I was intrigued reading this recent Motley Fool article examining the potential of Tesla creating a Silicon Valley-style “two-sided market” in the solar+storage space. These markets are common in technology, where a company develops proprietary technology (say, a smartphone) that benefits consumers and also turns those consumers into a ready market for other companies (think app developers). This network effect tends to amplify itself and drive high growth and increasing value for all three parties.

I would argue that there already is a two-sided market in DER – one Sunverge has been building since we started. Consumers value the added reliability storage gives them, along with the opportunity to lower their bills. Utilities value the opportunity to establish a new relationship with consumers as well as help meet increasingly stringent reliability and renewable energy requirements.

As this two-sided market evolves it will create more opportunities to involve more participants. Not only will consumers and utilities derive more benefit from the increased deployment of storage, but there will be more connections inside the home (a new generation of home automation devices and smart appliances) as well as outside (independent aggregators of stored power, power marketers).

All of this depends entirely on us developing and deploying the advanced intelligence needed to manage the complex interactions that will extend from the individual appliance all the way back to power generation and transmission. The focal point of that intelligence will migrate from the home, where most of it is today, to a centralized platform in the cloud. In Silicon Valley speak, the value is moving “up the stack.”

Let me give you an idea of what things might look like after a decade or so of this evolution, and why the platform in the cloud is so vital.

First, you can expect large numbers of homeowners, small businesses and local governments will be generating their own power, whether using rooftop solar or wind turbines. The increased efficiency of these sources means there will be a lot more power created each day, so there will be more (and more efficient) storage installed to capture that power for when it is needed. In fact, by 2024, Bloomberg New Energy Finance estimates two-thirds of all energy storage, on a cumulative basis, will be behind the meter.

Second, home automation devices, appliances and home systems like heating and cooling are going to get individually a lot smarter and more efficient. Homes are going to use less power even though they will have more things in them that need power (growth in electric demand is already flattening).

With increased storage and better efficiency, large numbers of consumers will buy a lot less electricity from the local utility. On the contrary, whatever they don’t need for themselves they will sell or trade on the open market and deliver through the grid. Various bidders will exist for that power, from other individuals to utilities to brokers who will aggregate individual distributed sources into a larger virtual power plant.

This is why the boom in storage is “set to transform the relationship between consumers and utilities,” in Bloomberg’s words. That transformation will be driven by software.

In fact, it’s only possible with greatly increased levels of intelligence, because you’ve got a lot more decisions to make about energy. It’s not about turning off the lights when you leave the room. Now you have to correlate all the different power using devices in the house and make them work as efficiently as you can – but, presumably, without taking cold showers in the morning or trying to cook dinner in the dark. Now, what to do if you need to have a full charge in your EV by 5 am on Tuesdays, instead of at 8 am the rest of the week?

Solving those problems are going to take some artificial intelligence that ties all your home data together, figures out your usage patterns (are you erratic or predictable, constant or peaky?), correlates them with things like the cost of grid power, the weather forecast, and the sunshine levels for the day, and then filters that through a set of parameters the consumer chooses. At that point, the software can manage usage accordingly, and come up with a battery management model that matches.

Those are not simple problems, but there’s another layer of complexity entirely when you start deciding when should you sell your stored power, to whom, and at what price. Keeping track of pricing that is changing by the moment, engaging in a dynamic bidding process, and the logistics of aggregation require more, and more centralized, intelligence.

So while each of those participants will offer their own piece of “intelligence,” they also need a single place to connect, amplify that intelligence, and have access to the network effects that drive value. The solution is a cloud-based platform that is able to set and maintain the standards for those connections and coordination, provide vital shared data, coordinate decision making among all the participants, and ultimately manage the movement of the power onto the grid.

In concept, it’s a much larger version of the “meta hubs” for home energy management I recently wrote about. You need this system to coordinate everything, streamlining and simplifying the process. You also need such a system to open the way for innovation, just as we’ve seen with mobile apps or cloud-based IT services.

This is where we’re focusing our efforts and positioning ourselves to build this multi-sided energy market and grid of the future. It’s the logical extension of the strategy behind our business from the beginning – and one that is accelerating along with the evolution of everything from storage technology to utility business models.

We’re rapidly getting to an exciting, efficient and highly intelligent energy future. I’m excited not only by what life will be like then, but by the opportunities it will create for new ideas and new services.