Startup Series: Battery-Powered Homes with Base

Oct 3

*This My Climate Journey podcast episode was recorded in front of a live audience at the Ion during Houston Energy and Climate Startup Week.

Zach Dell is the Co-founder and CEO of Base Power Company. Base aspires to build a reliable and affordable home energy service powered by distributed batteries. Their technology supports the grid during times of peak need and protects customers during outages. They claim to do this at a fraction of the cost of other solutions. Base is serving live customers in Texas and claims to be the only electricity provider to offer a home battery, monthly energy service, and installation, all in one with no requirement of rooftop solar.

MCJ is a proud investor in Base via our venture capital fund. The company recently raised a $68 million Series A round via Valor Equity Partners, Thrive Capital, and others in which we participated. In this episode, we dig into Zach's journey, the origins of Base, and what he sees as the path ahead for distributed storage and home energy as he builds a vertically integrated business in this enormous space.

Episode recorded on Aug 8, 2024 (Published on Sept 12, 2024)

In this episode, we cover:

[2:47] Zach's background and journey into entrepreneurship, with a focus on solving energy and climate problems
[7:57] How he landed on batteries and met his co-founder, Justin Lopas
[14:05] Base's residential approach in Texas
[22:00] The company's business model and role in the energy market
[25:03] Base's ideal customer
[27:30] The battery's current and future manufacturing strategy
[31:00] Zach's key learnings from starting a business
[32:18] Base's company culture and who they're looking to hire
[36:46] How Base could grow into other energy sectors
[40:00] Zach's vision for the future

Cody Simms (00:02):
Live in front of an amazing audience from the beautiful facility at the Ion at Houston Energy and Climate Startup Week, I'm Cody Simms and this is the MCJ Startup series.
(00:19):
Our guest today is Zach Dell, co-founder and CEO at Base Power Company. Base is aspiring to build a reliable and affordable home energy service powered by distributed batteries. Their technology supports the grid during times of peak need and protects customers during outages. They claim to do this at a fraction of the cost of other solutions. They're serving live customers here in Texas and claim to be the only electricity provider to offer a home battery, monthly energy service, and installation, all in one with no requirement of rooftop solar.
(00:54):
MCJ is a proud investor in Base via our venture capital fund. The company recently raised a $68 million Series A round via Valor Equity Partners, Thrive Capital, and others in which we participated. Today, we're going to dig into Zach's journey, the origins of Base, and what he sees as the path ahead for distributed storage and home energy as he builds a vertically integrated business in this enormous space. But before we start, I'm Cody Simms.
Yin Lu (01:23):
I'm Yin Lu.
Jason Jacobs (01:24):
And I'm Jason Jacobs, and welcome to My Climate Journey.
Yin Lu (01:31):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (01:36):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help.
(01:49):
Zach, welcome to the show.
Zach Dell (01:50):
Thanks for having me.
Cody Simms (01:51):
I got to start with something that's definitely going to date me, but when I first heard the name Base Power Company, the first thing that came to my mind was the early 2000s meme of, "All your base are belong to us." I don't know if you have any idea what I'm talking about there.
Zach Dell (02:03):
Oh yeah, totally. I-
Cody Simms (02:04):
Classic internet culture.
Zach Dell (02:04):
I know exactly what you're talking about.
Cody Simms (02:07):
And I'm sure that inspired the name of the company, right?
Zach Dell (02:08):
I have no idea what you're talking about.
Cody Simms (02:11):
All right. Anyway, go Google it. It's a ridiculous video game meme from the early 2000s.
(02:18):
You're from Texas. You've been really immersed in technology and company building, I guess, for a lot of your life. Growing up as you did, what was your childhood like? Was entrepreneurship a path you always knew you wanted to pursue?
Zach Dell (02:33):
Honestly, it never occurred to me there was anything interesting to do in the world other than build companies. I never wanted to be a doctor, I never wanted to be a lawyer, always wanted to be an entrepreneur. Nothing against doctors or lawyers. We need those. They're very important, but it just wasn't the path that I was excited about.
(02:47):
Early in my life, it became very obvious to me that great companies solved hard problems. And the harder the problem, the larger the economic outcome downstream of the solution. I was always inspired to solve hard problems and do so in a company building environment. From a very early age, I was inspired to be an entrepreneur, and very lucky to be able to do that today.
Cody Simms (03:09):
Walk me through your journey into focusing on clean energy as the area in which you chose to be an entrepreneur.
Zach Dell (03:16):
I really first got excited about energy in college. I started my first company in high school and I got to college and was really excited to start another company and figure out what kind of problem I could go solve. And I got excited about a opportunity to develop anaerobic digestion systems to convert human waste into biogas, primarily in India. So the idea was two birds, one stone. Hundreds of millions of people, if not billions of people in India, don't have access to sanitation infrastructure. They also don't have access to affordable reliable power. And so the idea was could you design a system that you could build with parts that you could buy at a local hardware store to process human waste into biogas or compressed biogas, methane that one could use to power a stove, a fan, a light. And I spent basically all of college working on this and recruited some engineers from USC where I went to school to work on this. We spent a bunch of time in India, learned a lot of really hard lessons as part of that process.
