the meter at all. And I think that this is a big difference between our technology and the existing paradigm of prepaid meters that are on the market, with the prepaid meters that have been on the market now for decades, the user needs to in some way physically interact with the meter. The most contemporary version of that technology is where they go to a vendor, they get a scratch card. The scratch card has a string of numbers on it called a token. And then they have to go to their meter, and they have to physically punch that token into their meter to then get their usage. With our system, it’s token-less, you don’t need a scratch card, you can go to a vendor, and you can make a cash payment. And then the vendor can use the SparkMeter app on the vendor’s phone, where the vendor has pre-purchased wholesale electricity credits from the utility that they can now sell at a retail markup to the retail customers. And so it’s all done through the app.

And then once that transaction clears, that would hit the customer’s account. And now that customers account is just automatically wirelessly topped up. So it’s one mode. Another mode is with mobile money, where if the utility itself has a mobile money account, they can do a backend integration with our software, where the customer can just send a mobile money payment to the utility’s mobile money account. And then once that transaction clears, that would then top up the customer’s account. And now again, completely wirelessly and pretty much instantaneously, the user now can have credit in their account and has electricity in their meter. So we’ve designed the system to be as easy to use and as agnostic towards payment types as possible.

Host Raj Daniels  18:54

So an example of mobile money would be like M-Pesa, in Kenya?

Dan Schnitzer  18:58

 Exactly.

Host Raj Daniels  18:58

How did you get into the IoT world?

Dan Schnitzer  19:01

So this is really where we felt that we were differentiated as a technology compared to the existing paradigm of smart metering AMI, or advanced metering infrastructure, is that we do take more of an energy IoT approach to the technology. That was pretty heavily informed by where I did my Ph.D., which was Carnegie Mellon University in Pittsburgh. And so it was through Carnegie Mellon and my graduate studies that I got connected to Anthony Rowe, who is one of our co-founders, and he’s a professor of electrical computer engineering there. We brought him in to work with us on creating a more flexible wireless mesh network system, and a system that would be more robust and resilient to areas where the power and the internet are intermittent and low-bandwidth. Obviously, on the internet being low bandwidth, the IT systems that AMI is predicated on, and this sort of pre-iPhone technology is where you essentially have a flawless IT implementation. That’s why your utility has an IT department. You have contractors from Deloitte or Accenture, from other IT contracting firms. You have a whole ecosystem of vendors, you’ve got Dell providing you or HP providing you with hardware. You’ve got Oracle providing you with databases, you have other vendors who are providing you with networking equipment and networking expertise. Everything is rigorously planned, costs a fortune, but it’s executed. And it has extremely high levels of reliability, in terms of bringing the data from the meters to the utilities’ on-site servers.

Now, nothing about that makes sense when you’re talking about an environment, in Haiti, or India, or in lots of parts of sub-Saharan Africa, where you know, the internet might virtually nonexistent, might be edge cellular networks out in the rural areas, and where the availability of electricity is also intermittent. So the systems for AMI are not going to be able to be used in that instance. And that’s where IoT, and pushing out more of the intelligence of the system to the edge. These IoT devices themselves are quite smart, they have a lot of intelligence to them. That’s what makes––the Nest Thermostat or an Amazon Echo, one of their Alexa devices, or any of these sort of smart sensors that we’re now putting into our homes––that’s the sort of characteristic that makes them these IoT devices, is this idea of edge computing.

We’re putting a lot of intelligence on the device itself. So we took the approach that rather than putting the intelligence into the network, or into what’s on the server, to put the intelligence into the meters themselves, and then also into the device that the meters communicate to, which we are starting to call a grid edge management unit. And that grid edge management unit is an energy IoT device that communicates locally with the meters over our wireless mesh network. And then it has a lot of intelligence, one of the things that it does, for example, is it caches all of the data that it’s collecting from the meters. And it’s caching that so that even if there’s an interruption to the internet connection, to go up to the cloud, that it can cache that data locally on the device for days, weeks, or even months at a time. And then when that internet connection is re-established, it can populate the cloud database with the data that didn’t make it up there, sort of the way that Dropbox might work on your computer to manage your files.

Host Raj Daniels  23:15

I’m smiling, because it’s all about batch processing.

