Movers and Shakers Interview with Larsh Johnson (LJ), Chief Technology Officer with Stem
Apr 30, 2018
As Chief Technology Officer, Larsh is leading hardware and software engineering to meet the needs of Stem's C&I, utility, and energy market customers. Prior to joining Stem, Larsh was Chief Technology Officer at Siemens Digital Grid, where he led technology development teams on products spanning from consumer metering, demand response, and analytics to control center software and grid automation. He joined Siemens via the acquisition of eMeter, a Bay Area software company, of which, he was a co-founder and responsible for innovation and development of meter data management, analytics, and advanced smart grid applications. Prior to eMeter, he co-founded CellNet Data Systems, a pioneer in wireless networks for smart metering and distribution automation and now a unit of Landis Gyr, a Toshiba company. Larsh was a founding member of the DOE’s Gridwise Architecture Council (GWAC) and remains a Member Emeritus. He earned a B.S. and an M.S. in Mechanical Engineering from Stanford University.
Vishal Sapru (VS), Research Manager for Energy Storage & Critical Power Group had an opportunity to conduct a Movers & Shakers interview with Larsh Johnson (LJ), Chief Technology Officer with Stem.
VS: Can you start by providing our readers a brief overview of Stem and its current role in the market?
LJ: Stem is the global leader in artificial intelligence (AI)-driven, customer-sited energy storage, providing innovative technology services that transform the way energy is distributed and consumed. Stem pioneered commercial-scale energy storage back in 2009, when we started with a hardware box, then rolled out a business solution for individual companies to reduce demand charges, and then evolved to where we are now: the largest digitally-connected energy storage network in the world, operated by a sophisticated AI platform that performs multiple applications to maximize the value of energy storage for the facility and for the grid.
VS: Please describe your product/technology/solution for our readers? How different is it from what is already available in the market?
LJ: Stem provides commercial and institutional customers with real-time energy optimization “as a service”, combining AI with batteries so that building owners and occupants can automatically lower electricity costs without having to buy expensive equipment or change their operations—at a price that aims to leave customers with most of the savings.
For the utility or grid operator, Stem’s AI-powered distributed energy storage network delivers fast-acting dispatchable capacity to help balance the grid at the system and local level. By forming “virtual power plants”, also offered “as a service,” the Stem network offers localized, on-demand, modular power to provide flexibility and reliability while decarbonizing the grid.
As Stem’s network grows, the grid operator and utility benefits grow, as does the customer’s ability to participate in new ways in the market.
VS: What will be some of the challenges Stem is facing and what strategy is in place to overcome them?
LJ: Developing high-value energy storage depends on the brains behind the batteries. Stem has deeply invested in data science and software development, using machine learning and other advanced computing techniques to maximize the value of batteries through prediction and optimization. That continuously-improving platform is difficult for competitors to replicate.
Another important challenge is the limited understanding in regulatory circles that energy storage can reliably and cost-effectively provide multiple services in a 24-hour period. We need to remove arcane regulatory rules that limit customer participation in demand reduction programs, and redefine DR programs to better integrate storage advantages into wholesale markets and resource adequacy plans. Stem’s strategy has been to invest in our regulatory activities to convey the customer demand momentum and benefits to modernizing our grids.
VS: What is the unique value proposition of Stem and what are your key competitive differentiators?
LJ: The value of energy storage is determined by brain power, not battery power – and energy superintelligenceTM is Stem’s DNA. Energy superintelligence is a new way of looking at storage—getting away from the concept of hardware towards what’s really needed to get the maximum value – an AI-based platform operating a network of energy storage systems. Stem’s AI, AthenaTM, is the first artificial intelligence for customer-sited energy storage; she optimizes the timing of energy use, aggregates individual systems to dynamically form Virtual Power Plants, and facilitates energy consumers’ participation in energy markets.
Stem brings a huge experience advantage – we have successfully developed more commercial-scale energy storage than other providers. Stem has had systems in commercial operation since 2012, now with more than 800 systems operating or under contract, and across 5 US states, Ontario, Canada, and Japan. We dispatched over 600 times in the California wholesale market in 2017 with hundreds on a five-minute response. The fact that we’ve attracted the field’s largest project investment pool, at $500 million, reflects that experience. No one understands this business better than we do.
VS: What is your strategy in regards to offering best value to customer for the price, compared to similar offerings from competitors, if any?
LJ: Stem’s AI enables it to “value stack,” meaning our systems can optimize between multiple price signals in the form of rate structures, demand response programs, coincident or capacity charges, wholesale electricity prices, and other cost drivers. Athena predicts energy usage and grid conditions, calculates the operations that will maximize economic returns, and keeps this updated in real time. The better and faster Athena’s decisions, and the more opportunities Stem can access that provide real value to the grid (such as through our eight existing utility contracts), the more valuable the solution becomes for our customers. Because Stem has more experience, more utility engagements, more advanced AI software, and a positive feedback loop from all three, we can be confident that the benefit to customers (beyond our competitive subscription price) will be higher than similar offerings.
VS: Continued innovation is the key to success in this growing industry. How is the process of innovation managed at Stem?
LJ: It starts with the retail and utility customers; we are constantly talking with them to learn what they value. Next, we hire top talent—and are keenly looking for more in the US and in Ontario. Finally, Stem integrates Agile principles and methodologies companywide to enhance cross-team collaboration and accelerate successful execution.
VS: What do you want the company to accomplish in the next couple of years and how would you define success for Stem?
