Base Power is one of the coolest companies I've ever featured on First Principles,
and they came out of stealth today. They are building huge home
batteries, which are basically different than other batteries in two ways, one
technical and one business. The technical reason is that it's
huge. It's literally 30 kilowatt hours, which is more than double
a Tesla power. Why does it need to be so big? Well, the answer is
it's doing more than just home backup. It still can do that, of course.
If the power goes out, you can draw power from your battery instead of directly from
the grid. But it is also buying and selling electricity on
the open market. So it's buying when it's low and selling when it's high.
Now, you as a consumer don't necessarily see all that. You just get
a home battery for effectively free just for the installation cost.
But Base Power is actually building on the back of that a
successful business. That is the second major difference where they are
a seller and buyer of electricity rather than just a hardware supplier.
So this is an incredible company and their founders are awesome. The
one that we talked to in the episode is Justin Lopas, who is known for basically two
things. First of all, for being the lead manufacturing engineer on SpaceX's
Starship rocket. Pretty damn cool. And the second one
is that he went from that to go to Andro, basically the second most
successful startup in recent times. So this is going to be
an amazing episode. I know you're going to love it. Let's dive into how these massive
We're here to help support the energy grids,
starting here in Texas on Austin where I'm based, and
do that by putting a lot of distributed
storage on the grid. So storage co-located with a power load
at the edge of the grid as opposed to centralized or at the generation source.
And after that, ultimately build a modern power company,
both generation and storage and consumption. The
real reason we're here for this is more energy equals more
human prosperity. There's a ton of studies out there. I
think probably your viewers have seen it, maybe you're familiar with Christian, but there
is a direct correlation between GDP per capita and
energy availability in a given country. There's many studies on this. Coming
increase and already existing increase in renewables and
volatility of supply as well as a lot more consumption of
energy from EVs and heat pumps and sort of the end use of energy in
the form of electricity is really putting a lot of stress on the grid. There's a lot of
people, a lot of smart people, a lot of money going into make power
cheaper, easier, better, more of it. There's nuclear, there's better
solar panels, there's wind, there's more efficient natural
gas plants, etc. And there's a ton of people working on the consumption side. This
is EVs and heat pumps and all this other stuff. There's not a lot of folks focused on
the grid, which is the thing that connects those two. And our
view is that that is where we need a lot of support for this
energy transition that we're working on now. So
that's what we're up to. Hell yeah. And you guys are doing it by basically installing big
batteries, like big batteries at people's houses. That's
how you're getting started, right? Yeah. So the start of the company
and the first product is a residential energy storage system.
And so maybe taking a quick step back here, like why sort
of do this and why do we think batteries are the solution or
one of the solutions that we need in order to fortify the grid? So if you
look at the grid today, and let's spend a bunch of time digging into the grid in
a second, but if you look at the grid today, it is quite underutilized if
you look at just what it is built for and what it, on average,
does. And now you're like, hmm, that's kind of weird. I hear
about grid stress all the time, like it seems like it's not built for what
we need. And the answer is that it is not built for what
we need from a peak demand standpoint. But most of the time, you're
well, well below peak, right? In any given year, by definition,
there's only one second, or one 15-minute interval here in Texas, or
one hour or one day that is peak. Everything else is below that. If you
put energy storage on the grid and you co-locate that energy
storage with the load, you're able to reduce the peak and
therefore have more total load with the same system size.
By putting the batteries at the load side as opposed to at the generation
side, you also can time shift. Not only can
you time shift demand, but you can time shift supply from renewables
that are not always there or you can turn them on like the wind and the sun. By
putting big batteries at homes and businesses that are
focused on the grid as opposed to just focused on kind of backing
up solar panels and being sized for the solar panels in the home, you
can in aggregate really increase the utilization
of the existing grid infrastructure as well as decrease those
peak loads and support more renewable generation. If
you look at renewable generation as a percentage of total
fuel mix, what you'll find is that that is going up a
lot every year, both wind and solar. In particular, here in Texas, there's a
lot of wind and on California, there's a lot of solar. Without batteries, the
marginal value of adding the next solar panel or adding the
next wind turbine on the grid goes down because you have this negative pricing
when everybody else is producing. But all the sun's up is
the only time you can produce with a battery, or sorry, that
you can produce with a solar panel. And so you need
a battery to sort of soak up all that extra production and therefore incentivize more
and more renewable generation. Yeah, I mean, people don't really understand this, but most
electrons that are captured by, like, solar panels or what
have you, are used, like, the speed of light later, basically.
