#9: Justin Lopas - Introducing the Next-Gen Home Battery

Base Power is one of the coolest companies I've ever featured on First Principles, and they came out of stealth today. They are building huge home batteries, which are basically different than other batteries in two ways, one technical and one business. The technical reason is that it's huge. It's literally 30 kilowatt hours, which is more than double a Tesla power. Why does it need to be so big? Well, the answer is it's doing more than just home backup. It still can do that, of course.

If the power goes out, you can draw power from your battery instead of directly from the grid. But it is also buying and selling electricity on the open market. So it's buying when it's low and selling when it's high. Now, you as a consumer don't necessarily see all that. You just get a home battery for effectively free just for the installation cost. But Base Power is actually building on the back of that a

successful business. That is the second major difference where they are a seller and buyer of electricity rather than just a hardware supplier. So this is an incredible company and their founders are awesome. The one that we talked to in the episode is Justin Lopas, who is known for basically two things. First of all, for being the lead manufacturing engineer on SpaceX's Starship rocket. Pretty damn cool. And the second one is that he went from that to go to Andro, basically the second most

successful startup in recent times. So this is going to be an amazing episode. I know you're going to love it. Let's dive into how these massive We're here to help support the energy grids, starting here in Texas on Austin where I'm based, and do that by putting a lot of distributed storage on the grid. So storage co-located with a power load at the edge of the grid as opposed to centralized or at the generation source. And after that, ultimately build a modern power company,

both generation and storage and consumption. The real reason we're here for this is more energy equals more human prosperity. There's a ton of studies out there. I think probably your viewers have seen it, maybe you're familiar with Christian, but there is a direct correlation between GDP per capita and

energy availability in a given country. There's many studies on this. Coming increase and already existing increase in renewables and volatility of supply as well as a lot more consumption of energy from EVs and heat pumps and sort of the end use of energy in the form of electricity is really putting a lot of stress on the grid. There's a lot of people, a lot of smart people, a lot of money going into make power

cheaper, easier, better, more of it. There's nuclear, there's better solar panels, there's wind, there's more efficient natural gas plants, etc. And there's a ton of people working on the consumption side. This is EVs and heat pumps and all this other stuff. There's not a lot of folks focused on the grid, which is the thing that connects those two. And our view is that that is where we need a lot of support for this energy transition that we're working on now. So

that's what we're up to. Hell yeah. And you guys are doing it by basically installing big batteries, like big batteries at people's houses. That's how you're getting started, right? Yeah. So the start of the company and the first product is a residential energy storage system. And so maybe taking a quick step back here, like why sort of do this and why do we think batteries are the solution or

one of the solutions that we need in order to fortify the grid? So if you look at the grid today, and let's spend a bunch of time digging into the grid in a second, but if you look at the grid today, it is quite underutilized if you look at just what it is built for and what it, on average, does. And now you're like, hmm, that's kind of weird. I hear about grid stress all the time, like it seems like it's not built for what

we need. And the answer is that it is not built for what we need from a peak demand standpoint. But most of the time, you're well, well below peak, right? In any given year, by definition, there's only one second, or one 15-minute interval here in Texas, or

one hour or one day that is peak. Everything else is below that. If you put energy storage on the grid and you co-locate that energy storage with the load, you're able to reduce the peak and therefore have more total load with the same system size. By putting the batteries at the load side as opposed to at the generation side, you also can time shift. Not only can you time shift demand, but you can time shift supply from renewables

that are not always there or you can turn them on like the wind and the sun. By putting big batteries at homes and businesses that are focused on the grid as opposed to just focused on kind of backing up solar panels and being sized for the solar panels in the home, you can in aggregate really increase the utilization of the existing grid infrastructure as well as decrease those

peak loads and support more renewable generation. If you look at renewable generation as a percentage of total fuel mix, what you'll find is that that is going up a lot every year, both wind and solar. In particular, here in Texas, there's a lot of wind and on California, there's a lot of solar. Without batteries, the marginal value of adding the next solar panel or adding the next wind turbine on the grid goes down because you have this negative pricing

when everybody else is producing. But all the sun's up is the only time you can produce with a battery, or sorry, that you can produce with a solar panel. And so you need a battery to sort of soak up all that extra production and therefore incentivize more and more renewable generation. Yeah, I mean, people don't really understand this, but most electrons that are captured by, like, solar panels or what have you, are used, like, the speed of light later, basically.