Cody Simms (04:09):
That sounds like multiple hard things all at once.
Zach Dell (04:12):
Yeah, I was young and naive.
Cody Simms (04:15):
The best way to start a company, right?
Zach Dell (04:16):
Yeah. And it's like, "Oh, hard problem. I got an idea for a solution. Let's go for it." And it was incredibly fun and interesting and we spent a bunch of time in India, which was great. Learned a lot about anaerobic digestion, which was great. Basically halfway through college, I realized that this was not a business. This was a project. The end customer was not able to pay for something like this. There just wasn't a commercial model around the business. I thought, "Okay. Well, I better get a job or start a company or join a startup." I went into investing really because I didn't have a company idea to run at. The objective function in my mind was just find the smartest people you can that work really hard and go learn as much as possible.
(04:53):
Long story short, I ended up at the Blackstone group. And so I moved to New York. I interned there. Before that, on a private equity team and joined them full time, moved to New York and I started investing. And when I got there, there was an energy team and a private equity team. I was on the private equity team, and I heard the energy team talking about an opportunity to buy a lithium mine and I put my hand up. "I want to work on that. That sounds interesting."
(05:16):
And so long story short, I staffed on an opportunity to buy a lithium mine. And if you're going to buy lithium mine, you better take a view on the price of lithium because you're going to own a lot of it. I spent a summer building a supply-demand model for the commodity lithium. And that means going and figuring out where are all the lithium mines? How big are they? When are they going to bring capacity online? How much capacity they're going to bring online? Okay, that's supply. And then you got to go figure out demand. A lot of the lithium demand is coming from electric vehicles and so you got to figure out what's the penetration of EVs. This is in 2018 when the penetration was a lot lower than is today, and analysts were all sorts of wrong about what the penetration actually was. And of course there's other sources of lithium demand.
(05:53):
And in doing that, there was this aha moment of, "Oh man, I actually think that battery demand is going to be a heck of a lot higher than what analysts are projecting." Why is that? Well, it's because the marginal cost of wind and solar plus storage is just lower than the marginal cost of coal or natural gas. Before subsidies, after subsidies, the economy is going to be powered by renewable electricity and batteries are going to be a key part of that. And this was just mind-blowing to me and incredibly exciting.
Cody Simms (06:20):
And a side question then, are we screwed when it comes to lithium supply? And do we have to innovate on things like sodium batteries and whatnot?
Zach Dell (06:27):
No, short answer. There's a long answer. Lithium is a very abundant mineral. It's not as rare as the media wants you to think, and there's actually lots of it in the US. There are interesting other chemistries like sodium ion, like manganese oxide. There's plenty of others that have promise for different reasons because of their energy density, because of different parts of the supply chain. But lithium still has tons of promise and room to run.
Cody Simms (06:52):
And just for my own knowledge, most home residential batteries today are what base chemistry?
Zach Dell (06:57):
For the previous decade, most home batteries were NMC, so nickel, manganese, cobalt. That has recently started to change. Tesla notably as the market leader switched, I think it was from Powerwall 2 to Powerwall 3, from NMC to LFP. Now, the majority of home batteries are LFP, although some new home batteries, companies are building NMC batteries.
Cody Simms (07:16):
To be determined how that plays out. So continue on. So you did this analysis of potentially buying a lithium mine. It got you into understanding the demand curve, it sounds like, of batteries.
Zach Dell (07:27):
And long story short, I ended up leaving Blackstone. Amazing time, learned a ton. The people there are very smart, worked very hard. Grew up as an investor there, and left to join a firm called Thrive Capital in New York where I was able to work with technology companies from seed stage to all the way through late stage, growth equity and public equity companies. And really the last year I was at Thrive, I spent the whole year studying the battery storage market, picking back up the thesis from Blackstone of batteries are the key, the grid needs more batteries, and existing instantiations of battery storage are falling short. And during that year, we made an investment in Anduril, and I went down to Orange County to do a factory tour and my tour guide was a guy named Justin who was leading all things manufacturing for Anduril, and we hit it off.
Cody Simms (08:13):
Describe Anduril just in case people don't know what the company does.
Zach Dell (08:16):
Anduril is a defense technology company. The clickbait headline would be they're like the modern Lockheed Martin, but that's not really a fair characterization. They basically are a R&D focused defense company where most defense companies are cost plus. So the government says, "Hey, build this. What's it going to cost?" Anduril says, "Hey, we think this product is right. We are going to invest our R&D dollars in building it and we're going to convince the government to buy it because it's a better product." And they've had a lot of success doing that. So they're really an R&D-driven company in a legacy industry without R&D-driven companies, which is really how we see Base in the energy industry.
(08:50):
So I met Justin and we hit it off. Brilliant guy, incredibly hard worker, very complementary skill sets between the two of us. It was pretty clear to me pretty quickly that he was the ideal co-founder for what had been stewing in my head. And I definitely can't take credit for everything that is what Base ended up becoming. He definitely pulled it out of me in a lot of ways. We spent the second half of '22 ideating together. And then the first half of '23, we started to really pick up steam on the idea.
Cody Simms (09:17):
And obviously Thrive has gone on to invest in Base, so they weren't too upset that you were on their dime as an investor pulling one of their portfolio company employees to start a new company together.
