![[Screenshot 2025-10-10 at 12.24.58.png]] ### **1. Market-Participation VPPs** (Third-party aggregators) - Aggregate customer assets and sell capacity into wholesale markets - Examples: Stem, Swell Energy, Next Kraftwerke - Revenue from energy arbitrage + ancillary services - Require sophisticated trading algorithms and market access ### **2. Utility-Led VPPs** - Utilities contract with aggregators for grid services - Examples: SCE partnerships, PG&E programs - Revenue from capacity payments + performance incentives - More stable, contractual revenue vs merchant market exposure ### **3. Asset Owner VPPs** - Own/operate distributed assets, monetize through markets - Capex-light if equipment financed properly - Revenue from stacking: energy arbitrage + ancillary services + demand response - Highest margin potential but requires upfront capital ![[Screenshot 2025-10-10 at 12.12.35.png]] ## **Business Model Comparison: Hardware vs Software Focus** ### **Hardware-Heavy Model** (Swell, early Stem) - **Pros**: Higher margin per customer, own full value chain, customer relationships - **Cons**: Capital intensive, slower scale, operational complexity (O&M, warranties) - **Path to exit**: Acquisition by utility/energy major (Sonnen → Shell for $300M) ### **Software-Heavy Model** (mature Stem, AutoGrid, Lunar) - **Pros**: Capital light, fast scale, platform leverage, higher valuation multiples - **Cons**: Lower margin per customer, dependent on hardware partners, commoditization risk - **Path to exit**: SPAC/IPO as SaaS platform (Stem at $1.35B valuation) ### **Hybrid Model** (Sunrun, Tesla) - **Pros**: Vertical integration benefits, control full customer experience - **Cons**: Requires massive scale to justify, capital intensive - **Path to exit**: Already public or part of larger platform