Like, from the time it takes—it's captured by the solar panel, travels at Like the, if it, and if it's not used, there are actually pieces of the grid where you're, are those like policies or whatever, where you have Like, do you want to talk a little bit about what that is and how that like real time supply and So I'm a mechanical engineer by background, so I think about everything in terms of physical sort of realities, and I think that's kind of helpful for folk. Imagine electricity is

just water for a second. Like if you had to generate, if you had to produce the water or pump the water out of ground or however you produced it, and you had to drink the water or use it for bathing or whatever, basically the exact same time, and you couldn't store any of it anywhere, that would be pretty hard. You need to make sure that you're pumping the exact right amount of water at all times for the use, which is changing. Some people take a shower at 8 a.m. and

not 12 p.m. or 12 a.m., right? And so we think about it from that perspective, storage is extremely critical for the stability of the grid writ large. And so, exactly as you said, energy is created in the same instant it is consumed, unless you have storage, which allows you to time shift that supply or that demand. You can think about the grid almost like a network, kind of like visualizing a network of pipes under a

city or something with water. It's the same sort of concept, and you have the same concept that you have in a pipe network or you have in a a network of roads where you have congestion, it's literally called congestion like it is on roads, on certain lines

of the grid. And so if you have a bunch of power on one side of Texas and a bunch of people on the other side of Texas, by the way, this happens, there's a lot of sun on the western part of the state, and it turns out Houston, Dallas, San Antonio, Waco, Austin, they're all on the east part of the state. You have congestion to drive on the road from the solar farm in Midland

to where all the people are in Austin, as an example. You gotta kind of think about what the batteries do from both time-shifting demand as well as time-shifting supply, such that that road is fully utilized, but not overutilized. So the network analogy is a good one. And if you look at those maps of like, you know, the energy grid across America, it's funny. I think people don't really know this, but there are three grids in the United States. There

is the East, the West, and Texas. Texas has Like, you know, they really are very different from like a normal grid for lots of reasons. And that's probably why you're starting. Yeah, totally. So why are we starting in Texas? It's certainly not the only place that we will operate, but it's a really, really interesting place to begin. So you're totally right. There are three physical grid connections. There's a Western area connection,

kind of like west of the Rockies. There's east and there's Texas, right? Texas is also colloquially known as the ERCOT region. This is the Electric Reliability Council of Texas, ERCOT. That is the, another acronym for you, the ISO, the Independent System Operator, basically the kind of command center for the

grid, so to speak. There's a handful of these ISOs, they also call them RTOs, Regional Transmission Operators, which you'll find, by the way, it's totally a side here, maybe distracting, but there are, I think there are more acronyms in grid and electricity than there are in the DOD and defense space, but that's a total side. Whoa, that is a hot take. I thought you were even gonna say space. So DOD definitely beats out space, but like just barely, and then, wow, okay,

all right. It's incredible. We have an acronym demystifier here at the company for new folks. Anyways, totally aside. So there's these ISOs and RTOs, one of which is called ERCOT, that operates the Texas grid. Texas is, by and large, totally disconnected from the other grids. And so The grid is pretty much all of the transmission is AC, it's alternating current, right? And so the frequency and the phase, or I should say just the phase of

ERCOT's grid does not match the west or the east. And so anytime that there is a tie between the West and the East to Texas, there's a DC link. Just to give you a sense, there's like

less than 2% or 3% of the total, the peak demand of Texas is linked to East and West, so it's effectively an island. You can think about Texas' grid sort of like Hawaii's or Japan's, where it's like basically a functional island. The other interesting thing about Texas is it is the one place in the U.S. where the Sun Belt and the Wind Corridor meet, right? So the Wind Corridor is kind of like center U.S.,

east of the Rockies, west of the Mississippi, kind of that region. And the Sun Belt is obviously kind of the southern, so they're one to two states, right? And Texas is the only place that those two things meet up. And so there's a ton of renewable resource here. It's a common misnomer when people outside of Texas, myself previously included, think about Texas. They're like, oh, it's oil country. It is. There's a ton of oil and natural gas in the ground here, but there's more

renewable resource here than anywhere else in the US. There's also an enormous amount of land to capture that renewable resource, both wind and solar. And so it's just a really interesting place. Renewable generation drives a lot of volatility of supply. The fact that Texas can't borrow from its neighbors when it