LJ: Stem is experiencing robust growth and executing successfully at that pace, and our investors see continued high growth and execution potential. We will keep building out the world’s most advanced energy intelligence platform, continue our US and international expansion, develop more products and services for commercial and utility customers, and deliver the best customer experience in the industry.
VS: Could you elaborate on the acceptance or adoption of your product/solution in the marketplace and are there any positive client testimonials that can be shared with us?
LJ: We currently have more than 280 customers in our network, with 9 out of 10 respondents to a third-party administered survey indicating that they would highly recommend Stem. More than 40 of our customers have chosen to pursue additional projects with us after an initial location or pilot. Over 30 customers participated in case studies on our website, with more added each month, including glowing testimonials, such as:
- “This is one of the best projects I’ve done on the campus,” Soka University.
- “Stem is an opportunity to showcase our leadership in sustainability and energy management. The Stem team has proven to be very knowledgeable, resourceful, and interested in helping us achieve our goals,” Macerich.
- Stem’s predictive analytics, in tandem with reliable energy storage hardware, help manage our energy use more efficiently at peak times,” Adobe Systems.
- Stem’s software is best-in-class. It tells the battery when to store and discharge power, responds to demand response opportunities, and reduced our exposure to changing utility rates,” StubHub Center.
VS: Do you foresee the acceptance of your product/technology/solution in the marketplace to have an influence on the direction of the overall market going forward?
LJ: Absolutely; we see this every day. For example, we have customers that tested energy storage under certain rate structures or Demand Response programs in California and now want to take those services to their other facilities across the country. This demand proves how customer-sited storage starts small but will scale to be a huge and reliable resource in the next few years due to customer desire to control energy costs and their interest to participate in the markets in new ways. Utilities are seeing this interest and are increasingly looking to distributed storage as an opportunity for customer engagement.
VS: As a general conclusion, what do you think the future holds for such solutions, and more specifically, what role can we expect Stem to play in shaping the future of the industry?
LJ: Utilities are facing more location- or time-specific grid constraints, and the markets are moving towards new services that give customers increasingly more options and control. The KWh number is no longer as important to the utility or grid operator as the timing and location of that KWh. Stem will use its extensive experience to propose market models that use energy storage’s advantages to meet the increasing demands of energy consumers and increase the efficiency of grids all over the world.
VS: What are your company’s marketing and product positioning strategies? Do you plan to form any strategic alliances/partnerships?
LJ: Customers increasingly want to mix and match resources and utility or grid programs to provide all the grid response they can, automatically without their involvement, and get paid for it. We aim to build the largest partner ecosystem to extend the ability to create service offerings, whether combining traditional Demand Response (DR) and storage DR with CPower, addressing site-level demand management and reduction of the PLC (cap tag) charge with Constellation, our solar storage offerings with multiple solar partners, or in new bundled service offerings on the horizon—our AI makes that possible and reliable. We also go to market with some of our international investors, including Mitsui in Japan and elsewhere. Our many partnerships and global investors enable us to offer flexible combinations of services in multiple territories and access to new programs or market opportunities.
VS: What is unique about your company in regards to offering the best and differentiated service experience to customers?
LJ: Stem’s partner ecosystem, our project longevity, and our experience in differing regulatory paradigms result in continuously-improving AI algorithms to meet customer needs. All our systems capture load, performance, grid dispatch, and other data on a one-second basis, feeding terabytes of information to our cloud, and in turn, feeding our machine-learning software and predictive analytics.
Our experience leads to holistic, well-informed recommendations for our customers regarding rate structures, system sizes, utility programs, and interaction with other energy projects. That leads to better expectation-setting, the means to more effectively overcome hurdles in permitting or installation, and over-delivery through continuous improvement. We invested early on in the delivery teams and processes required to execute and deliver a seamless service offering for our customers in addition to product development and sales.
VS: Please describe the importance and focus of your company towards building and strengthening the brand equity of your offering?
LJ: As a solution, energy storage is best described as a service enabled by intelligent technology. Therefore, our reputation and the sophistication of our platform are paramount. We are already known as the market leader and as a pioneer in thought leadership and technology. We are notably one of the only highly recognizable, independent energy storage brands left in the space. We continue to align our resources to build and maintain the Stem brand based on the long-term value of our AI, Athena.
VS: What kind of customer feedback mechanism do you have in place to ensure that the product development and innovation matches market and customer needs?
LJ: We build customer engagement into our robust customer operations, product marketing, and product management strategies, asking their input to our products and services through market research efforts and periodic interviews.
VS: How do you compare yourself with top competitors in regards to offering Best-in-Class solution, with a full complement of features and functionality?
LJ: We are Best-in-Class on any metric one can devise at this stage in the industry: AI platform runtime hours, R&D investment in our AI and other software capabilities, data ingested and analyzed, systems installed, systems under contract, number of permitting authorities that have authorized us, geographic presence, innovative offering models, customer satisfaction, and the list goes on. Our lead in experience and platform technology is currently quite large, translating to more value delivered to customers and high market share.
VS: What are the unique features of your product/technology that address unmet customer needs and competitors are unable to replicate and replace?
LJ: Electricity costs are increasingly being driven by when and where it is used. This trend is a complex, real-time challenge that is difficult for most businesses, utilities, and grid operators to respond. The unmet need we fulfill is for a super-intelligent technology that can manage real-time energy optimization using the most advanced data science techniques available, and force-multiplied learning based on experience and size of network. Competitors will be hard pressed to catch up, make the necessary investments, and build the operational experience needed to earn customer trust.