Dan Schnitzer  23:17

Yeah, it’s very much about batch processing. It’s about the system being able to operate independently of the operator. And so with these AMI systems, the focus is really on the kind of human operator at the utility who might need to send a manual command to retrieve certain data from the meters. Whereas we are taking more of this approach, we basically have unlimited database storage in the cloud. We now have this very powerful edge computing device, our grid edge management unit. So let’s just process everything independently, and make the data available in the cloud whenever the user wants to do something with that data.

Host Raj Daniels  24:03

And the market you mentioned, Sub-Saharan Africa, India, they’ve leapfrogged the whole wires and they’ve gone directly to cell service, 3g, 4g 4g 5g, so I’m guessing you’re able to leverage those rather than have to depend on traditional wire systems.

Dan Schnitzer  24:20

Yeah, that’s right. We’re agnostic to the internet backhaul. If there is an ISP, that’s great. If it’s cellular, that’s fine. If it’s satellite, that’s fine. Maybe next year some of our customers will be on SpaceX’s Starlink internet connection. So we don’t care about the internet connection. But I think you’re absolutely right. The thing that we are leapfrogging is we’re going straight to IoT, and we’re kind of skipping this IT step. The benefit of our system is that there isn’t any traditional IT and networking that the utility needs to do. And that’s because our meters, with the grid edge management unit, come with their own mesh network that’s plug and play. So there’s no configuration, there’s no networking, the utility installs the meters, they install the management unit, they turn it on, and it immediately just starts communicating. And then the other big shift for the utility industry that we’re pushing on is instead of having in-house servers, databases that you have to maintain, and IT systems that are running those databases, and are integrated with their other systems, it’s all software-as-a-service. And it’s all in the cloud. And it’s super easy to just create new instances when necessary. It’s super easy to use standard, well-documented APIs to get the data out and to put it into other systems. And that’s much more of this IoT kind of approach, instead of that traditional networking IT approach.

Host Raj Daniels  25:59

You’ve made it sound very simple, but I know from being involved in tech, hardware is hard. How difficult was it to get to this point?

Dan Schnitzer  26:07

It was really difficult. We were also starting at a time several years ago, when the cost of the smart metering hardware itself was still pretty expensive––when it wasn’t unusual for a smart meter to be in the realm of $200 per unit. As a result, we designed our own smart meter from the bottom up to be a lower-cost smart meter. And that’s where we originally thought we were going to get a lot of our advantage was cost advantage compared to other smart meters on the market. And then a really interesting thing happened, which was that suddenly, companies in China began producing smart meters, almost as a commodity, where they just converged on a fairly standard, fairly common design, across the manufacturers of a smart meter base that could then plug into different communications modules.

And so that’s where around that time, not surprisingly, GE sold off its meter manufacturing business. And there were some other transactions in the space as well with companies that were making meters. And there was this realization that you actually might not end up making money on selling the smart meter. Because of this cost pressure from China, pushing down the prices. And instead, the focus became more on the services and the software. And so our evolution on the hardware side has come full circle, where we are no longer manufacturing our own meter design or even our own communications module design. We’ve now completely outsourced that to a Chinese company that makes smart meter bases at a much lower cost than we were able to, and then we’re also working with a Korean company that manufactures radio modules. It’s still all our software that’s running on the radio module, but where we really went to the specialists in terms of the manufacturing, and we’ve now integrated with those hardware platforms. The grid edge management unit is a piece of hardware that we have designed and is where we do own that unit in terms of the design. We originally had outsourced the base station, while we were using our own in-house designed metering hardware. And so we’ve now switched. The reason for that is because we do want something that’s much more customized and streamlined and provides greater value. We felt that we could do that by designing our own grid edge management unit, instead of outsourcing that to off-the-shelf hardware.

Host Raj Daniels  29:08

And just for the benefit of those listening along, how long did it take you to go from prototype to production?

Dan Schnitzer  29:15

That was probably the first two years of the company’s existence was going from prototyping and R&D to when we were first able to sell our meters and have them used by a small number of customers.

Host Raj Daniels  29:34

And I’m really fascinated with the model. So I’m gonna stay on this for a moment. You mentioned earlier partnering with vendors. Can you explain what a vendor is that’s selling the power? What does that person look like? What does that organization look like?

Dan Schnitzer  29:49

So I think you’re referring to our customers?

Host Raj Daniels  29:52

You said that the consumer goes and purchases it from a vendor. Is that correct?

