The rise of grid power electronics with Drew Baglino

Latitude Media covering the new. The energy transition. I'm Sheo Kahn, and this is Catalyst. Not only will SSTs ultimately cost less per unit of voltage conversion, but they'll also add all of this additional value-added functionality. That allows you to get more out of every wire existing and new that utilities build. And that is the pathway towards affordability. That is what the 21st century grid will look like. Coming up at long last, an ode to Power Electronics.

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All right. So my friend Drew Baglino came on this podcast about two years ago, right after he'd left Tesla after a seventeen year stint culminating in him leading energy and powertrain and a whole bunch of other stuff there. At that point, he was taking some time off and figuring out what was going to come next for him. Turns out it was power electronics. Drew started a company called Heron Power.

And Heron is introducing a new type of device to the grid that combines solid state power electronics with software and controls to dramatically simplify a whole class of grid infrastructure while simultaneously imbuing it with a host of new capabilities. For all the time on this pod that we spend talking about what's going on in electricity, I think we actually haven't spent enough of it talking about the actual equipment that underpins the market.

We know that there are long lead times for things like transformers and switch gear, but is there an opportunity to leverage the unprecedented growth in the market right now that we've talked about many times to catapult a new class of technology onto the grid at scale? I think so.

For disclosure, I'm an investor in Heron and I have been since their first external round. And actually just this week, Heron announced a$140 million Series B led by Andreessen Horowitz, where we at EIP also doubled down. Anyway, here's Drew. Drew, welcome back. Thanks, Shale. Happy to be back.

All right, let's talk about power electronics. Um I want you to start by explaining basically what power electronics are, but maybe through a history lesson. Like, like tell me the history of power electronics. Yuck, I I'll I'll try my best uh here. I think people have heard many times about the history of the transistor, right? And Moore's Law and how, you know, transistors went from vacuum tubes to three nanometer devices. inside of GPUs, right? Like I think most people are familiar with that.

But at the same time Using some similar technologies. uh an equivalent thing happened with power transistors or power semiconductors over basically the same time frame from like the 70s through to today. Um but what was improving was not the size, although the size did imp improve and it wasn't just the size alone, but actually it was some other very important things to power semiconductors, like the voltage that you can block.

with the power transistor or the power MOSFET or the power IGPT. Um and also it was the current capability that you could you know Basically, the current density is the way to think about it. So amps per millimeter squared that you can get uh through. the power transistor. And then one of the more important thing

uh more recently is actually like the thermal conductivity that you can achieve through the device. So like uh if you have better thermoconductivity, it's easier to keep the device cool, which means it's easier to go to higher current density. Um, and then maybe one of the most important things that has improved over the four or five decades is the switching speed of the device. Like how quickly can it change states? And w and you're you might be asking like, Well, why does that matter?

Um, but I think it to think about why it matters, it's it's useful to consider the world of electricity more broadly. Um, so how does electricity work, right? Until batteries existed, you couldn't really store it. It's generated in one place. And it's connected through a contiguous circuit, like contig continuous conductor to where it's used at the end use. And any like branches or Ys in the circuits, they're they're all like

simultaneously affecting each other uh unless you have devices in the middle to decouple the flow of electricity. If you don't have any devices to decouple the flow of electricity.

though anything that is connected to the circuit affects anything else that is connected to the circuit and instantaneously. It's amazing actually how this happens. Um And that's why when people say the electricity grid is like the world's largest man made machine, they're not wrong because all the devices, the motors, the the everything that's plugged into every wall is in some way affecting everything else that is plugged into the wall. Um

And the only thing that can change that is if you can control the flow of electricity. And that is what power electronics, as they have improved over the past four or five decades, actually allow you to start to do. is dynamically and with modern devices that are made out of like silicon carbide and gallium nitride, millions of times per second.

stop and start the flow of electricity through uh a a power transistor and uh ultimately therefore control the power flow through, you know, circuits in a device or on the grid. Um so that's like a very zoomed out view and I I can certainly go into more details.

Well, I think a key point to make here, right, is you you're talking about you talked about the electricity grid. and what power electronics can do on the grid. But um but that's actually not mostly, first of all, it's not mostly what's on the grid today. And second of all, it's actually not mostly where power electronics are used today. So I want to spend a minute on where power one of the places where power electronics are used today and where you have a bunch of personal experience.

And then get back to like what that enables for for the grid, which is what you're bearing building in Heron. Uh but but right, like am I am I wrong that I know we we have some power electronics on the grid, but it's not common. Yeah. Well the first applications of of power electronics in like the late seventies and early eighties uh were built on relatively slow switching, relatively large format thyristors and IGPTs.