Zach Dell (09:28):
They're incredibly supportive. Josh and the team at Thrive have been incredibly supportive since day one. I think if you look at the Thrive team, it's full of people who were entrepreneurs, are going to be entrepreneurs, have an entrepreneurial mindset. And when I joined Thrive, I told Josh, "I want to be an entrepreneur. I want to build a company." And his response was, "Great. Awesome."
Cody Simms (09:44):
This just a good story to me on the collaborative nature of early-stage entrepreneurship. If you do good things, you can attract talent around you, and that talent tends to stick with you across multiple projects.
Zach Dell (09:55):
Absolutely. The Thrive team was crucial in getting Base off the ground.
Cody Simms (09:59):
Share a little bit more about Justin's background.
Zach Dell (10:00):
Justin from Detroit grew up in the auto industry, studied mechanical engineering at Michigan, went to SpaceX right out of college, was promoted across different programs at SpaceX, and then eventually was tapped to go build the launch site for Starship and was one of the first people down at Boca. Just an incredible engineer and operator and then one of the first people on the hardware manufacturing operation side at Anduril, stood that up at Anduril for little over two years, and then we met and started working together.
Cody Simms (10:28):
Building the launch operations at Starship, that guy has seen probably incredibly stressful operating environments, I would imagine.
Zach Dell (10:35):
That is putting it very lightly, yes.
Cody Simms (10:38):
Any stories that he shared with you that you're at liberty to share?
Zach Dell (10:40):
I'll let him share those stories. Justin is an execution machine, and I think a lot of those skills he learned working for Elon and working with the SpaceX team.
Cody Simms (10:48):
What's the why behind Base? You guys spent this time working together. What did you ultimately land on as the thesis that you thought needed to be solved?
Zach Dell (10:56):
There's a personal angle. I'm from Texas. I grew up here. My whole family's here. So we'll talk about a customer why and then the more system level why. On the customer end, folks in the audience, some of you I imagine are from Texas or lived here over the last decade, but really actually if you lived anywhere in the country in the US over the last decade, your power has gotten more expensive and less reliable, which is totally crazy actually.
Cody Simms (11:19):
Especially when we're in a phase where supposedly the cost of power is going down, the cost of generation.
Zach Dell (11:24):
Exactly. So the cost to create power has gone down pretty dramatically actually over the last decade when solar, other renewable resources gaining scale, but the cost of move power, the cost of transmission and distribution, has gone up. And so if you've lived basically anywhere in the country, your power has gotten more expensive over the last decade. Think about all the things in the country that have all the technologies. Everything has gotten better over the course of the last decade, and our electricity has gotten more expensive and less reliable. And so the mission of the company is to reverse that. We want to bring affordable and reliable power first to Texans and eventually to the rest of the country. That's really the customer reason.
(11:58):
The system level reason really comes from this understanding of the grid at a system level, and the grid desperately needs more battery storage. If you look at existing battery storage technology, it's been a really good asset class over the last couple of decades. Every major asset manager owns a battery storage platform. Blackstone, the firm I was at, owns Aypa Power. BlackRock owns Jupiter Power. Apollo owns Broad Reach Power. Aries Brookfield, all these guys own massive portfolios of utility scale storage. These have been 10, 20% levered IRR asset classes over the last decade or two, but they're fundamentally limited for two reasons. One is interconnect capacity. So if you want to get a utility scale battery grid connected, depending on where you are in the country, it takes anywhere from five to 10 years, which just adds a bunch of cost.
Cody Simms (12:42):
This is because at utility scale, the batteries tend to live next to power generation. They're co-located or close to co-located, is that right?
Zach Dell (12:49):
That's part of it. And that's true for some, the utility scale batteries. But it's really a combination of it's a permitting problem, it's a part availability problem so there's a massive shortage of transformers, and then it's partially just a trucks and crews and poles and wires manual orchestration problem. We're talking shipping container in the middle of farm field batteries. Getting them grid connected is just really difficult. It takes a lot of time.
(13:12):
The other constraint is transmission. So you have transmission congestion. Houston is a great example of this. You have tons of power demand. You don't have a lot of generation in the city of Houston. It's really hard to get power in and out. These utility scale battery developers will spend millions of dollars and a ton of time trying to figure out where to put their battery. You study the grid, the nodes and the load zones, you say, "Okay, we're going to put the battery here." And then five years later, seven years later, 10 years later, when you get the battery grid connected, the grid has changed and your answer's wrong. And so that's a problem. You bought the land and you got it sited and you bought the interconnect there and you have all these things going.
(13:42):
And so we're looking at these two constraints, this transmission constraint and this interconnection constraint, and saying, "Well, what if we deployed storage where the grid already is so we don't have to wait in the interconnect queue. Co-locate it with the power load."
Cody Simms (13:54):
Where the grid is already consumed, I guess, where it's heavily dense.
Zach Dell (13:57):
Right, co-locate it with the power load so we can circumvent these two constraints of transmission, transmission constraints and interconnect.
Cody Simms (14:05):
And residential became the answer for that immediately?