Dan Schnitzer  29:58

Yes. So our customer is a utility. And the way that they sell electricity to their end-users is entirely up to them. A lot of utilities have vendors who are the middleman between the utility and the end-user. And it’s that vendor that the end-users are actually buying their electricity from. So in some cases, this might be a small shop in a rural village. In other cases, this might be a big company that has a franchise where that utility is giving the franchise rights to that company to sell electricity credits to the end-users. And in other cases, it might be the utility itself, where the utility is directly receiving payments from its customers to provide them with electricity. So the point that I was making about our software platform is that we’re really agnostic to the business model and the modes of payment that particular utility is using to receive payment from their customers.

Host Raj Daniels  31:06

And I’m asking because, again, it reminds me of back in London. There was a time where you could actually go to the post office or a local convenience store to pay an electric bill or a gas bill.

Dan Schnitzer  31:16

That’s right. Yeah. And still, for some of our customers, there is that middleman between the utility and the end-users. And if that’s the case, that’s totally fine. Our system can accommodate that.

Host Raj Daniels  31:32

How does the utility benefit from the data it collects from the end-users?

Dan Schnitzer  31:37

I think this is where we certainly want to build capability at SparkMeter to deliver a lot more value to the utility outside of this domain of payments and metering and billing. And that’s a super important aspect of the utility operations. I think it’s where we really focused the last few years. But the promise of smart metering is that the utility can leverage the data from the meters to say, oh, I have an outage on this part of my grid. And think about in the days when we didn’t have smart meters that were communicating data, how would the utility find out about outages? It might be very manual, it might be that their customers are calling them to tell them that they don’t have an outage, or it might be that the utility has some real-time sensors on its network.

But they have a way, way smaller number of those sensors at parts of their network that are much higher up in the transmission distribution system. And they don’t have a sensor in every single customer household. So if one of those sensors is saying, this part of the network doesn’t have power, what does that mean? Or, if all those sensors are saying, everything’s good, we all have power, but the issue is further down the network, and some customers don’t have power, how does the utility find that out? That’s where smart meters can essentially act as sensors and provide the utility with this data, this information, in this context, that has nothing to do with what we traditionally think of as belonging to the domain of metering for billing and payment. And so that’s what we’re striving to do is to take the data, and to produce analytics, that might tell the utility, based on these voltages, we’re seeing this much voltage drop on this line. And when you have voltage drop on a line, there’s a cost there. You’re burning more electricity than what you would ideally want to be losing to your losses. Or we might be able to tell the utility that based on the aggregated load from a particular transformer, that the load on that transformer is over the capacity of the transformer. And if you keep on loading your transformer this way, you might reduce the lifetime of that transformer by five years, so you’re gonna have to replace it early, and that’s more expensive for the utility.

There are all sorts of additional analytics that you can produce for the utility using that data. And I think that what we’ve seen happen in the United States, with its experience with smart metering and AMI, is that you don’t necessarily get those benefits unless certain things are true. And to go off on sort of another tangent for a minute, I think what was interesting about the experience with smart metering in the US is that the 2008 financial crisis resulted in the ARRA, the American Recovery and Reinvestment Act, and that authorized billions of dollars of grants under the DoE’s smart grid investment and grant program for utilities. A lot of those grants were used to buy smart metering AMI systems, but many of those utilities never went the step beyond just using smart meters for billing.

And so we now are over 10 years later, after those smart metering procurements, and these utilities still aren’t using the data to go into outage management, or managing their distribution systems, or improving their planning processes. Because in many cases, they’re not even pulling back data from the meters other than just the energy data, which is what you just need for a bill, you just need to know kilowatt-hours. So they might not even be pulling back the voltage or the current or power quality data, in some cases, because they might not even have a database. And especially for these smaller utilities in the United States––of which there are many––where they, like utilities in developing countries that we’re serving, they don’t have a big IT department, or they can’t afford to spend a million dollars on Oracle or Accenture or Deloitte to come in and get them set up. And so there’s been this real tragedy of AMI in the United States, in that it hasn’t provided a lot of value to these utilities, outside of billing. And that’s something that we’re looking to kind of fix. And we’re looking to make sure that if you’re a customer of ours, and using our smart metering system, that we’re providing you with software out of the box that’s giving you additional value into these other operating areas of your utility.

Host Raj Daniels  36:42

Which sounds like a huge opportunity.