needs to drives also volatility of prices. There's also what's called a deregulated energy market, which I'm sure we'll get into a ton of here later, that allows us to basically sell energy directly to consumers and essentially sort of be the energy provider to the customer. That's a unique thing here that happens in Texas and a handful of states, most of which are in the Northeast. But

all of those things combined, it's a great place to... And the fact that it's a great place to be, Austin in particular, is why we Today's episode is brought to you by Coda. Teams use Coda to get on the same page literally. By bringing together documents and spreadsheets and apps all into one place, it stops you from ping-ponging all over all these different apps. Coda is great for working with remote employees or for just centralizing all that

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can get started with Coda today for free. head over to coda.io slash fp that's c-o-d-a dot i-o slash fp to get started for free So I've heard people sort of like honestly mock ERCOT, just like the reliability piece in the word in particular, because there's the very famous example of that winter storm in like 2021 or whatever it was, when basically Texas being disconnected from the other grids couldn't get any energy into

the state. And so people were just without power for a really long time. Yeah. I mean, that sort of example is a great reason why you would want batteries, why you would want storage. But maybe that's a good example. Maybe that's like a good enough tie to like talk a little bit about those energy markets and tell us how the buying and selling works and, you know, basically just like what that looks like tangibly for like a consumer or a business in Texas. Yeah, so let's start with how the Texas

energy market works. So the sort of simplified view of this is there's essentially three main players. You've got The people who make the power, called the generators. You got the people who own the poles and the wires. This is like the grid itself. When you see poles and wires, you think the grid. Those are called the utilities. And then there are energy retailers.

And those are the people that buy the energy from the generators, pay the poles and wires guys to deliver it, and they sell it to the end consumer. So if you're a homeowner in Houston or Dallas or Waco or Round Rock or whatever, you can choose who your power provider is. So this is very different than if you live in SoCal, where I used to live, and if you want electricity at

your house, SoCal Edison is the only option. In Houston, you have like a hundred plus different options of who you buy your power from. And those are called reps, retail electric providers. We are a retail electric provider that buys energy from the grid on the wholesale markets and sells it at a retail rate to our customers. And so that is sort of one piece of the business and that is tied into

the batteries and I'll get to that in a second. But the way to think about the Texas energy market is that it is, you have a freedom to choose who your power provider is. As a consumer, utilities themselves are regulated monopolies in their jurisdictions. So there's a handful of big utilities in the state. There's one, as an example, in Houston called CenterPoint. CenterPoint owns the poles and wires and the infrastructure, but they don't sell the energy to the customers, and

they They don't and they can't legally generate the energy. So that's kind of like the three main buckets of how the Texas energy market works. The Texas energy market is also a relatively free trading market, meaning the price of energy changes every 15 minutes, 24-7, 365. If you go to ERCOT.com, you can see it's actually safe. There's some really good data on this. And the prices change based on supply and demand, just like any other market, but they also change geographically.

So we can go into a lot of detail here, so I could kind of like pull out of the rabbit hole for a second, but there is a handful of different ways in which it is broken up geographically. The important point here is that the prices at specific areas of the grid are different, and those prices are basically reflecting what I was saying earlier,

which is congestion. So if there's a bunch of congestion on a line going from outside of the city of Houston into Houston, it is likely that the node on the city side of that is paying a high price, right, for that electricity. Over in Midland, as an example, where I spent a summer as an intern many, many, many years ago in the oil fields out there, they might have negative pricing because there's more energy there than can be delivered across

the transmission line all the way to Houston. What you'll find is that there's a large disparity in prices geographically based on where the energy is produced versus consumed and where there is congestion on the grid. And so that price signal tells us where we should go put a battery because that is where the most volatility is. And as you put a battery in a specific node, you drive down the volatility by decreasing the peak demand and

increasing the trough demand and sort of relieve that congestion. So, kind of long-winded way of explaining how the Texas energy market works, but it's a fascinating, extremely, you know, extremely niche and nuanced thing that like not everyone, especially those who don't live in Texas, but even those who do, aren't necessarily exposed to in their day-to-day. And that's a really fascinating thing to learn about, which is why I'm so excited to learn about it.