Like, from the time it takes—it's captured by the solar panel, travels at
Like the, if it, and if it's not used, there are actually pieces of
the grid where you're, are those like policies or whatever, where you have
Like, do you want to talk a little bit about what that is and how that like real time supply and
So I'm a mechanical engineer by background, so I think about everything in terms of physical sort
of realities, and I think that's kind of helpful for folk. Imagine electricity is
just water for a second. Like if you had to generate, if you
had to produce the water or pump the water out of ground or however you produced it, and
you had to drink the water or use it for bathing or whatever, basically
the exact same time, and you couldn't store any of it anywhere, that
would be pretty hard. You need to make sure that you're pumping the exact right
amount of water at all times for the use, which
is changing. Some people take a shower at 8 a.m. and
not 12 p.m. or 12 a.m., right? And
so we think about it from that perspective, storage is extremely critical for
the stability of the grid writ large. And
so, exactly as you said, energy is created
in the same instant it is consumed, unless you have storage, which
allows you to time shift that supply or
that demand. You can think about the grid almost like a network, kind of
like visualizing a network of pipes under a
city or something with water. It's the same sort of concept, and you
have the same concept that you have in a pipe network or you have in
a a network of roads where you have congestion, it's
literally called congestion like it is on roads, on certain lines
of the grid. And so if you have a bunch of power
on one side of Texas and a bunch of people on the other
side of Texas, by the way, this happens, there's a lot of sun on the western part
of the state, and it turns out Houston, Dallas, San Antonio, Waco,
Austin, they're all on the east part of the state. You have congestion to
drive on the road from the solar farm in Midland
to where all the people are in Austin, as an example. You
gotta kind of think about what the batteries do from both time-shifting
demand as well as time-shifting supply, such that that road
is fully utilized, but not overutilized. So the
network analogy is a good one. And if you look at those maps of like,
you know, the energy grid across America, it's funny. I
think people don't really know this, but there are three grids in the United States. There
is the East, the West, and Texas. Texas has
Like, you know, they really are very different from like a normal grid
for lots of reasons. And that's probably why you're starting. Yeah, totally. So why are we
starting in Texas? It's certainly not the only place that we will
operate, but it's a really, really interesting place to begin. So you're totally
right. There are three physical grid connections. There's a Western area connection,
kind of like west of the Rockies. There's east and there's Texas, right? Texas
is also colloquially known as the ERCOT region. This
is the Electric Reliability Council of Texas, ERCOT. That
is the, another acronym for you, the ISO, the Independent System
Operator, basically the kind of command center for the
grid, so to speak. There's a handful of these ISOs, they also call them
RTOs, Regional Transmission Operators, which you'll find, by the way, it's totally
a side here, maybe distracting, but there are, I think there are
more acronyms in grid and electricity than
there are in the DOD and defense space, but that's a
total side. Whoa, that is a hot take. I thought you were even gonna say space. So DOD
definitely beats out space, but like just barely, and then, wow, okay,
all right. It's incredible. We have an acronym demystifier
here at the company for new folks. Anyways, totally aside.
So there's these ISOs and RTOs, one of which is called ERCOT, that
operates the Texas grid. Texas is,
by and large, totally disconnected from the other grids. And
so The grid is pretty
much all of the transmission is AC, it's alternating current,
right? And so the frequency and the
phase, or I should say just the phase of
ERCOT's grid does not match the west or the east. And so
anytime that there is a tie between the West and the East to
Texas, there's a DC link. Just to give you a sense, there's like
less than 2% or 3% of the total, the
peak demand of Texas is linked to East and West, so it's
effectively an island. You can think about Texas' grid sort of like Hawaii's
or Japan's, where it's like basically a functional island.
The other interesting thing about Texas is it is
the one place in the U.S. where the Sun Belt and
the Wind Corridor meet, right? So the Wind Corridor is kind of like center U.S.,
east of the Rockies, west of the Mississippi, kind of that region. And the
Sun Belt is obviously kind of the southern, so they're one to two states, right?
And Texas is the only place that those two things meet up. And
so there's a ton of renewable resource here. It's
a common misnomer when people outside of Texas, myself
previously included, think about Texas. They're like, oh, it's oil country. It
is. There's a ton of oil and natural gas in the ground here, but there's more
renewable resource here than anywhere else in the US. There's also an
enormous amount of land to capture that renewable resource, both
wind and solar. And so it's just a really interesting place. Renewable
generation drives a lot of volatility of supply. The
fact that Texas can't borrow from its neighbors when it
needs to drives also volatility of prices. There's
also what's called a deregulated energy market, which I'm sure we'll get into
a ton of here later, that allows
us to basically sell energy directly to consumers and
essentially sort of be the energy provider
to the customer. That's a unique thing here that happens in
Texas and a handful of states, most of which are in the Northeast. But
all of those things combined, it's a great place to... And
the fact that it's a great place to be, Austin in particular, is why we
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So I've heard people sort of like honestly mock ERCOT, just
like the reliability piece in the word
in particular, because there's the very famous example of that winter storm in
like 2021 or whatever it was, when basically Texas
being disconnected from the other grids couldn't get any energy into
the state. And so people were just without power for a really long time. Yeah.
I mean, that sort of example is a great reason why you would want batteries,
why you would want storage. But maybe that's a good example. Maybe
that's like a good enough tie to like talk a little bit about those energy markets and
tell us how the buying and selling works and, you know, basically
just like what that looks like tangibly for like a consumer or
a business in Texas. Yeah, so let's start with how the Texas
energy market works. So the sort of simplified view
of this is there's essentially three main players. You've got The
people who make the power, called the generators. You got
the people who own the poles and the wires. This is like the
grid itself. When you see poles and wires, you think the grid. Those are
called the utilities. And then there are energy retailers.
And those are the people that buy the energy from the generators, pay
the poles and wires guys to deliver it, and they sell it to the
end consumer. So if you're a homeowner in Houston or
Dallas or Waco or Round Rock or whatever, you
can choose who your power provider is. So this is very different than if you live
in SoCal, where I used to live, and if you want electricity at
your house, SoCal Edison is the only option. In Houston, you have like
a hundred plus different options of who you buy your power from.
And those are called reps, retail electric providers. We
are a retail electric provider that buys energy from
the grid on the wholesale markets and sells it at a
retail rate to our customers. And
so that is sort of one piece of the business and that is tied into
the batteries and I'll get to that in a second. But the way to think about the Texas energy
market is that it is, you have a freedom to choose who your power
provider is. As a consumer, utilities themselves
are regulated monopolies in their jurisdictions. So
there's a handful of big utilities in the state. There's one, as
an example, in Houston called CenterPoint. CenterPoint owns the poles and wires and
the infrastructure, but they don't sell the energy to the customers, and
they They don't and they can't legally generate the energy. So
that's kind of like the three main buckets of how the Texas energy
market works. The Texas energy market is also
a relatively free trading market, meaning the price
of energy changes every 15 minutes, 24-7,
365. If you go to ERCOT.com, you can see it's actually safe. There's some really good
data on this. And the prices change based on supply and
demand, just like any other market, but they also change geographically.