Um, and the first place that they went to be applied was towards uh variable frequency drives on large industrial motors. And this is a great example of, you know, before power devices existed in this way, those motors were kind of just always spinning, always ready to go at at full power. And even if the pump in your factory or you know, the fan on some large air handling system didn't need to run at full speed.

It was. Um uh or you had to have like large mechanical relays to like switch it on and off, but you could only do that like a couple thousand times or the switch would fail. Um, and it wasn't like a fast moving switch. So it was sort of like

You know, you'd you'd go over and hit a breaker and turn it on or something like that and then be on for the whole day. Um So those first applications, these variable frequency drives, instead, what they would do is they would match the like need of the load, whatever the water flow rate you wanted or whatever you wanted to do with your electric motor and your manufacturing process. Two.

You know, to the the electrical load would match the mechanical load. And and uh and and all of a sudden you had a lot of efficiency in in in industry because of variable frequency drive. Uh the next real application was was actually large AC to D C to A C switching stations on the on the grid. Um these were air insulated, like the size of central exchanges, if you remember what telecoms buildings used to look like.

Um, and and they would allow you to decouple like an islanded grid from another islanded grid using a DC link between them. These are sort of uncommon infrastructure, but actually really useful when you look at the US with five separate balancing uh major balancing authorities in the electricity grid, there are DC links between them. They're not very high c power capability, but there are DC links between them and they allow the frequency to be different in those different places.

Um and and uh and yet you can actually tie, you know, power flow between them. Yeah, right. So it's like people talk about Urcot like it's an island grid and it is like technically an island grid, but it's not like there isn't a physical connection to I guess probably three of the other grids around. these D C links that allow some power flow between the different uh regional authorities and

And there's I mean, there's other DC links like between Europe and uh the UK or North Island and South Island and New Zealand. They're pretty common. And the way they're they're they were built in the eighties was using early power electronics devices that switched really slowly, but you know, maybe thousand times a second, but allowed you to do this. uh D C to A C to D C kind of conversion. Um or sorry, A C to D C to A C kind of conversion.

And then power silicon uh started to become better. And th these are like silicon MOSFETs. Okay. So hundred volt, two hundred volt silicon MOSFET. And that that was m early eighties. You started to see these in switching power supplies on like PCs, VCRs, TVs, like

cordless phones, answering machines, all of the like consumer electronics of the eighties and early nineties, you know, had like some small switching power supply. Or it had like silicon diodes in it with a traditional transformer. So you'd have like a sixty hertz transformer that would go from

in a wall wart on your wall that would go from 120 volts down to like 10 or 8. And then that would go through a a bridge rectifier, which is a power device, uh to to make a a DC voltage that would go into the electronics device. Um so that was sort of edge based power electronics for consumer low powered power applications.

But then uh silicon uh IGPTs and uh got better um and were able to do like six hundred volts or maybe even twelve hundred volts. And and and in the early nineties you started to see solar inverters. and early drive inverters for electric vehicles. Um, and maybe uh variable speed fans for HVAC systems and homes and all of these edge interesting applications for where you needed to go. Either AC to AC at different frequency for variable speed motor or DC to AC with solar or AC to DC for a battery.

uh or in a in an electric vehicle from the DC battery to the AC on the motor in the uh in the electric vehicle. So these are all like awesome applications of devices that existed at the time that could switch like tens of thousands of times per second. and do, you know, six hundred to twelve hundred volts.

Um, maybe you could do a hundred amps in a single device. Um, and then if you get as you get into the like 2000s and and 2010s, Uh some researchers in the US started working with some new wider band gap silicon uh semiconductor materials.

silicon carbide, um gallium nitride that had some intrinsically awesome cape characteristics like silicon carbide can switch super fast. It's got really good blocking voltage capability. And You know, while I was at Tesla, we started using silicon carbide to make drive inverters in cars because the

incremental cost of the more expensive transistor was more than outweighed by the savings in battery because the drive inverter could be so much more efficient using silicon carbide. So while you might spend a hundred dollars more on silicon carbide devices in the car, you'd save four or five hundred dollars in the battery.

Is it true? I so okay, this is I wanted to get to this. Uh so you know, when you were at Tesla, you were working with silicon carbide because it was it's in every Tesla inverter. Um was the were electric vehicles what really drove the supply chain scale up for silicon carbide. What is the supply chain like for silicon carbide and like W how has it matured over the past, I guess, decade now?

