![[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