So we can go into a lot of detail here, so I could kind
of like pull out of the rabbit hole for a second, but there is a handful
of different ways in which it is broken up geographically. The important point
here is that the prices
at specific areas of the grid are different, and
those prices are basically reflecting what I was saying earlier,
which is congestion. So if there's a bunch of congestion on a
line going from outside of the city of Houston into
Houston, it is likely that the node on the
city side of that is paying a high price, right, for
that electricity. Over in Midland, as an
example, where I spent a summer as an intern many, many, many years ago in the
oil fields out there, they might have negative pricing
because there's more energy there than can be delivered across
the transmission line all the way to Houston. What you'll find is that there's a large disparity
in prices geographically based on where the
energy is produced versus consumed and where there is congestion on
the grid. And so that price signal tells us
where we should go put a battery because that is where the most volatility
is. And as you put a battery in a specific node, you
drive down the volatility by decreasing the peak demand and
increasing the trough demand and sort of relieve that congestion. So,
kind of long-winded way of explaining how the Texas energy market works, but
it's a fascinating, extremely, you
know, extremely niche and nuanced thing that like not everyone,
especially those who don't live in Texas, but even those who do, aren't necessarily exposed
to in their day-to-day. And that's
a really fascinating thing to learn about, which is why I'm so excited to learn about it.
Totally. I mean, I think the, um, so when you are a seller,
You can also be a seller, which is kind of part of the point. Um, you
can buy it when it's low and sell it when it's high. Um, so
do you sell it back to the utilities or do you sell it to other reps? So,
um, here's the analogy that I use that I think is helpful. So imagine that you and
I are standing, uh, on either end of like a lake and we each have cups.
and I have a cup of water, yours is empty. I pour
my water into the lake and then you pick your cup up into
the lake. It's like you didn't get my water, you just got water,
but it was sort of contributed by me. That's
sort of the way to think about it from a physical perspective there's
a bunch of different sort of sub markets but but let's just say you're you're
in what's called the real time market exactly what it sounds like I buy
energy right now I pay the price like this 15 minute
interval price for the energy to charge my battery or Run
my blender, like you said. That's on the buying side. On the selling
side, when you're selling back to the grid, you're essentially offering it
almost like you're offering a stock to the New York Stock Exchange,
or you're pouring a cup of water into the lake. It's like a sort
of bid-ask spread, so to speak. Check. That's
how you're paid back. The utilities are very impartial to the market.
They just transmit the energy from
where it is generated to where it is consumed. How much of a
spread are we talking about though? Like, I guess, I mean, if it can
be literally negative in wherever Midland and then positive,
presumably still in Austin, like that's, that's obviously a huge spread, but like a
normal day or whatever, it's not, I imagine it's not huge
Like is the market like relatively efficient across geographies
Uh, so there's, there's spreads across geography and then there's also spreads across
time. And so, um, the market is,
is efficient, but the pricing volatility is,
is very high. So I would encourage you or maybe viewers to,
to, to actually spend some time on the ERCOT website. It's, it's really just
like if you're a nerd on this stuff, like I am, uh, you think
you'll find it quite fascinating. But basically if you look at kind of just, let's
just say, let's. abstract away the geographic volatility
for a second and just look at sort of average prices in the whole state. As the
sun is setting, you have this pretty common problem, especially in the summertime. The
sun is setting, so supply is falling, available supply
is falling, but demand is just peaking, because this is like as
people come home from work. The demand peaking at like 5, 6 p.m.