Yeah, in twenty ten this the supply chain for silicon carbide was like tiny. It was you know, silicon carbide was used in LEDs, um and nothing else really. Um But but some folks at Wolf Speed and Infineon and a few other, you know, uh device manufacturers were like, this is gonna be an amazing power semiconductor, you know, platform and started to develop, you know, a whole bunch of different devices, first in like the 600 volt class.

to support EVs and then later at higher voltages to support grid applications. And the first way that we incorporated it into Tesla's was with model three in the onboard charger. You know, we wanted to make the onboard charger more affordable. The best way to make uh power electronics systems that involve isolation more affordable is go up in frequency because to get isolation you basically need to use a transformer of some type. And transformers become smaller as you go up in frequency.

It's just a like a linear relationship between frequency and and and size and that's That's uh just based on like how much energy you can store in an inductor and like how quickly you're you're like charging and discharging that inductor. If you charge and discharge it faster, you can kind of like you know, you're moving more energy per unit time and you can make the inductor smaller.

And so we really wanted to make the the onboard charger smaller. So we used these early silicon carbide devices uh to make the onboard charger uh yeah, I think we reduced increased its power density by like a factor of two. We dramatically reduced its cost. And at the same time that onboard charger was also also did the like DC to DC conversion between the battery bus and the low voltage net in the vehicle. And and so it was a great like integration play.

So silicon carbide went there and then silicon carbide went into the drive inverter uh to make the the drive inverter uh about one percent more efficient, which you're like, oh that doesn't seem like a lot, but when you think about You you size the battery to give you, let's say, 300 miles range. You know, that 1% is worth three miles of battery size, and uh 1% of battery is a lot.

All right, so let's then so we we you walked through a good history there uh of power electronics and sort of ending with like your own personal experience with with silicon carbide specifically as a as a class of power electronics.

um within Tesla vehicles, let's contrast that to what's on the grid today. So let's go back to electricity now in the in the grid. Like what what do what do we use today at those branching wise on the grid? And like how is it different from these things? We, you know, prior to power electronics really becoming a thing in the 70s and 80s, the only way you could

electricity or the flow of electricity was with mechanical switches. You know, think of the breakers in your breaker panel, or maybe you've looked into this uh your neighborhood utility switch yard and seen these like huge armatures that you know, spring open to disconnect uh one feeder or or reconnect another feeder. Um, you know, these are Large, bulky, slow, slow is in like it actuates in hundreds of milliseconds.

Um, and and can actuate, you know, once every couple of minutes and and it's really not meant to actuate more than like a couple thousand times in its total a lifetime. Um, that's how electricity is controlled at the at the grid scale. Um, there's really not a lot of real time

You know, millisecond uh control. And and this contrasts with like the latest generation of battery inverters or or solar inverters, um, or like the way you charge an EV, the power electronics are actively controlling voltage and current. You know, hundreds of thousands of times per second using really small magnetic devices. And it's not just that grid.

develop designers and electrical engineers working on power systems, they they're really limited on the tools they can use. So they have these slow switches and then and and that and the switches they're used there, they're using to like isolate a fault.

Or if they wanna route through a different line because one of these lines is overloaded, you know, they they maybe are are bringing new lines in and old lines out or something like that, rerouting power slowly on this like one second type time frame or once an hour type time frame. They also don't have any dynamic control over voltage, frequency, power factor, you know, using power electronics at thousands of times, so thousands of cycles per second. Um

They they just have static voltage transformers, AC to AC transformers. These are these like gray boxes you see on your street corner or on on your uh telephone pole. Uh maybe, maybe, maybe you've seen some large ones in a in like a commercial subdivision or something like that. That is those, those are passive, think of them as like fixed ratio passive voltage dividers or voltage multipliers.

And there's no control over how power flows through there. It's just passively moving as as uh following the path of least resistance, right? Um and and there's and and so that is That is still the state of the art. What I described was true in nineteen seventy and it's still kind of true in today and in in in 2020s. Um And in fact, many of the transformers on the grid today were installed in the nineteen seventies. Like they're they're very old on average. Yeah. Yeah. Over something like over

Well I can't remember the numbers, like over seventy percent of them are over thirty years old, distribution transformers, something like that. Some crazy crazy statistics. But yeah, um... You know, there's some some some stuff on the edges starting to to some additional tool tools in the tool kit and maybe in the last five to ten years where like stat comms are an example where you have these like switch capacitors that could you can use to

to do some power factor control. And there's some power electronics in those. They're not used that often. Um, but those do exist. Um but the uh the what you can do with power electronics uh is much more and and I think What we've seen happen with silicon carbide, silicon carbide 10 years ago was 600 volts or 1.2 kilovolts. You know, nowadays they're silicon carbide devices that are two point three KV capable or four point six KV capable.