Zach Dell (14:08):
Residential, we think, is the place to start. Commercial is very interesting too. Now, commercial is a can of worms because there's big industrial sites and then there's Whataburgers and Wendy's and Chick-fil-As. We think the latter is probably more addressable for a Base-type product in the near future than more industrial-scale solutions. But the reality is most of the peak demand, specifically in Texas but really all over the country, comes from Resi HVAC. In the summer, in August, it's hot as heck in Houston and you're going to crank your AC and that drives up the demand for power, which drives up the prices. If you can put batteries where the load is, on the homes, you can deal with that issue more effectively.
Cody Simms (14:47):
Just thinking about the current technology capabilities of our existing utilities, you mentioned Whataburger. During Hurricane Beryl, I saw a tweet somewhere that said, "You can't see where the grid is back online unless you go to the Whataburger app and can see which Whataburgers are running or not, and that was your indication of what neighborhoods were back on online."
Zach Dell (15:08):
Visibility into the power grid is a hard problem solve.
Cody Simms (15:11):
That's amazing. So that's the two whys. And then what about the why in Texas?
Zach Dell (15:16):
Well, Texas is the center of the energy addition. It has got more wind and solar than anywhere else in the country because it's in the middle of the wind corridor and the middle of the Sun Belt. And so it's an amazing place for renewable resources. It's also an island grid and it's also out of the purview of FERC. It also is a competitive free market. As a place to build a business, Texas is second to none.
Cody Simms (15:38):
You've got the two big renewable markets with Texas and California, I would think. California now has this whole net metering 3.0 thing that really does incentivize solar plus storage going forward when things are installed. But I guess is it just harder to do business in California and to get up and running? At some point, you probably looked at those two and made a decision.
Zach Dell (15:58):
We definitely want to enter that market eventually. The business model will have to change. You can't be a competitive retailer. Competitive retail does not exist at the residential level in California. And so if we showed up to PG&E and said, "Hey, PG&E, we're a startup. We got these batteries and the software and we'd really love to do business with you," our guess is that they would say, "Well, do you have any customers? Does the product work? Do people like it?" And so it's not a very good place to start.
(16:24):
So we figured, "Hey, let's start in the free market, land of the free, go down to Texas, start in the free market, build a business, build a product that customers love, that they want, that they tell their friends about, they sign up for, refine the product, make it better, and then go to the regulated states where we can partner directly with the utilities and help them lower their system costs which will ultimately help them lower their rates that they charge their rate payers.
Cody Simms (16:47):
And you have to be good at a number of things. You have to be good at marketing and sales. We haven't even gotten into how the business works yet, which we will do, but are there one of these problems you have to solve right now at the very earliest stages when you're in the process of signing up hundreds of customers?
Zach Dell (17:01):
At the end of the day, if you don't have customer love, you don't have a business. If you're selling a product that is a nice to have or you have to convince someone why they want it, it's going to be a real hard road. The first thing first and foremost is just build a product that is a no-brainer. What's our marketing strategy? Marketing strategy is build a no-brainer product that everyone is like, "Obviously, I want to be on Base because I'm going to have affordable, reliable power. If I sign up with Base, I know that my bills are going to stay low and my lights are going to stay on."
Cody Simms (17:28):
So what is Base? How does it work?
Zach Dell (17:30):
Base is a home battery company. We don't actually sell batteries. We sell affordable, reliable power. So if you sign up with Base, you get a battery installed on your home for a fraction of the cost of a traditional home battery. When the grid is up and running, we use that battery to support the power grid. When the grid goes down, you get that battery to back up your home. So you get all the benefits of home backup without the high upfront cost, in addition to a electricity bill that is typically lower than the competition because that's not our core business.
Cody Simms (17:56):
As a homeowner, I'm not buying this thing upfront. I'm not having to finance 15 or $20,000. You are coming and installing it. I guess I pay a small installation fee, but-
Zach Dell (18:06):
That's right.
Cody Simms (18:06):
... it's your battery. Base owns it. Is that right?
Zach Dell (18:08):
That's right. So our view is that us as a market participant, we can internalize the value of that battery a lot better than the homeowner can. So when the grid is up and running, when you don't need that battery, there's not a lot that you can do with it as a homeowner to extract value from it. And we can get value from that battery because we can use it to support the power grid. The home battery market for the last decade has been this premium product, Valence. Batteries have had this premium Valence, the Powerwall, the Enphase battery. They're shiny, made of glass. They go on the wall. They cost $20,000. They're really pretty. Batteries are amazing but they're not premium products. It's an efficiency box. It's a savings machine. And we think that batteries should be sold as such. We deploy batteries as grid assets, and we internalize the value of those assets and we share that value with the customer in the form of a lower electricity rate and affordable backup.
Cody Simms (18:58):
To some extent, it's a little bit of an evolution of the rooftop solar leasing. Am I crazy trying to draw those parallels in my mind?
Zach Dell (19:06):
Not crazy, but it's quite different. I think rooftop solar is interesting in its own right and has its own unique challenges. Installing rooftop solar is a lot more complicated. It's a lot more nuanced. You got to go out to the house a couple of times before. You have to check the angles of the sun, angles of the roof. People also get a little skittish around, "Oh, you're going to drill holes in my roof. You're going to put glass up there. I don't know about that." Some people love the way it looks. Some people hate the way it looks. We think that batteries should be a no-brainer for every home. Every home should have a big battery in it that load balances with the grid.