is not a Texas phenomenon. This happens kind of everywhere. But
you have demand peaking just as supply is falling. And
so you have this like approaching curves that happen and
unfortunately get quite close to each other. In the summer, this is
what batteries help support. And you'll have prices that can go
from zero or negative in the middle of the day
when you have overproduction, you know, from solar and wind,
up to, and I just put a number in your head here, is up to $5,000 per megawatt
hour. That's $5 per kilowatt hour. Just
to give you a sense, like in the very, very expensive utilities,
like in California, you're paying on the order of like 30 or 40 or 50 cents
a kilowatt hour. You're not paying nearly
this sort of $5. So there's this very, very volatile prices that
especially happen in the summer when you have declining supply
from solar and wind, and you have peaking demand,
especially from HVAC loads. So, the spreads are
quite high, and they are highest in the areas in which
they sort of need batteries the most. And so, the way to think about
it is what we're doing with a battery on a customer's
home is when energy is very expensive,
we're discharging it. Yes, we are selling it back to the
grid, but we're also negating the load of the home. So,
if you come home at 5 p.m. and energy prices are $5 a kilowatt hour, $5,000 a megawatt hour,
we are likely discharging the battery into the home and
the rest is going to the grid in
order to basically say, okay, we don't need to go
buy that very expensive energy from the grid to sell to you at what would
normally be a loss for any other rep that doesn't have a battery. And
so it certainly
makes our economics as a business better, but very importantly,
it allows us to offer very competitive rates to
customers. And by the way, they get the benefit of the backup. We haven't talked
about that. We totally need to spend some time on that. Totally. The
fact that we were able to basically turn off the customer from
the grid at certain expensive times means that our average
cost to serve that customer is decently less than
on the price spread between the wholesale electricity price
Presumably this is a commodity market and people are just racing to the
There's not a huge amount of margin between what you're buying and what you're
I don't know if that's actually true. Do you have enough of a
margin to play with there, basically, between how you're buying it from
the transmission dudes, or the utilities, and then
what you're selling it to consumers at? Yeah, so you're basically asking,
what are the economics for just a standard rep? Yeah,
I should be clear. We are a rep as a way to distribute our
batteries. We think this is the most effective way to get
the most batteries on the grid as possible. It allows us
to offer a service to customers, and in particular, allows us
to monetize the value of a battery behind the meter that we
own, right? It's very important for folks to understand. We're
not, like, selling a battery to a customer. We
are giving a battery to a customer. They're paying for install. We're giving them the battery. We
retain ownership of it. It's a much lower upfront cost to
them. And the rep allows us
to monetize that. Like if I gave you a battery and you live in PG&E territory
or something, it would benefit you, but we wouldn't see any of that. And
so we need to sort of split the
benefit in order to sort of give you the battery at no cost. at
no cost other than the cost of install to you. So
the rep is like not meant, it's not necessarily our
core business, it is the way in which we go to market. But we
are not here to be a
rep that is like, just for a rep's sake, we're using the rep as
a way, as a wedge into the market in order to distribute batteries
in a way that does not require us to kind
of like have a huge deal with a big
monolith utility. So to answer the question, being
a rep on its own without the battery is a pretty tough business. You're
right, it's a commodity business and so you're looking for ways
in which you can lower your average buy price because you have a flat fixed sell
price typically is how most reps price their energy. Um,
and, uh, there's, there's a lot of like really interesting, probably not
for, for the subject of this conversation, but really interesting data analysis and
trading and risk pieces that, that come with being a rep. Um,
but our, uh, again, our, our core, our core business is really building
a battery farm and bringing customers along for the journey
and the energy transition. And by the way, we use a rep to, to
I think the interesting thing about how most home batteries are deployed today
Like if I think of, if I think of like, well, what does everybody think when they think of a
home battery? They think of a Tesla power wall. Like what do people have their Tesla power wall
attached to the solar panels that are on the roof? Like most people think
of it as a thing I am buying. I am buying a battery to
go along with my solar panels. That's like the normal way. And that's why
I think that your rep thing is so interesting because you're basically giving people
batteries. All they have to do is pay for the cost of installing the original service.
And then they just like have the benefit of a battery, but they didn't have to buy
And they don't even have to have solar on the roof. Like that's a pretty unique model. And I
would love for you to dive into like why you chose that and the benefits of that and
that sort of thing. Yeah, yeah, totally. I think you're hit on the exact right
core kind of question here and core sort of differentiator question
is that it's a completely
different business model than your sort of traditional battery developer
manufacturer. Our thesis
and philosophy and what we're seeing so far, and
if you look kind of out in the market today, is that the
battery does not really provide a lot of benefit to the home. It provides
the benefit of backup, which is, by the way, very important,
especially to folks here in Texas where, unfortunately, there's a lot of outages. But
that benefit only happens like a handful of times a year. Even in
Texas where it happens a lot, it's like once a month, once every other
month kind of thing. But the rest of the time, that thing is just sort of sitting there
not providing value to the home. It should be providing value
to the grid. Also, the battery is
much more valuable to the power company, or I
should say, the battery is much more valuable to whoever is
exposed to the wholesale markets where the real volatility is, as
opposed to just a flat rate. Like if you bought a battery from, you
know, whoever, and you put it in your home and you paid 15 cents a
kilowatt hour all the time, like, why do you care about time
shift energy, right? The value of the
battery is really best for the grid and best exposed to the wholesale
markets. And so that's what the REP allows us to do. And so, yeah,
this is like a core fundamental fundamental piece
of the puzzle is you get the benefits of home backup without
the high upfront cost, and all the rest of the time, the benefits
accrue to the grid, which then lower system costs and ultimately lowers cost
of energy, more available energy, more human prosperity, like
I mean, I think that there's so many interesting choices that you guys made with the
battery deployment too. So there's like, uh, we can talk about all of them, but there's
like load side versus generation side. There's like the
There's, um, I don't know. It's like, like the business model,
which we already sort of talked about the inverter that goes along with the battery. Like all these things are
I think maybe the simplest place to start is the size
Do you want to just tell us why you chose the size you did and what
it is? The battery that we're developing now is
a 30 kilowatt hour system. And so that
is far larger than your traditional home battery systems, which are on the order
of 10, 10 plus, plus or minus kind of five. kilowatt
hours. The reason for that is a fewfold. One,
I would say the reason that the existing home batteries in the market today are
relatively small is because they're sized to be paired with solar, right? So like
one battery is roughly on average one solar
system on a house worth over a day. So you basically, you
know, produce over the day, you store in the battery, and then you discharge, you
know, for a handful of hours at night. And again, that battery is just sort of
like focused on the home. When you go, okay,
that home is really a way for us to get interconnection onto
the grid. And by the way, we're already there. The
truck's there, the guy with the tool, the electrician's already there with the tools.