And when you look at distribution voltages in the US that are seven KV or twelve KV or twenty twenty one or thirty-five KV, you don't need too many of those devices in series. To interact with the grid at those voltages. And and and and yeah, with the progression of silicon carbide, it's now possible to make. Solid state transformers that can be much more capable than just a passive switch. Uh or passive voltage divider.

Yeah, so I want to come back to what solid state transformers do for what can't that they can do in various applications. Before we get off of the traditional transformer stuff though. Um, I'm curious your perspective on like what is so what's happened in that market in traditional oil-filled transformer world is we've had this. This supply chain that's been gummed up for for years now. I mean, it dates back to, you know, when all supply chains started to get gummed up during COVID.

And then one by one, most supply chains kind of cooled off and like lead times for most stuff around the world kind of went back to normal. And it did not happen with transformers. And the lead times now for traditional transformers, I think both distribution. and uh high voltage stuff are are basically as long as they've ever been. And I've had a lot of people when I talk to them about this express some mystification about it because

I mean, sort of as you described it, they're like quote, dumb things. We've been producing them for a hundred years. You would think. we could solve that problem quicker than we have. What's your perspective on like why absent new technology, like why haven't we just solved the transformer shortage? Yeah, I think there's so many factors. Um so many at play.

I'm I'm not gonna try to get them in order. I'm just gonna start rattling them off though. So first is just straight up demand. So we we now have growth again. At and it's broad based growth. There's growth of loads that are interconnecting at transmission, like large data centers.

Uh there's growth of large generation and that's partially because old some assets are being retired and partially because we have need just in general more generation. So there's a bunch of generation transformers and large transmission uh load interconnect transformers. And then we have like broad based distribution load growth from electric vehicles, home electrification. Um some of that is policy driven, some of that is pure just demand driven.

Um, so we have broad base increases in demand. Uh in fact I have some statistics here. You know, power transformers, these are generator transformers. Uh demand is up uh is over double since 2019. Uh for generation step-up transformers, um, it's uh up over 250%. Uh distribution transformers up over uh up over a hundred percent. And so just straight up demand increase. And I think.

You can't say the demand increase is just load growth because it's not. Some of it is replacing what you said is totally right. We've a lot of these core transformers on the grid uh or for large uh interconnects that were built. You know, they were built in the seventies and and so Stuff can last as long as it can last, but at some point it needs to be replaced. Um so some of it is just aging infrastructure and some of it is load growth.

So there's this demand piece. And then I think there's a little bit of regulatory uncertainty. So you saw the DOE m s you know, start saying things like we're gonna change the basic materials in in in in Transformers or at least take some public comment about potentially doing that. Um, and that was in the name of making, you know, transformers more efficient. You know, for some background transformers.

are generally 99, 99.2, 99.3, depending on how they're loaded or size, uh efficient. So there's not a lot of room to make them more efficient, but they're everywhere. And uh and uh one thing that's interesting about Transformers is That efficiency rating, th this is traditional transformers, I'm saying that efficiency rating is is at at low rated low.

But actually, there's loss in transformers that never go away. Um, it's the steel, the magnetizing losses in the steel. And that's one of the reasons why. um, transformers have this laminated grain-oriented electric steel. It's actually reduced that vampire loss or idle loss. Um And so some of the and most of the transformers on the grid are not fully loaded. And so you end up with a lot of that like idle loss adding up all over the place. So that

DOE investigation was about reducing that idle loss. And I think, you know, with that regulatory uncertainty, maybe some people didn't make investments in expanding grain-oriented electric steel supply, which is one of the most important, I mean it's biggest by mass contributors to passive transformers.