Cody Simms (19:35):
Describe the battery that you install.
Zach Dell (19:38):
Today, we install a 20 kilowatt-hour battery. It's one of the larger home batteries you can get on the market, but we are working on a 30 kilowatt-hour home battery. That'll be our Gen 2 product. That'll provide you with even more backup. And the battery is designed to support the entire home's power load, so you get whole home backup. So when the grid goes down, your power doesn't and you really don't even know that you lost power. In fact, we've had plenty of customers have outages this summer where we send them a text, we say, "Hey, you're in an outage. This is how much backup you have," and they have no idea. They're really excited when that happens.
Cody Simms (20:09):
And how does the size of that battery compare to if I went and bought a Tesla Powerwall or something today?
Zach Dell (20:14):
Tesla Powerwall is 13 1/2 kilowatt-hours.
Cody Simms (20:16):
2X plus larger.
Zach Dell (20:17):
Not quite today, but Gen 2 will be over twice.
Cody Simms (20:20):
Oh, you're 20, yeah.
Zach Dell (20:20):
Exactly.
Cody Simms (20:20):
You're 20 kilowatt-hours.
Zach Dell (20:21):
Exactly.
Cody Simms (20:21):
Yeah. And today when people are installing a battery, everyone does it for different reasons. It could be for backup. It could be to better utilize the existing solar they have. It could be to offset the cost of EV charging. As you're talking to customers, are you hearing why typically people look for storage? And maybe here in Texas, given the history of the last few years, it's a more obvious answer than in other parts of the country. I don't know.
Zach Dell (20:41):
I think it's very simple. Customers sign up for Base because it's the most affordable home backup on the planet. That's the reason. We save people money on their monthly bill. We have really great customer service. We're a modern tech company in every way, in the way that you interact with us. But the value proposition is really the world's most affordable home backup.
Yin Lu (20:59):
Hey, everyone. I'm Yin, a partner at MCJ Collective here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast. We started in 2019 and have grown to thousands of members globally. Each week, we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change.
(21:26):
Some awesome initiatives have come out of the community. A number of founding teams have met, several nonprofits have been established, and a bunch of hiring has been done. Many early-stage investments have been made as well as ongoing events and programming like monthly women in climate meetups, idea jam sessions for early-stage founders, climate book club, art workshops, and more. Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com and click on the Members tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (22:00):
On your end, the business model is you're not selling batteries, you're actually participating in the energy markets with the electrons that the battery is storing. Can you explain a little bit about how that works?
Zach Dell (22:12):
Exactly. So we use the batteries to support the grid in times of peak need. So there's really two ways we do that. One is by bidding the batteries into the wholesale electricity markets and the other is by using the batteries for what's called ancillary services, which is really a capacity market that is directed and designed by ERCOT, the Electric Reliability Council of Texas, that basically says we need certain grid services at certain times for certain things, and we're going to compensate market participants for their participation in those grid services.
Cody Simms (22:41):
That's a fancy way of saying, "Hey, there's a lot of peak load right now. Who has some extra electrons?"
Zach Dell (22:45):
Exactly.
Cody Simms (22:46):
"And we'll pay a lot for them."
Zach Dell (22:47):
But it's some other things too. It's frequency regulation. It's all different kinds of things that the grid needs at different times.
Cody Simms (22:53):
I read somewhere recently that a lot of the utility scale batteries are actually more for that frequency regulation than necessarily peak load management. Explain that. I don't even know what that means, to be honest.
Zach Dell (23:03):
Batteries will be used for whatever the most compelling economic opportunity is for them. For some batteries in certain parts of the grid, that's energy arbitrage. And for other batteries in different parts of the grid, that's ancillary services. We run the same optimization off of our fleet, which is what is the best way to use this battery today? That's how we're going to use it, and I think that's how any kind of economic actor should behave. It's like what is the best way to create value?
(23:28):
We're in the process, thanks to the good work that folks have done on the ERCOT task force, to actually get distributed energy resources, access to these ancillary services. We're in the process of aggregating all of our distributed assets and getting them access to these ancillary services. And so over time, we'll be able to bid our entire fleet into this ancillary services opportunity. We're not quite there yet, but we're well on our way.
Cody Simms (23:51):
Describe exactly what that means in terms of the stabilization, I guess.
Zach Dell (23:55):
Basically, the grid operator ERCOT will procure services, whether it's regulation, reg up, reg down, or we capacity at different times based on what the grid needs. And the different resources, whether it's a centralized resource or an aggregated, distributed set of resources, will respond to those requests and be compensated for it.
Cody Simms (24:15):
Basically, the grid needs to operate at a consistent frequency rate and you're trying to help maintain its performance there.
Zach Dell (24:20):
That's right.
Cody Simms (24:21):
And then on the arbitrage side, how big can these spreads be of cost to store versus peak cost to sell in the same day period?
Zach Dell (24:30):
Big. Ercot.com has actually great resources if people want to go online and check it out for themselves. You can see in real time the price of power and what it's doing. There's a company called Grid Status that does a really good job of charting some of this data. Prices go as low as $0, actually sometimes they go negative, and they go as high as $5,000. That's the price cap currently. And so zero to 5,000 is a really big gap. The swings are large.