Let's put as much energy as we can because the customer is not directly
paying for it, right? The cost basically scales
roughly linearly with dollar per kilowatt hour. And so we're
like, hey, we might as well just put put as much battery on there as we reasonably can
that can reasonably fit. And so the bigger the battery, generally
the better. Obviously, there's like space and electrical panel
limitations we can talk about and sort of like where the real world meets
like what is optimal. But the bigger the battery, generally the better. The
other thing that we sized for is
a pretty large inverter. And so the larger inverter allows us
to discharge that battery, if we want to, all onto the grid or
onto the grid in the home. relatively quickly. What tends
to happen, especially for pricing here in Texas, even in the
summer and the winter, is you get these really kind of peaky prices where
it's not like a slow ramp up, it's like really high for
maybe an hour and then it's like low because now people
are going to bed. It's like people came home from work, and
the sun set and gas plants have been turned back on or there's not enough batteries
in the system, whatever. So price is really high because supply was tight and
now price fell down because everybody's going to bed. And so you want to
be able to discharge a lot of energy very quickly out onto the grid. And
so the whole system we're developing is sized for how do
we maximize the value of the interconnection at
the home. The homeowner didn't know that their interconnection had value. Now
they do, and the value that they get is having backup.
Can you talk about what that means physically? This is
one of those things that I've only ever read and I've never actually said aloud before, so here we go. The
C-rate or whatever, basically the
way that a battery is discharged, is it called C-rate? I don't even know. Totally. Yeah,
C-rate is You can think about it basically as one over
the number of hours that it takes to discharge a given like sort of unit of
battery. So a 1C battery is like from full to empty
in an hour, is the way I think about it. People make it seem
more complicated. It's not that complicated. So a 0.5C
battery is a two-hour discharge battery essentially. We are using lithium
iron phosphate cell chemistry, which is
far more stable than the traditional nickel manganese cobalt
or NMC, NCM chemistry that you'll find in
a lot of EVs. Some EVs are switching over to LFP, which
you'll find there. And so it's much safer, it's much more stable. It's a little less
energy dense than NMC, but the thing isn't
needing to accelerate zero to 60 like my Tesla does. It's
just sort of sitting there, and so the energy density isn't quite as important. And
it's also lower cost. And importantly, it has
way less sort of rarer minerals than
NMC does. You don't have the cobalt and the nickel and the manganese, as
the name would imply. And so, our batteries are just about 1C,
which allows us to discharge them roughly at an hour. So, we have a 24-kilowatt inverter,
30-kilowatt hour battery. And
you kind of asked sort of how you think about this physically. What
folks will see and we're bringing to
market later this year, the battery is like, you can kind of imagine it's like an
old or like an outdoor AC unit, kind of like on
the order of two-ish foot square by on the order of three,
four foot tall. And it's ground mounted and
so much easier and simpler to install. In
a wall-mounted system, you don't have to worry about a lot of weight on the wall and
doing structural calculations and all this other stuff. You need four
square feet of available space, and you
need some panel space to electrically wire it in, and there it is
on the home. Would love to spend more time on kind of the whole deployment motion and operations, because
that gets interesting as well. Totally. I was actually let's let's just head there right now. I mean,
I think it's really interesting to ask or like to think about how
you reduce the time and also the cost of deployment because
both of those probably matter a lot. I mean, the things that are probably in the time category are like
even permitting. Like I imagine you do have to get this like permitted, right? Yeah,
yeah. So this whole... Let me take a quick step back
out from permitting for a second because that's a rabbit hole we could spend an entire
video on. I could write a dissertation on
permits at this point. We think about this entire thing, and this kind
of ties into my background here. We think about this whole thing from
customer says they're interested in getting battery on their home and
only paying for the cost of install and all the sort of benefits we discussed. From
that, all the way through to operating battery on their home and
everybody's happy and we're just charging out on the grid. That whole thing
we call the deployment factory. It's not necessarily like
physically building a thing like, you know, like in my past in
kind of one location, but instead it is a series of
process steps, each that have a cycle time associated with them, a
number of humans that are required or automation that is required. They
have tooling required for each one. And so this is a really, I
think like, Honestly decently differentiated thing from what
many kind of in the like home services type business where
it's or this vertical or business lives does or in solar install business.
They typically think about each installation is like its own construction
project, but the project manager. and it has like a unique set of
permit plans and all of that stuff. We take a much different approach,
which is, hey, we're installing what is relatively simple in comparison to
solar or any other thing that you would, you know, a hot tub or
something or whatever, you know, a new kitchen you would install. This is like quite,
quite, quite simple, both physically and electrically. And
we want to do it the exact same every time if we can. We want to offer the same product every
time if we can, and we want to do it really fast. And so each step of that process,
one or a handful of which are permitting related, has
an owner, it has a sort of a defined entry
to that process, a defined exit. These are all sort of first principles
of manufacturing that we're applying to this motion. And so on
the physical install time side, which is kind of what you're getting
at, our system is far easier to
install than what you'll traditionally see in the market. The ground
mounting is a good bit of that. And then it also is
like, things that maybe sound simple, but are very
important. So like, instead of having multiple boxes, either on
the ground or on the wall, sort of wired to each other, which requires
conduit and conductors, and you have to strip and crimp and
put fittings on the end of conductors, all of that is simplified by, we sort
of Lego brick stack our entire system. So
we have a little sheet metal base, we have six battery modules, we
put a battery management system on top of that, an inverter on top of that, and
a hub on top of that. No tools are required for anything I just said. It's
all board-to-board connections, it is latches, and
it's all put together. And so the physical install, we think about
like a NASCAR pit stop or like a factory line as
opposed to something that you have to
have a ton of experience and knowledge and skill set and sort of fine crafting
and bending conduit exactly the right way and all this other stuff to
connect a bunch of boxes together. So all of that comes in together
when we go do the physical install, but there is a ton of work ahead of that, which
You mentioned the inverter, but is there other like ways that you have to plug into
either the grid side or the house side that require more work
Yeah, I mean, in the last segment there, I
made it sound like it's literally just like plug in. So the mechanical side
is quite easy to install. The electrical side is we
basically, so we build the whole system and then we have one
in and one out is the way to think about it. So because our system is
quite large from a energy and power standpoint, we
can use it to go right in between
basically the meter and the main panel. Looking around the side of homes, you'll
find there's typically a meter box, and at least here
in Texas, that's almost always separate from the main breaker box.