Um, and then maybe some people were thinking solid state transformers were gonna come. I mean, I've been thinking that. Obviously, that's one of the reasons why I started Heron Power. Sure. Was because I'm I I believe that solid state transformers are gonna replace passive ones. So You have people sitting in this industry wondering whether the grain orange electric steel is going to be designed out by policy, wondering whether

We're just in the a bubble of, you know, replacing a whole bunch of stuff built in the seventies and this electricity demand growth isn't going to be sustained. Um, and so they're not investing as quickly as they otherwise could. Um anyways, those are some thoughts I have. Yeah. What do you think? I mean I I think all those things are true. I mean the only thing I would add to it is having spoken to a bunch of like

old school legacy transformer manufacturers, you know, they have gone through boom bust cycles in their business over their lifetimes and they're reticent to get out over their skis. And so they want to they're expanding, like everybody is expanding capacity. But

Yeah, but they're measured about it, right? They're not expanding by five X. They're like building a new factory and expanding by two X and that takes a couple of years. And by the time you catch up, like now the data center demand forecast has gone up by another two X anyway. And so we're still behind. Yep. So I I I think that's part of it too, is just like reticence to overinvest amongst the incumbents, which is I think like people can fault them for it, but it's actually like a reasonable

I'd rather be uh if I'm i if it's like a it's a tragedy of the commons type of problem, right? Like any given one of them would rather be uh in an undersupplied market. Yeah. Because then they have pricing power and and margin power. rather than oversupplied. And so they might as well expand to whatever they feel like highly confident they're going to be able to sell out of. Yeah, there's there's another regulatory uncertainty item that I didn't mention, which is um tariffs.

And, you know, with the rapidly changing tariff set of rules and regulations, both from the US and from other countries, you know, sometimes it's hard to know where to build a factory. And these factories, they're they're rel relatively large investments. And it's not just the investment that that is at risk, but if you pick the investment in the wrong location,

you could be on the other side of a tariff that you hadn't ever predicted before. Um so people are sort of waiting for a lot of these things to shake out, I think, um, when when making these expansion decisions.

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All right, which creates in some part the market opportunity for you to come in and introduce new technology. So back to what you are doing, which is solid state transformers. But I think that kind of undersells it in some ways. Cause what you're building is sort of a it contains a solid state transformer, but it actually replaces a more than that.

um in terms of what would otherwise have to get built if it didn't get deployed. So I I just want to talk about like what these this class of power electronics, what these solid state transformers can enable by different category. Because as you said, they're used all over the place.

So let's talk about the markets that you're focused on, starting with okay, if I'm gonna connect a new solar project or a new battery to the grid, what is the what what are the list of things that I normally need to go from Generator to grid. And then in contrast, what does it look like if I install a Heron link, which is your product?

So I'm building a hundred megawatt Solar facility and uh what my single line diagram, what's on it? So you you start with um trackers in the field and some combiner boxes that are collecting D C somewhere around fifteen hundred volts D C. That fifteen hundred volts D C is brought into Most of the time, but not all of the time, central inverters. Uh these central inverters are central inverter skids, and on that skid you have a uh D C to A C inverter.

Modular to like the one megawatt level. So maybe you'll have four one megawatt DC to AC inverters. Um so the input voltage is 1500 volts, the output voltage is six hundred ninety volts AC. Um and then on the other side of the 690 volts AC, you'll have uh some protection devices, maybe a a main breaker, some fusing. Um, and then you connect to the low side of a step up transformer.

uh a medium voltage transformer. Usually it's oil f oil filled. Um sometimes it's a dry type transformer. And on the other side of that transformer, you've got thirty four K V A C most typically.

Um and there's also some fusing and potentially uh switch gear there on the sent on the on the skid. Um and then you connect that thirty-four KV in in a like daisy chain configuration to a bunch of these inverter skids, maybe five or six, and then eventually you get to a medium voltage feeder breaker, feeder, breaker. That is about 600 amps worth of 34,000 volt inverters.

uh usually something around 30 to 40 megawatts at that breaker. Um and then on the other side of that breaker, you now have a generation step up transformer that would typically be rated for like that full hundred megawatts. Um and in and on the other side of that generation step up transformer you'll have hundreds of kilovolts. So depending on the grid, two hundred kilovolts, three hundred, six hundred.

Um, so that is the typical single-line diagram of solar. It also looks like bat batteries look very similar. Um, inside the skid, you know, you've got companies like SMA, uh Um EPC, Power Electronics, Huawei, Sungro, you know, they make The power electronics part, that DC to AC part, some of them might make the transformer, most of them don't. package sometimes, right? They'll like put put a transformer in a box with an inverter.

Yeah, they'll put the transformer on the skid, like the the the plinth so that it's like easy to land, but they usually don't make the transformer. The transformers are are are um generally made these days in like China, India, and Mexico. Um very few of them are actually made in the US. And in that total system, you know, you'll have that ninety nine percent efficient transformer.