Dan Schnitzer  36:44

Yeah, it definitely is. And we’re having some really interesting conversations, even in the United States, about how we might be able to at least take the software part of what we’ve built and work with utilities, especially small utilities in the US. If you’re a utility serving fewer than 250,000 customers, there are a lot of technology companies, vendors, especially these IT systems providers, that might not even be interested in working with you because you’re too small. And that’s because they’re in the business of selling IT services contracts, whereas we want to be in the business of selling on a software-as-a-service cloud platform basis to as many accounts as possible. And if that means going to small utilities that are serving fewer than 250,000 customers, but they’ve got smart meters installed, that looks like a great opportunity for us.

Host Raj Daniels  37:40

Indeed it is. So I want to get to the crux of our conversation. You mentioned a few things earlier. You mentioned your eighth-grade science experiment. Then you also mentioned working in Haiti, and now the work that you’re doing in India, Sub-Saharan Africa. I see a thread there. What’s the why? How did these things come together?

Dan Schnitzer  37:57

I think where these things kind of come together is just an interest in, certainly personally, in my work having meaning. And that’s a unifying characteristic of all of the people who work at SparkMeter, I think any one of us could go and work for a different company and probably get paid more. And for some people, that’s the interest is maybe you’re working on a super challenging technical problem, or working somewhere where you have high upside financially. And I think that what unifies the people at SparkMeter, and certainly for me, personally, is that this is really about doing work that’s going to have an impact on people’s lives in an area that is definitely of great personal interest to me. You can have an impact, working on water or sanitation issues, or agricultural issues, or health issues. That’s certainly true. I think for me personally, I just have an intrinsic interest in energy, something I’ve been passionate about for a long time. And seeing energy as this enabler of opportunity and energy as being, if I have access to clean, reliable electricity, in particular, that means that I am going to be much more empowered and have many more opportunities as an individual on the planet than if I didn’t. And so I think that there is that thread of viewing energy as this vehicle for delivering opportunity and freedom for people around the world.

Host Raj Daniels  39:52

Why is it important to you to have work with meaning?

Dan Schnitzer  39:56

I think that that probably just came from my upbringing and in particular, from my mom. I remember from a pretty young age my mom, essentially, teaching me about privilege. And that wasn’t the hot word that it is today. But I have pretty distinct memories of my mom telling me things when I was six or seven, that I was lucky to have been born in the United States, to a family where we didn’t have to worry about being hungry. And we didn’t have to worry about having our necessities met, and where we had nice things, and we could go on vacation. And that was not something that many people in the world did have. And so I think that was something that my mom reinforced in me. And also where she created an explicit sense of expectation that I could do anything I wanted to, as long as it helped people.

Host Raj Daniels  41:08

I love that it sounds like your mom was a lady way ahead of her time.

Dan Schnitzer  41:11

Yeah, I think she certainly is.

Host Raj Daniels  41:14

Well, you’ve been on this journey for a while now. What’s the most valuable lesson you would say you’ve learned about yourself?

Dan Schnitzer  41:21

I think probably something having to do with resilience. We’ve gone through a lot of challenging and trying times. I’ve had a couple of my advisors say that at some point, I should write a book about the experience because of some of the things that we’ve had to go through. And I think that’s probably not foreign to founders and leaders of companies that are backed by venture capital, and are trying to have an impact in their work, and that they aren’t just building an app out of Silicon Valley or New York, and they’re building an app as like something consumer-facing for them to make a ton of money, that there’s this other motivating factor behind their work. And that can create some degree of tension when you do have that mission focus for your company. But you’re also bringing in, essentially, venture capital. So I think that there’s been certainly an interest from investors in financing impact, which is great. And our investors certainly view that as being part of their investment mandate. But I’ve certainly found that this isn’t the easiest road to have taken. But that there have been some great learnings about myself in terms of where I can pull from to be resilient and to continue to lead the company through challenging times.

Host Raj Daniels  43:01

Well, speaking of leading the company, let’s move into the future. It’s 2030. Magic wand. What does the future hold for SparkMeter?