And so we basically intercept the line in between those two, we run out from
the meter into our system, out from our system into the main panel,
and that allows you to back up the whole home as well as be
able to back feed onto the grid or discharge into the home. And
so that does require a little bit of conduit, but it
is not wiring our system to itself, so to speak. It
is wiring our system into the home. And we're doing a number of things
on the install side as it relates to connectors and fittings and that sort of
thing to make that process even as simple as possible. And there's some Skunk Works
projects to make that even more easy,
as a production guy, like a guy who has built factories and
like built high throughput processes, basically, I'm
Like, what are my, what are the things that can slow us down? What are the things that have the highest variability?
Where are the places in the supply chain that, you know, I have to really like care
about getting those parts in on time. So like maybe we'll buy more of them. Like, can you
just tell us like how your production brain is approaching this, like kind
of different problem than building a bunch of rockets or a bunch of, you
know, like weapon systems or whatever? You know, I think it's like, I
think that you can apply sort of this like production mindset to
a lot of, you know, call it business processes. And
so I think you're totally right. Like, one of the things we talk about a
lot here is sort of the theory of constraints, like where's the blocker, and
making sure that the constraint is
obvious, easy to spot, well understood and
there are metrics around exactly what the right constraint is so that you can go put
the right resources into that constraint
and sort of squash that constraint very quickly to go on to the next one. So
I think it's a really important principle of kind of how we're building out the operations
here. Some of those steps are
in our control. So as it relates to making
sure that we have the right size system on the home and
that we have the labor scheduled, as an
example, and that we have the right tools and
that we've communicated correctly with the customer, all those things are like in our control. Some
of the items that are less in our control are on permitting or
sort of interconnection with the utility, that sort of thing. And even then,
like, you can apply a sort of production mindset to use your
terminology to that, which is, okay, what are the steps that we
need to take in order to provide the most accurate, clean
submission we possibly can to the authority,
whoever it is, they call AHJ, another three-letter acronym, Authority
Having Jurisdiction, which is like the municipality. Authority Having, that's funny. Yeah,
AHJ is like a city of Austin or whatever, right? Like
it's the, that's the AHJ. And so we've
spent quite a bit of time, we continue to spend time on each sort of new area
we move into as a business, putting a
lot of thought and effort and time into producing the
exact right detailed documentation and submissions such that the
throughput or the fallout rate, if you're using a manufacturing terminology,
through that permit process is as throughput is as high
as possible or fallouts as low as possible, right? So even
things that are out of our control necessarily, we can still apply a production mindset
to and I think get good results. This might not be a thing that is
kind of continuous. I guess it is to some extent, whatever. In
the beginning of starting this company, you had to make a bunch of decisions about
what are we actually going to build? What are we going to rely on partners for? What
are we going to do? What are we going to do in-house? What are we going to source? Whatever, like
build versus buy. You had to make a million of those decisions. How did
you end up making the ones you did? And actually, what are you building within the
battery module itself? Yeah, no, it's a great question. So,
yeah, I think there's a... What
we're building here is what we call a complex coordination machine.
We have to be good at a lot of different things. All
of the stuff that we just mentioned on the deployment factory, that's only one piece of it though. We
need to be good at financing and trading
energy with ERCOT and all the regulatory sort of
like hoop jumping you have to do there. We have
to be good at acquiring customers and building a brand. We need to be good at software
and hardware. And so what we've tried to do is
be really thoughtful around build versus buy and sort of each one of those verticals.
And so, like, as an example, on
the installation side, we own, internally,
we own basically all of the pre-install, and then we
subcontract out our electrician work today. This
is something that we're kind of, you know, going, we
will edit over time, for sure, and likely have a mixture of
in-house versus out-of-house. We've said, hey, look, I think it's actually most, beneficial
for us to not sort of manage the physical
electrician labor today. So that was a build versus buy decision. So
we need to be good at a lot of different things that are honestly quite
different from each other. This is, by the way, total aside, but one of the interesting things
about being a founder is that You do a lot of like context switching, especially
in this business. We're going from hardware development to
software development. That's like sort of engineering or technology. Then
we've got customer acquisition and building a brand. This is
more of a consumer products thing. We then
go to energy trading and interfacing with
the electricity markets. This is like more of a finance-ish thing,
right? And so each one of those verticals, we
have tried to be thoughtful on what we build versus what we buy. And
so a good example of this is in
the deployment factory that we talked about earlier. Again,
deployment factory being customer says, I want it to, it
is installed on their home. And
in that, we are basically building,
we're owning ourselves basically the entire pre-install process,
and then we're working with a subcontracted electrician to basically
do the physical install. And that was a conscious decision around build
versus buy that we thought made the most sense
at the time and continue to feel like it makes the most sense, but we'll likely change
that over time. I think it's important. A
lot of businesses, especially those in sort of the
Elon company circles perhaps, have a
tendency to kind of really, really vertically integrate. And
while I think like that's the ultimate end game that you should really be
striving for, because if you're able to own pieces of
the supply chain and the labor and the deployment
factory and all that other stuff, it is very beneficial. It's
not necessarily the place to start. And so we're trying to be very thoughtful
about build versus buy and really build the things where we think we have
some differentiated motion or process or technology
and buy the things where we don't have a differentiated thing
today and we'll add some differentiation over time. I'm curious to
hear also about, like, there's obviously a ton of decisions that you have
to make when building, basically, battery packs about what to build versus
buy. Can you talk us through a little bit more of those decisions about, you know, okay,
you're not out there, like, mining the raw materials, but at
the end of the day, you are building, like, presumably, like, the pack design or
something that, you know, like, how you integrate all the cells together, that
kind of thing. Like, where in that spectrum did you
decide to draw the line and why? At the cell level, it
is made the most sense to buy. And I think what you'll find if
you look at the battery market in general is that the automakers and
stationary energy storage manufacturers are producing
an enormous amount of cells at really low costs and really high quality.