And you'll have maybe like a ninety eight percent efficient inverter. So you have like ninety seven percent efficient conversion. Uh or maybe maybe ninety eight point five, uh, if you're lucky. uh percent inverter. So you'll have like a ninety-seven and a half percent efficient total conversion system. So when we do this with a solid state transformer, we basically move the sixty hertz transformer.

To 100 kilohertz transformer. And that makes it much smaller, like 50 to 100 times more power dense. And now we have power electronics control on both sides of that hundred kilohertz transformer. And and we have not a modularity of a megawatt, we have a modularity that is sized to that small isolation transformer, somewhere like a hundred to two hundred. Kilowatt. And the interesting thing about that level of modularity is it gives you robustness to faults because if you have a fault,

you only lose like a hundred kilowatts, you don't lose a megawatt. Or in the case of the transformer that would be on that skid, if that transformer failed, you'd lose four four megawatts and you'd need a crane to replace it. Um and you might need to wait weeks to months to get that replacement transformer. So that's

That's uh that's sort of like what we're doing at a high level. And what we remove from the single line diagram is we remove the legacy transformer. We remove that six ninety volt, you know, breaker or fuses protection there. Um, and we also, because we don't have that medium voltage transformer anymore with the inductance of that medium voltage transformer, we get to remove some of these power factor correcting capacitors that are at the central plant.

Um, and we also ha get to have simpler protection on that medium voltage feeder because we don't have a transformer that could have a really hard short and light on fire. We have like a power electronics front end that uh is if it's gonna have a fault, it's gonna be like one point two per unit or like just slightly overloaded uh uh current. Um so the protection gets a lot simpler as well.

So that's that's the kind of thing we're doing uh for solar and and batteries and also for data centers and w what what that although the data center story is a little bit more nuanced. We're gonna get to that one in a second. I I wanna for for solar batteries, I mean, I think Okay. There's been a There's been a long history of electricity, less so I guess, in the like

solar and battery inverter world, but s to some extent there where people introduce some new technology. Um, I'm thinking about like a a bunch of like the distribution automation stuff that happened in like the the era of the twenty tens and stuff like that, where You know, you can you can make a pitch that like this is better. It in the it enables something, some control that you didn't have otherwise or or whatever. Um but

Better isn't always what wins in the electricity market. Right. And so I think the important thing is to say like, what are what is the the net outcome? it it that actually matters, right? And in the case of s solar and batteries, it it seems to me, and I'm curious what you think the like rank order killer apps thing, because this is one of these things that has like

numerous benefits, but which ones really matter? It it does enable greater control. But to me, it seems the key ones for solar and batteries, the maybe the biggest is reliability, actually. Like it's a step function change in reliability, which People don't appreciate like how much failure there is of utility scale solar in particular because of inverters.

Um, and maybe transformers to a lesser extent, I think. But but reliability, space savings, capex, like what are the things that you feel like like when you're when you're talking to customers, what do they care the most about?

Yeah. Um, reliability is a big one. So solar inverters are the largest source of underperformance on utility scale solar plants. It's not the modules. You'd think it would be the modules because there's so many of them and they're out in the fields and you worry about hail and you worry about whatever. But actually no it's it's uh

It's the inverters. Um their availability, central inverter availability is on average in the industry ninety seven and a half to ninety eight percent, which basically means two to two and a half percent of the time when they should be producing power, they're not. And so that's just straight bottom line on your project. Um, you know, you thought you'd be getting, you know, dollars for kilowatt hours delivered and you're and you're not.

The other the other thing, um, and it's not just the inverters, it's actually the transformers. So from s some statistics we've learned. Um transformers Are not really designed to run at their rated power, you know, as long as they do in these desert power plants, you know, where they're.

first of all, very hot because they're sitting in the sun. And second of all, because they're running at nameplate rated power for eight or nine hours a day. So they are failing about one percent, one point four percent per year on average. And so that that transformer that's pretty hard to replace. Um is uh needs needs to be replaced. And if you have a hundred transformers on your utility, you know, solar facility, you're replacing a transformer or more a year. Um

And uh that's that's not fun. And and the last thing is they have no monitoring. You know, there's no real intelligence built into these transformers. And so I've been talking to these large owner operators of renewable power plants and they have to send people out to like measure what the oil health looks like and look at all the bushings and and do all these things to make sure that they don't have thermal events in the field.

Um, so they're a big pain point that people look to get rid of. Uh so rel reliability is one and you mentioned that. The other is the solution is about one percent absolute more efficient. Um, so that that drives, you know, uh production value. Um And for something like, you know, battery installations, it's round trip efficiency improvement. So it's not just like count doesn't just count once, it counts twice.