Totally. I mean, I think the, um, so when you are a seller, You can also be a seller, which is kind of part of the point. Um, you can buy it when it's low and sell it when it's high. Um, so do you sell it back to the utilities or do you sell it to other reps? So, um, here's the analogy that I use that I think is helpful. So imagine that you and I are standing, uh, on either end of like a lake and we each have cups.

and I have a cup of water, yours is empty. I pour my water into the lake and then you pick your cup up into the lake. It's like you didn't get my water, you just got water,

but it was sort of contributed by me. That's sort of the way to think about it from a physical perspective there's a bunch of different sort of sub markets but but let's just say you're you're in what's called the real time market exactly what it sounds like I buy energy right now I pay the price like this 15 minute interval price for the energy to charge my battery or Run

my blender, like you said. That's on the buying side. On the selling side, when you're selling back to the grid, you're essentially offering it almost like you're offering a stock to the New York Stock Exchange, or you're pouring a cup of water into the lake. It's like a sort of bid-ask spread, so to speak. Check. That's how you're paid back. The utilities are very impartial to the market. They just transmit the energy from where it is generated to where it is consumed. How much of a

spread are we talking about though? Like, I guess, I mean, if it can be literally negative in wherever Midland and then positive, presumably still in Austin, like that's, that's obviously a huge spread, but like a normal day or whatever, it's not, I imagine it's not huge Like is the market like relatively efficient across geographies Uh, so there's, there's spreads across geography and then there's also spreads across time. And so, um, the market is, is efficient, but the pricing volatility is,

is very high. So I would encourage you or maybe viewers to, to, to actually spend some time on the ERCOT website. It's, it's really just like if you're a nerd on this stuff, like I am, uh, you think you'll find it quite fascinating. But basically if you look at kind of just, let's just say, let's. abstract away the geographic volatility for a second and just look at sort of average prices in the whole state. As the

sun is setting, you have this pretty common problem, especially in the summertime. The sun is setting, so supply is falling, available supply is falling, but demand is just peaking, because this is like as people come home from work. The demand peaking at like 5, 6 p.m. is not a Texas phenomenon. This happens kind of everywhere. But you have demand peaking just as supply is falling. And so you have this like approaching curves that happen and

unfortunately get quite close to each other. In the summer, this is what batteries help support. And you'll have prices that can go

from zero or negative in the middle of the day when you have overproduction, you know, from solar and wind, up to, and I just put a number in your head here, is up to $5,000 per megawatt hour. That's $5 per kilowatt hour. Just to give you a sense, like in the very, very expensive utilities, like in California, you're paying on the order of like 30 or 40 or 50 cents a kilowatt hour. You're not paying nearly

this sort of $5. So there's this very, very volatile prices that especially happen in the summer when you have declining supply from solar and wind, and you have peaking demand, especially from HVAC loads. So, the spreads are quite high, and they are highest in the areas in which they sort of need batteries the most. And so, the way to think about it is what we're doing with a battery on a customer's home is when energy is very expensive, we're discharging it. Yes, we are selling it back to the

grid, but we're also negating the load of the home. So, if you come home at 5 p.m. and energy prices are $5 a kilowatt hour, $5,000 a megawatt hour, we are likely discharging the battery into the home and the rest is going to the grid in order to basically say, okay, we don't need to go buy that very expensive energy from the grid to sell to you at what would

normally be a loss for any other rep that doesn't have a battery. And so it certainly makes our economics as a business better, but very importantly, it allows us to offer very competitive rates to customers. And by the way, they get the benefit of the backup. We haven't talked

about that. We totally need to spend some time on that. Totally. The fact that we were able to basically turn off the customer from the grid at certain expensive times means that our average cost to serve that customer is decently less than on the price spread between the wholesale electricity price Presumably this is a commodity market and people are just racing to the There's not a huge amount of margin between what you're buying and what you're