Dan Schnitzer  43:10

So if everything goes in the kind of most optimistic development with energy access, 2030 is the target for global universal access to electricity. The hope is that by 2030, all of the roughly 1 billion people, the number might be closer to 800 and 900 million people currently, who don’t have access to electricity whatsoever, that would not be the case in the next nine to 10 years. And by 2030, there’s universal access. I haven’t stayed super current on the modeling efforts, but as of a few years ago, the expectation is that the most economical means of connecting the roughly 1 billion people who don’t have electricity whatsoever to electricity would be roughly divided equally between extending an existing grid, solar home systems––small scale distributed solar home systems that provide a relatively small amount of electricity for basic needs, like lighting––and then the remaining third through microgrids.

And so if we take, let’s say, that would be 500 or 600 million people who would be connected either to a grid that’s extended or to a new microgrid, you’re talking about something on the order of 100 million new grid connections over the next 10 years. 10 million connections per year. And we’re hoping that about half of those at least will come from microgrids, which is really exciting. I reckon I don’t have a great source for this, that there are probably about 1 million microgrid connections today, it’s worth noting that SparkMeter, we’ve sold over 150,000 meters to date, mostly to the microgrid sector. So we have a very high market share today of existing microgrid connections. So my hope is that we go from a million connections today, where SparkMeter has a relatively high market share to 100 million connections, and maybe it’s 50 million connections on microgrids in the next 10 years. So 50x market size increase, and if we can maintain our current levels of market share, where in 10 years, we have well over five or even 10 million of those microgrid connections are being served through SparkMeter systems. So I think that’s one aspect of aspiration. The other one is in DERs, distributed energy resources, being used as virtual power plants for the grid. I think everybody in the US is pretty well aware. And on the same page, for virtual power plants up and DERs to be used in a coordinated way through DERMS platforms, distributed energy resource management system platforms, that we need to have a much smarter grid. Our hope is that our technology is what enables that smarter grid, especially at the edge of the grid, for utilities in emerging markets and developing countries.

Smart meters should be the cornerstone of that. And I think that that’s the system that we’re building today, is we provide utilities with a smart metering system. And then we use that data, combined with information about the utility system, to produce grid analytics. And then the grid analytics would help inform a strategy for DERs to potentially be used as virtual power plants at the grid edge, because the grid analytics would tell you exactly at what location, what amount, and at what price grid services from those distributed resources would provide value to the grid and the customer. So I think that’s the other in-ten-years part of the equation is that SparkMeter is not just selling meters, but we’re doing full utility digitalization through grid analytics, and enabling new business models like virtual power plants.

Host Raj Daniels  47:41

Well, I look forward to seeing both of those aspirations come to fruition. Earlier in the conversation, when I asked you about things you learned on your journey, you mentioned tenacity, which is advice also. But the last question is if you could share some specific advice or words of wisdom with the audience, what would it be?

Dan Schnitzer  47:59

I think there’s a lot, and the reason why there’s a lot is, maybe this comes back to what’s worked for me, which is to surround yourself with great mentors, and put yourself in a position of learning and acknowledging through humility, how little you know, and how much you could potentially learn from someone, or learn even in circumstances that might seem familiar. But maybe you’re missing something, maybe there’s still something more that you can learn, even from familiar circumstances. But I think that the most important thing is, think about who your heroes are, if you have any heroes, whether any of those people could be your mentors, and pursue them. But really, I think it comes back to: find mentors, find people who you look up to and who you believe have values that you aspire to have, or have achieved things that you aspire to achieve, and see what you can learn from them.

Host Raj Daniels  49:11

You know, I think the idea of going out and finding mentors, identifying mentors, is often overlooked. People get intimidated, but I appreciate that advice. I think more people should actively pursue as you said, the people they admire and see, you know, how they can become part of that. You mentioned a group of people, a tribe of people that can surround themselves with.

Dan Schnitzer  49:31

Yeah, exactly.

Host Raj Daniels  49:32

Dan, I really appreciate your time today. And I look forward to the continued success of SparkMeter and catching up with you again soon.

Dan Schnitzer  49:40

Sounds great. Thanks for taking the time.

Host Raj Daniels  49:44

Thank you, Dan.

Before we go, I’m excited to share that we’ve launched the Bigger Than Us comic strip, The Adventures of Mira and Nexi.

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If there’s a subject or topic you’d like to hear about, send Raj Daniels an email at BTU@NexusPMG.com or contact me via our website, NexusPMG.com. While you’re there, you can sign up for our monthly newsletter where we share what we’re reading and thinking about in the cleantech green tech sectors

Raj Daniels

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