Um, and the other thing is we're we're taking this opportunity to simplify the O and M. Like we don't have any of the transformer O and M. You need it you don't need to check the oil or replace the oil. Um, there's just a a whole set of systems that you could delete. Um uh we don't have that switch gear either, like I was mentioning.

Um so uh So, yeah, altogether we we see a five to six percent NPV uplift for our customers building with this type of inverter versus an alternative type of inverter.

All right, so let's talk about the the large load of the data setter use case, where by senses there's a a similar set of uh benefits that you get from switching to solid state transformers. But actually one big difference, at least as I've seen, is is the delete a bunch of stuff side because it seems there's a lot more stuff to delete in the data center use case. Yeah. Data centers.

Still distribute power today the way they did when they first came into vogue in the nineties, which is you know, all the racks are connected at uh AC, usually like 240 line to neutral AC, um uh and and like you know four fifteen line to line. Um and so that means you you're starting with hundreds of kilovolts outside the data center. You're doing sub subtransmission voltage, thirteen or thirty-four KV, uh, to the different data hall areas. Um, and then you have like a three megawatt

uh medium voltage transformer going from that medium voltage to that four hundred volts AC, let's say. And then that four hundred volts AC is is, you know, brought into the data hall. uh through a uh a gray space area with a bunch of maybe UPSs and protection um and power distribution, and then through bus bars uh overhead above the rack. Um and in a world where, you know, dis interacts are ten kilowatts.

that's uh maybe a fine approach, but as they become a hundred kilowatts or a megawatt, you know, it starts to look like EV charging, uh, or grid store grid batteries or or grid or solar for that matter. and and it needs to change and rather than using AC as a distribution means you know, you you start looking at power electronics to go directly to DC and and and higher voltage racks as well. Um and so now the rack rather than being like native backplane voltage of 48 volts.

you know, which is just a legacy thing from the telecom switching stations of the eighties and nineties. you know, now the backplane voltage of the racks will be eight hundred volts or even higher, and then you can use a S S T based solution to go from medium voltage, thirty four KV all the way to eight hundred volts with no grayspace rooms with UPSs and power distribution panels and and uh anything like that. No additional transformers at all.

Um, and you can incorporate just the amount of energy storage you need on that eight hundred volt side to handle like GPU ripple or whatever other power ripple you you you have. and also allow for thirty seconds or of hold up time to support facility transitions, you know, to generators or from one medium voltage connection to another. Um and you can remove 70% of the stuff in the uh in the electrical diagram and and a similar amount of footprint.

And and and and you're like, Oh, that does that really matter? The GPUs are where all the money is. Well, that's true. The GPUs are where all the money is, but where a lot of the time is and the labor shortage. is in, you know, the certified electricians that are doing a ton of electrical work, a ton of AC electrical work, and you're removing all this copper.

Uh demand because you're you're not distributing power at a low voltage anymore and you're bringing high voltage as close as possible to the rack. So it's a major like headache alleviator or you know, painkiller as you like to say, Shale. For people building data centers. Yeah. For sure. I mean I mean, and the other thing is space, right? You mentioned you're deleting a bunch of stuff, which frees up a bunch of space. And space is at a premium in data centers. Yeah.

You get to you get to bring the stuff that needs to be low latency and close together as close together as possible because you're removed all of this power distribution equipment that would otherwise be occupying white space.

Okay, so we talked about solar and best and we talked about data centers. So let's go back to the grid then, just to wrap up. Over time, and obviously this will take a long time, but if over time, if we go and start to one by one go throughout the transmission distribution system and replace all of these traditional oil-filled transformers that are on the grid right now, ultimately with solid state transformers. Like big picture, what does that enable from a grid management perspective?

Well, utilities and grid operators right now are facing um a lot of pressure, right? They've got aging infrastructure, growing demand. Um and they they're in the market for new solutions and luckily SSTs can provide a ton of value propositions beyond just voltage transformation.

Um an SST can have a cost similar to a traditional oil filled transformer, um, but at the same time provide functions that would be that that would be provided by popcorn components around the transformer, functions like overcurrent protection, fault isolation. what an automatic tap changer does for voltage correction, uh what three phase balancers do to enable higher utilization on the different phases in the distribution grid.

They can provide the spinning inertia type functionality that synchron synchronous condensers do for frequency regulation. Um and they can also take the place of cap banks for power factor correction. So with the Choice to go s SST the next time they need to place a uh a distribution substation down or replace an aging fifty year old, you know, thirty-four KV to two OA transformer.