Cody Simms (24:53):
So that's the business opportunity that you would then participate in is Base is if you can store it at zero and sell it at 5,000, you keep the profit.
Zach Dell (25:02):
Buy low, sell high.
Cody Simms (25:03):
That's a good business model. It's been proven. Explain a bit about where you guys are. You launched the company pretty recently.
Zach Dell (25:10):
We started the company in June of last year. We launched the product in May of this year. We've got a couple of hundred customers with batteries on their homes for supporting them. We were supporting them all summer. We had many customers experience outages throughout the summer. We started north of Austin, so the company is based in Austin. Our first customers were on core territory north of Austin, so Pflugerville, Georgetown, Hutto, Round Rock, Temple, Taylor, Killeen. We're now moving north up to Fort Worth, Dallas area. We'll launch Houston sometime probably early next year.
Cody Simms (25:39):
Describe your ideal customer in terms of what their existing residential energy plan looks like. Is it new construction? Is it retrofit?
Zach Dell (25:46):
It's a homeowner who wants to save money on power and keep their lights on. The market is really anyone who wants to save money on power and get access to home backup. Look, if you live on a hospital grid or you've never experienced a power outage, you're probably not looking for a home backup solution.
(26:02):
Now, you might be interested in supporting the power grid in times of peak demand and lowering your electricity bill, in which case Base is a great option for you. But the customers that come running to Base are those who have frequent power outages. So if you work from home, if you have young kids, if when the power goes out, things get really bad, Base is a great product for you.
Cody Simms (26:21):
Right now, are you doing full retrofits? You're not constrained to new construction, for example?
Zach Dell (26:26):
No, we are working with home builders and we're going to announce a partnership soon with a major publicly traded home builder that we're really excited about. Our existing customers are actually 100% retrofits.
Cody Simms (26:37):
Is there a certain amount of daily or monthly power consumption or size of home that you're using to qualify leads? The question I'm getting at is resi installation just scares me because it can be so variable. And so as you're at an early-stage startup trying to qualify, "Of the 100 inquiries we got in the last month, here are the ones we're going to focus on."
Zach Dell (26:56):
Absolutely. So really big houses, so 10,000 square feet, 8,000 square feet, 6,000 square feet with a massive pool and four AC units, you're probably not a great fit because the battery's not going to last that long. You're pulling ridiculous amounts of power. Smaller home, medium-sized homes, average power consumption. That's an awesome fit.
Cody Simms (27:12):
And I realize over time this target customer, Base is going to expand and increase, but initially in your initial go-to-market, it has to be probably fairly narrow.
Zach Dell (27:21):
It's not all that narrow. It's really folks who want to save money on power, want to protect their home from outages. We can back up small homes. We can back up big homes. Big homes are going to have less backups than small homes.
Cody Simms (27:30):
And today, you're not manufacturing the batteries, I think, but over time you're never going to build your own battery cells but you will actually build the casing and all this. Can you explain a bit about the manufacturing strategy?
Zach Dell (27:41):
Yeah. So we think that the home batteries on the market today are not built for the use case that we are using them for. The original home battery was designed to be paired with solar, and it's really built with the home in mind and it's built around this business model of a gross margin sale. So you're going to buy the battery, you're going to pay money, the OEM is going to make a gross margin. That's not our business model. That's not our strategy. Our strategy is more of an infrastructure asset owner, and so we need a different product. We need a product that is built with the grid in mind, not the home in mind. So that's a bigger battery, it's a bigger inverter, more storage, more power. And it's also a lot easier to install. It's a lot cheaper to install. It requires a different design.
(28:19):
So if you look at the Powerwall, the Powerwall is the Lamborghini of batteries. Like I said, it's made of glass. They strap it to the wall, they sell it for $20,000. We joke that we're building the Corolla of batteries. Corollas are great. That's a compliment, actually.
Cody Simms (28:31):
Very reliable.
Zach Dell (28:31):
They are incredibly reliable. They're efficient. They're affordable. They're safe. That's our strategy. Our battery is built with those design requirements. It's safety. It's affordability. It's reliability. It's efficiency. And you just wouldn't build a taxi fleet of Lamborghinis. You'd build a taxi fleet out of Corollas, and that's what we're doing.
Cody Simms (28:49):
It strikes me that if you are manufacturing and also owning these battery assets across a distributed base large enough to build a business on top of. That's a crap ton of CapEx. This is going to be an expensive business to build.
Zach Dell (29:07):
Great businesses are money machines. You put money in one side and you get more money out the other side. What matters is return on invested capital, which is not a concept that is discussed often in early-stage venture, but it is if you work in private equity or private credit or any of the late-stage capital formation or investing areas. It's all about IRRs and dollars invested and how much capital you can return off those dollars. And so we think that we can deploy capital at really high rates of return. For capital allocators, you want a money machine that can take a lot of money in one side and generate a lot more out the other side, so this doesn't all have to be equity capital. Batteries are highly bankable. These cash flows are well understood by the capital markets, and we're already debt financing our batteries. We're not the first group that's done that. There's a precedent for that. So we think that there's a way to really efficiently finance these assets and generate really high returns on capital for our investors.