And so that's like a, okay, we do not
build a sort of, and there are many companies out there that are working on this, we're not
building a cell chemistry company, right? That's not kind
of what we set out to go do. There are a
handful of really fascinating companies that are working on that problem, but
it's not something that we set out to go do. On the other
end of sort of the hierarchy or the bill of materials, as
it were, is this sort of enclosure and how we
mount it to the other boxes around it and how we wire it
and that sort of thing. That's like core to our custom hardware.
And so that's really important for us to us to develop ourselves. So
then there's like a spectrum in between, right? So connectors and
individual electronic components doesn't make sense for us to do, but the integration of
all of those, this piece is really important. And I
think what you'll find in a lot of kind of very successful integrator
type businesses, and Enrol is certainly one of them, as we discussed,
like they're able to take existing technology
that is maybe applied a little bit of a different way or has a little bit of a different
sort of look and feel or integration and apply it
to this new problem. And that's what we're doing kind of throughout the Bill of Materials. And
so there's things in there that are While
the component part is sourced by us, the integration and
the overall construction of it is developed by us. Totally. I
mean, I think one of the other interesting things about y'all is that you are deciding to
do a thing that other reps are not, that you're actually going to do this
unique, this like modern software stack, basically that,
you know, looks good and is transparent to the customer and
whatever, just like is a modern, nice software product.
So do you want, do you want to tell us more about like both the consumer facing part
of the software, but then also the other stuff like the, you know, trading and all that, all
that sort of thing. Yes, so you kind of think about kind of the software and maybe
three areas kind of helpful to break it out. So there's the stuff that runs
on the device, there's the stuff that runs in the cloud to manage the devices, and
then there's the sort of consumer-facing end of it. And you're right
that the kind of standard in the market today for retail
electric providers is typically that they're not technology-focused companies,
right? And so our
view is that we should apply what is, you know, to
some degree maybe table stakes for modern SAS, you
know, if you're using a some
sort of B2B software in your day-to-day, the sort of slacks or ramps
of the world. It's like good design, good UI, high functionality,
good integration. These things don't really exist today
in the energy markets. If you've paid your bill for
the electricity from a rep in Texas or
anyone else, I think you'll probably agree, or any
other sort of utility service. We're
developing a modern, good UI so you can track your
usage. There's a bunch of interesting features that we're going
to be rolling out here over the next few months for consumers on the consumer
end. Now, the other two pieces, which is the software
that runs on the devices and the software that runs on network, is
a really interesting problem, actually. So it's a, we like to
think about it as sort of a distributed systems problem, where you have a
bunch of different things that you can't talk to. It's kind of like satellites in
some way. It's like, once you've deployed a battery and
you have, you know, a lot of them out there, you definitely don't want to go back
to them. It's sort of like a satellite in that way. It's sort of like, you
know, it's gone, it's out there, so you better be able to Talk to it reliably. You
better be able to get telemetry off of it reliably. You better know
what it's doing and be able to diagnose and repair things all remotely without
touching it. And so that's the sort of software stack that we're building,
is the ability to manage the network very effectively and have
the device do self-diagnostics and safety health checks and
all that other stuff sort of on the device itself. And so that's the on-device software.
And then the, call it like, higher-end sort of
cloud-side software is both
interfacing with the market. So it's, hey, prices are high now here,
and so I'm going to tell this battery or these few batteries to discharge. But
actually, they're low over there, so I'm actually going to tell those guys to charge. And
so that management layer is a very complex
sort of software problem. And
also, interfacing directly with the markets is also its own sort
of has some regulatory oversight
around kind of how you do it and what trades you can place. And
there's a handful of different markets. There's the real time market. There's
the day ahead market. There's a thing called ancillary services. And
so basically managing all of that is what
we're developing the sort of top level software to do. Cool.