They're at the same time getting all of those other value added functions kind of for free. And what those other value added functions do. is enable more utilization of the existing poles and wires. And utilization is the key to affordability. Um if you look at the rate cases uh uh for public utilities uh at PUCs around the country, you know, they take their total costs of new CapEx and maintaining existing CapEx. And then they divide that by kilowatt hour serve.

And the best way to serve more kilowatt hours is to increase the utilization of the existing poles and wires. And to do that you need intelligent infrastructure that can dynamically respond uh to the conditions of every circuit. and maximize the utilization of every circuit. And and so not only will SSTs ultimately cost less per unit of voltage con conversion.

But they'll also add all of this additional value-added functionality that allows you to get more out of every wire existing and new that utilities build. And that is the pathway towards affordability. That is what the 21st century grid will look like.

You were describing how the grid works before I was thinking about like a network of tributaries. I was thinking about a river system. Yeah. Right. Uh and at every spot where like two rivers converge, there is a there's a Y, right? Like It's... It's going possibly in the opposite direction of what I'm imagining here from a river system perspective. But but from uh if we're trying to find the right metaphor here.

Um, it's like at every one of those uh connection points, you know, we've always had to build a dam. And we still have to build a dam that allows us to control the water flow. But we used to build it with like sticks and rocks and now we have concrete and whatever the Hoover Dam is built out of and like we can control it to a much higher degree than we could before.

Well, I I I think a better analogy if we're gonna use a water analogy, because I've thought about it, uh a water analogy would be like The way the grid works today for if you have like a hundred units of water that are flowing through the upstream side of the river. And uh then

You know, if you had control in the past, it would be that like ten units go one way and ninety units go the other. And like you couldn't really change much about that. Like it was gonna always be that way. So if it were two hundred units coming down the river, it would be one eighty and twenty. And if it was fifty, it would be forty and ten.

uh or or forty five and five. Um, but with power electronics, you can have whatever you want on the other side of that dam. And I think another example is like locks. Like, oh, locks are used to kind of like adjust levels and Imagine locks as like they take a long time to move the boat boat up and down potential, right? That's what you're doing is you're changing the potential of the boat. Like literally like the gravity, like how high above.

uh uh the in altitude the boat is relative to like other parts of the river. So yeah, that's kind of what power semiconductor devices are. They just can move, you know, the most recent generation of devices can move like thousands of volts in nanoseconds. You know, and that volts are potential. That's the an analog, right? And that that's compared to like, you know, mechanical switches in the past.

You know, they were moving in milliseconds or tens of milliseconds or even seconds to do the same thing. So that's the analogy, I guess. The the Locks metaphor uh really comes it it it's perfect for me specifically. I grew up you know this, I grew up in Madison, Wisconsin and I literally grew up across the street from a Lox. It's uh there's a river that goes through two lakes that are

Uh in Madison, anybody from shout out to anybody who lives in the Tenny Lapham neighborhood of Madison, Wisconsin who knows the locks. Uh the locks take forever. They do take forever. And I actually it was a great uh I brought my three year old back to Madison last year, or when he was three at the time. And uh and it's like a big activity. You can go watch the locks and it's like a it wastes a whole bunch of time with a three year old. That's great. Yeah.

Well, there's a lot of high hydrology analogies to uh electrical circuits. Like have you do you know Waterhammer? I've heard Waterhammer, yeah. Yeah. So water hammer is basically like an undamped transition. Like if you go and like turn off the you know, your water faucet, like from full

water coming out to like water off, you get like oscillations in the water column and you need something to damp that out. And usually if you're a good plumber, you you do you add that. And if you don't, that oscillation could last forever. And the same thing exists in

uh electrical circuits. Um and you can harness that for good. That's what resonant converters do. Like they use that oscillatory behavior to have more efficient like soft switching uh when changing from one voltage to the other or one frequency to the other. Um, but it can also be bad things and you can get oscillations that end up with grids going unstable, like what happened in Spain. So uh Water hammer on the grid.

Water hammer on the grid. There it is. We figured it out. All right, Drew. This was awesome. Thank you so much for your time.

Absolutely. Thanks, Shell. Always a pleasure. Drew Baglino is the founder and CEO of Heron Power. This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today's topics. Latitude is supported by Brelude Ventures. This episode was produced by Max Savage Levinson, mixing and theme song by Sean Marquand. Stephen Lacey is our executive editor. I'm Shale Khan, and this is Catalyst.