Cody Simms (29:56):
Initially, right now, while you're in the hundreds of customer bases, you're funding this off the balance sheet. You're buying and owning these assets. The company owns them. But eventually you can find financing partners that basically do distributed project finance of these assets at scale across your customer base.
Zach Dell (30:09):
That's one way we could do it. We are debt financing batteries today, so we're very focused on capital efficiency from day one. To be determined how we will finance CapEx at scale, but the goal is return on capital and capital efficiency.
Cody Simms (30:20):
In terms of the actual manufacturing capability, how big of a focus is nailing this form factor?
Zach Dell (30:28):
Manufacturing is a misleading word. Most people here probably have an iPhone or a MacBook. Apple doesn't own a bunch of factories. They use contract manufacturers. Designing products and manufacturing products are two different things. Maybe one day it will make economic sense for Base to have a factory, maybe it won't. Some of the biggest hardware technology businesses in the world don't own factories. They work with contract manufacturers. They design the products and then someone else manufactures them. To be determined exactly how we'll do it, but we have many people on the team who have designed and manufactured products at scale.
Cody Simms (31:00):
What have you learned so far in now deploying out to hundreds of customers that surprised you the most? Are there key assumptions you had going into the business that you have discovered were not great assumptions?
Zach Dell (31:13):
I think that when you start a company or you study companies, you hear customer focus, customer focus. Bezos talks about this, being obsessed with the customer, and it just becomes so much more real when you actually do it. You think you know what the customer wants, but you don't actually know until you talk to them and hear it from them. And customer feedback is just this incredibly valuable thing. And getting out, going to the house, talking to the customer, shaking their hand, answering the phone, talking to them, reading what they say all day long and their text messages to you, it's just incredibly valuable feedback. And so it's not necessarily something that I hadn't heard. It was just surprising how true it actually is.
Cody Simms (31:52):
What's been surprisingly easy?
Zach Dell (31:54):
Nothing. We have an incredible team. I'm so lucky. The people that I get to work with are just world-class at what they do. A lot of the things that I thought would be really freaking hard are still really freaking hard but made a lot easier because I'm surrounded by some of the best people out there. I've just been blown away by the effectiveness of our team. It's made this challenge feel more palatable.
Cody Simms (32:18):
What's the culture like? What's it like to work at Base?
Zach Dell (32:21):
It's intense. It's an intense culture. I'll be totally honest. It's not an easy place to work. We work really hard. We're very direct. I think people challenge each other. We are in person in Austin, but it's incredibly fun and it's incredibly fulfilling.
(32:34):
Last night I was in the office, 9:00 PM, music playing. There was 20 people there. Not blasting. It's not a party, right? It's like people laughing and high-fiving. And there's maybe a meeting happening over there. There's some light music happening in the area where everyone works. It's just an incredibly high energy place to work because you have a lot of people who are very passionate about the mission, who have left companies like SpaceX, like Tesla, like Apple, like Anduril, have picked up their lives, moved to Austin to come solve a really hard problem. It is a place that attracts really smart people, really ambitious people, really hardworking people, and people who relish the opportunity to be in the eye of the storm.
Cody Simms (33:09):
Are there companies you model Base off of that you say, "Oh, I like the culture of that company"?
Zach Dell (33:14):
Our first four people outside of myself were all from SpaceX, and so I think that there's a lot of SpaceX culture at our company. There's a lot of Tesla culture at our company. Everyone's definition for good is just the best they've seen, and so everyone takes their definition for good and brings it to Base. I have my own definition from good that I learned at Blackstone and Thrive. Justin has his definition for good that he learned at SpaceX and Anduril. Jared, same thing. Cole, same thing. Dana, Michael, our early people brought their definition of good and whatever the thing is to the company, and we're all trying to redefine it for each other.
Cody Simms (33:46):
You guys just raised a lot of money for a company your age, honestly. Where are you investing in terms of team talent right now? What are the big areas you're trying to bring into the company?
Zach Dell (33:58):
The company's about 75% engineering. It's mostly engineers, hardware, software, firmware. And then deployments engineers, so like manufacturing engineers, process engineers, industrial engineers. And then we have folks on the growth side, marketing, advertising, sales. And then we have policy, supply chain, those kinds of things. So those are the main areas.
(34:17):
I feel very strongly that the company's most valuable asset is its team. We are incredibly focused on attracting the best people in the world to come work at Base. If anyone's listening or in the audience and is excited about the problems that we're solving, the work that we're doing, and wants to be a part of a really high-performing team that works really hard, shoot us an email, zach@basepowercompany.com. You can email careers@basepowercompany.com. You can apply online. We want to hear from you. Our core focus is building the best team in the industry.
Cody Simms (34:44):
It strikes me that you're building in a space that is for the most part dominated by regulated monopolies or pseudo-monopolies that have been around for 100 years in many cases, are incredibly quality-focused in terms of what they have to do. They can't screw up. That is what they have to be focused on all day long. If they screw up, lives are lost. There are real problems. You're coming in as a startup going after that space. Do you think you can build a move fast and break things sort of technology forward? Essentially utility, that's what you're trying to do, right?