Are you guys going to eventually have basically like a trading desk of finance dudes
at the office? It's like the, you got the engineering, you got like the,
like the electrical, the installer guys. And then you got like these, these
like quant finance bros who are like just the masters
of the trading market. Yeah, I
would say this is something that we need
to and are starting to get good at. I think there's like a sort
of maybe movie theaters version of this, which we don't
want to have. And then there's the more real version, which is we're
taking a data science based approach as opposed to a sort of When
you think of a person doing trades, it's like
sort of what you see in the movies. It's not bad. It's a very
scientific approach to how you're able to best monetize
the value of the batteries. But also extremely importantly,
how you're able to make sure that you have sufficient,
you know, margin in the system for errors or issues, for
backups, for outages, and how you're safely operating
the system. We don't want to, you know, build
a sort of trading desk and just set them loose to sort of like trade energy in
the batteries. It's very much a co-optimization problem with
Totally. I mean, I imagine some of those constraints are really interesting. Like my, my, my
gut instinct, like, as soon as I heard about this idea, I was like, well, if I was a consumer,
I would want to make sure that there was some sort of protection I had that like,
you are just going to like sell all my battery electricity array right before
Prices are really high. So like, we're just getting rid of all of the electricity that
I want to use. It's because it's at my house. Like I I'm curious, like, do you
have, like, I'm sure there are a lot of safeguards that are like that to,
protect the customer, they're like for regulatory reasons or whatever, like, do you
mind talking about some more of them? So I think it's like, it's, it's, it's somewhat of
a misnomer that the, that high prices translate to
high likelihood of outages. So, so what you'll typically find actually is that
the, um, And when prices are high, it
is because of a supply and demand problem. And when there are outages, it's
typically because of a infrastructure failure
problem. Somebody drove into a pole next to your house or a hurricane came through Houston and
tore down some wires and stuff. And those two things aren't really that correlated. And
so I would say that, like, the likelihood that
those two things happen together is to start with low. Okay, so
that's like point one. Point two is
we have a reserve capacity in the battery that we set
dynamically based on the likelihood of an outage during sort
of the upcoming window. And
so that's like another sort of safeguard item. And
the third thing I would say is when you do have a
correlated high price before outage scenario.
The way those typically work is that the grid
operator needs to sort of shed load. This is, by the way, a really bad day for ERCOT
or for Texas Grid. This does not happen very often, but it has happened. They'll
like rotate outages, basically. And so your individual outage is
quite short. So the energy you need in the battery to sort of sustain through that
outage is relatively low. And we have a really big battery,
and so it's much larger than you would otherwise normally have
with a smaller one. The last point, kind of the fourth point, is
if you look sort of just throughout a given day or week or month, we
on average have a high state of charge in the battery. So
the chance that somebody randomly drives
into a pole near your house or something, that that happens right at
the end of a discharge is quite low. And even then, we still have energy
reserve left in the battery. If it happens any other time, it's
likely either fully charged or almost fully charged. And
so it's like less of a sort of, it's
something we spend a lot of time thinking about, but it's maybe less
I imagine there's part of it too, where these pieces of software, like the different layers
or whatever you would call them are interacting in interesting ways. Like I could imagine
that having telemetry from tons of
homes all over the place would give you pretty good data that you could use
Like, uh, I don't know. Are there like temperature things that
like, I don't know, maybe you have some cool sensors or something that we can like pick up
temperature or usage or whatever. Like what are the
sorts of telemetry that might help you with that kind of thing? Yeah,
it's a really interesting point. The data that we're able to capture off
of the system is very important. And
it's not even just important for us to operate our system. It's
actually very, very beneficial to and important to the
grid operators as they think about how to build new infrastructure or
maintain existing infrastructure. The
standard in the market today is that utilities, at
best, have 15-minute interval data, right? So every 15 minutes,
they knew how much energy you used in the last 15 minutes, and
that, like, lags a few hours or whatever. But
they don't have sort of sub-15-minute data oftentimes,
and they oftentimes have a challenge sort of aggregating
and presenting that data in a sort of, you know, useful
or unique way. There's a handful of companies actually that are working on
this sort of using meter data challenge. But we have
much, much tighter telemetry on our system. And our system both
measures what the battery is doing from a charge and discharge perspective, as well
as what the home is doing from a consumption perspective. And so that data
is very valuable to allow us to size our system, to operate our
system, but we're also able to share that with the utilities, which in
sort of some early discussions has been very beneficial to us. Sorry,
I should say very beneficial to them to
really fine tune what what
energy usage means in a given very short period of time, and
how that affects stress on the system. At the end
of the day, kind of taking a big step back here, what we're trying to do is
fortify the grid with energy storage. And to
do that, we're able to time shift energy, we want
to have sort of very fine grain data around
the time with which we're shifting energy and kind of how that plays throughout
the system. And so that data is super, super valuable to
Um, this might be, this is, this is totally far afield from the software piece
we were just talking about, but I'm curious about it because it reminded me of like, um,
so there are lots of reasons why your battery might just be better
There's the outage thing, obviously there's like the software piece
of it, which is just a better sort of like user experience, more transparency about
pricing, that sort of thing. But the third one, which we haven't talked about, I don't actually know
if this is true, so you'll have to correct me if it's not, but is there a way
that the battery being DC actually helps in
some ways? Like the fact that you would have basically like a DC rail
into your house as opposed to like AC? Can people
actually use that? Is that a thing? It
is not a thing today, or at least not more of a thing today. It's
funny actually, a lot of appliances inclusive of
your EV, are consume energy in
DC form. So anything with a, or most things with
a DC-based motor, convert or
rectify specifically the AC that is on the
grid back down to DC. But what
if you had a big DC source in your home? That's
a pretty interesting item. There's not an infrastructure built for
this today, and it's not necessarily something that we're
spending a lot of our current time on. But
it is a very pretty interesting thing. You can dig it all the way back to
the Edison days and the fight between DC and AC. AC
ultimately won from the grid perspective, but there's a lot of things that consume energy
at the end, and motor or whatever in
the form of DC. And so having a DC system in a home
Well, awesome. Perfect, man. Is there anywhere you
want to send people? Places like, I don't know, your website?
Can they sign up for electricity if they're in Texas? Yeah, totally.
So you can sign up right on our website. You
kind of like put in your address there and it tells you if we're servicing your area now.
If not, we put you on the wait list. So
yeah, website is basepowercompany.com, B-A-S-E powercompany.com.
And yeah, we're based out here in Austin. So for
anybody who's either in Austin or is looking to move
to the great city of Austin, we're also recruiting top
talent. Yeah. Thanks a bunch, Christian. Super great to