Zach Dell (35:22):
We think about as move fast and fix things. We have this culture at Base where if you find a problem, that is an awesome thing. I think at most companies, if you find a problem, you don't really want to tell people. You're like, "Oh man, I don't want to be the person that reports this problem. My manager's going to get all angry." At Base, if you find a problem, it's like, "Whoa, problem, problem. Sound the alarm. We got a problem." And everyone swarms and we go solve that problem ASAP. You're rewarded. High five, good job. You found a problem. Problem is just opportunities to develop solutions, and you stack solutions on top of each other and now you have competitive advantage.
Cody Simms (35:52):
What do you think a technology-driven utility company looks like as you continue to build this thing?
Zach Dell (35:58):
It's a company that knows how to do a lot of different things well, so build hardware, build software, deploy systems in the wild, deal with customers, build a brand, deal with the regulatory environment, have efficient financing. It's a lot of things done well at the same time. We think of our business as a complex coordination problem. That's the moat. It's degree of difficulty. It's that you have to do a lot of things at the same time that are very difficult, and you can't really screw any of them up.
Cody Simms (36:24):
Right now, you are piggybacking essentially on the grid, storing energy and solving a problem for customers. But building a business, again as we talked about, on the spread of the price of electrons there. Do you think you'll supplement that storage with other grid participation in the future? Will you get into power generation down the line? Could you own an asset of solar farms, for example?
Zach Dell (36:46):
Short answer, yes. The longer answer is that batteries and solar, like peanut butter and jelly. They're incredibly complementary. And we are studying the solar opportunity and we think we have some really exciting things to bring to that market. We're really focused on deploying batteries today, but eventually we will likely bring a solar product to market. What the shape of that product is exactly, I can't explain in detail today. We're excited about distributed power on the power grid. And if you come to our office, what's happening in that room, it's hardcore engineering to solve problems to make the power grid more scalable, and that definitely will include generation.
Cody Simms (37:24):
One critique of batteries that I've heard, which is counterintuitive, is if they're storing when energy is the cheapest, sometimes that can be at night. And it can be coal or it can be gas. And then they're releasing when there's peak demand. That could be in the afternoon when there's actually a lot of renewables online and they start competing with each other to where you're actually disincentivizing renewables by having storage. I think that's a short-term problem personally. As the cost of renewables continues to plunge, that will go away over time. How do you grapple with these kind of problems where no matter what you do, there's going to be someone who points out this is an issue related to emissions or this is an issue related to policy?
Zach Dell (38:03):
There's no panacea. Batteries aren't perfect, and we didn't start the company to have a rebuttal to people's issues. We started the company to promote human prosperity through energy abundance. What that means is making power more affordable, more reliable. And the way we're doing that today is by putting more storage on the grid so more, when it's solar, can come online. That's really why we exist.
(38:25):
There are all kinds of holes you could poke and why batteries aren't great in certain situations. I think the energy industry is very nuanced. Energy is a highly geographically defined problem. What works in Texas doesn't necessarily work in the Northeast and the Northwest and the Southwest and Southeast. And there's no one-size-fits-all solution anywhere, but we look at the problem at a systems level and say, "Okay, what technology can we build to make the biggest impact?" And we think that batteries are the solution.
Cody Simms (38:48):
Are there any policy levers that you wish were changed that would help the company.
Zach Dell (38:53):
The policy environment is encouraging, particularly in Texas. There are a lot of great regulators, lawmakers, legislators in the state that are working to create the environment for the Grid 2.0. Texas is the energy capital of the country and should be the energy capital of the world, and I think that is largely due to the free market, the work that the regulators have already done in the state to incentivize innovation. And so our hope is that that continues over the next couple of decades, and we can be a driving force for that.
Cody Simms (39:27):
Permitting reform is the topic du jour. How do we get more transmission lines, to your point earlier, deployed more quickly? If you had the mic at the presidential debate tonight, is there a question you would ask that would be a big difference for Base one way or the other?
Zach Dell (39:40):
That's above my pay grade.
Cody Simms (39:42):
No problem. The last question that I'd love to understand is if you could paint a picture of what the future looks like for base that all of us can say, "Hey, we were in the room when Zach said, 'Hey, this is what it's going to be in 15 years,'" what do you think we have?
Zach Dell (40:00):
I think that it looks like millions of customers across the country who don't have to worry about their bill going up or their power going out. They can go to sleep at night knowing that they've got a technology solution in their home that is going to protect them from outages and is going to keep their bill low in the summer, in the winter, and is going to basically provide them with the most affordable, most reliable power that they could possibly have.
Cody Simms (40:23):
Awesome. And in doing so, as I've heard you explain, building a next-generation, technology-based energy company. That's what I'm hearing you describe.
Zach Dell (40:32):
That's right. We want build the modern power company of the electric era. It starts with batteries and homes, but there are many more chapters to that story.
Cody Simms (40:39):
Cool. Zach, thanks so much.
Zach Dell (40:41):
Thanks for having me.
Jason Jacobs (40:43):
Thanks again for joining us on the My Climate Journey podcast.
Cody Simms (40:47):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem-solving capacity.
Jason Jacobs (40:56):
If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com. And if you have a guest suggestion, let us know that via Twitter, @mcjpod.
Yin Lu (41:09):
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Cody Simms (41:19):
Thanks and see you next episode.