I don't know if that's actually true. Do you have enough of a margin to play with there, basically, between how you're buying it from the transmission dudes, or the utilities, and then what you're selling it to consumers at? Yeah, so you're basically asking, what are the economics for just a standard rep? Yeah, I should be clear. We are a rep as a way to distribute our batteries. We think this is the most effective way to get

the most batteries on the grid as possible. It allows us to offer a service to customers, and in particular, allows us to monetize the value of a battery behind the meter that we own, right? It's very important for folks to understand. We're not, like, selling a battery to a customer. We are giving a battery to a customer. They're paying for install. We're giving them the battery. We retain ownership of it. It's a much lower upfront cost to them. And the rep allows us

to monetize that. Like if I gave you a battery and you live in PG&E territory or something, it would benefit you, but we wouldn't see any of that. And so we need to sort of split the benefit in order to sort of give you the battery at no cost. at no cost other than the cost of install to you. So the rep is like not meant, it's not necessarily our

core business, it is the way in which we go to market. But we are not here to be a rep that is like, just for a rep's sake, we're using the rep as a way, as a wedge into the market in order to distribute batteries in a way that does not require us to kind of like have a huge deal with a big monolith utility. So to answer the question, being

a rep on its own without the battery is a pretty tough business. You're right, it's a commodity business and so you're looking for ways in which you can lower your average buy price because you have a flat fixed sell price typically is how most reps price their energy. Um, and, uh, there's, there's a lot of like really interesting, probably not for, for the subject of this conversation, but really interesting data analysis and

trading and risk pieces that, that come with being a rep. Um, but our, uh, again, our, our core, our core business is really building a battery farm and bringing customers along for the journey and the energy transition. And by the way, we use a rep to, to I think the interesting thing about how most home batteries are deployed today

Like if I think of, if I think of like, well, what does everybody think when they think of a home battery? They think of a Tesla power wall. Like what do people have their Tesla power wall attached to the solar panels that are on the roof? Like most people think of it as a thing I am buying. I am buying a battery to go along with my solar panels. That's like the normal way. And that's why I think that your rep thing is so interesting because you're basically giving people

batteries. All they have to do is pay for the cost of installing the original service. And then they just like have the benefit of a battery, but they didn't have to buy And they don't even have to have solar on the roof. Like that's a pretty unique model. And I would love for you to dive into like why you chose that and the benefits of that and

that sort of thing. Yeah, yeah, totally. I think you're hit on the exact right core kind of question here and core sort of differentiator question is that it's a completely different business model than your sort of traditional battery developer manufacturer. Our thesis and philosophy and what we're seeing so far, and if you look kind of out in the market today, is that the

battery does not really provide a lot of benefit to the home. It provides the benefit of backup, which is, by the way, very important, especially to folks here in Texas where, unfortunately, there's a lot of outages. But that benefit only happens like a handful of times a year. Even in Texas where it happens a lot, it's like once a month, once every other month kind of thing. But the rest of the time, that thing is just sort of sitting there

not providing value to the home. It should be providing value to the grid. Also, the battery is much more valuable to the power company, or I should say, the battery is much more valuable to whoever is exposed to the wholesale markets where the real volatility is, as opposed to just a flat rate. Like if you bought a battery from, you know, whoever, and you put it in your home and you paid 15 cents a kilowatt hour all the time, like, why do you care about time

shift energy, right? The value of the battery is really best for the grid and best exposed to the wholesale

markets. And so that's what the REP allows us to do. And so, yeah, this is like a core fundamental fundamental piece of the puzzle is you get the benefits of home backup without the high upfront cost, and all the rest of the time, the benefits accrue to the grid, which then lower system costs and ultimately lowers cost of energy, more available energy, more human prosperity, like I mean, I think that there's so many interesting choices that you guys made with the

battery deployment too. So there's like, uh, we can talk about all of them, but there's like load side versus generation side. There's like the There's, um, I don't know. It's like, like the business model, which we already sort of talked about the inverter that goes along with the battery. Like all these things are I think maybe the simplest place to start is the size Do you want to just tell us why you chose the size you did and what it is? The battery that we're developing now is

a 30 kilowatt hour system. And so that is far larger than your traditional home battery systems, which are on the order of 10, 10 plus, plus or minus kind of five. kilowatt hours. The reason for that is a fewfold. One, I would say the reason that the existing home batteries in the market today are relatively small is because they're sized to be paired with solar, right? So like one battery is roughly on average one solar

system on a house worth over a day. So you basically, you know, produce over the day, you store in the battery, and then you discharge, you know, for a handful of hours at night. And again, that battery is just sort of like focused on the home. When you go, okay, that home is really a way for us to get interconnection onto the grid. And by the way, we're already there. The truck's there, the guy with the tool, the electrician's already there with the tools.

Let's put as much energy as we can because the customer is not directly paying for it, right? The cost basically scales roughly linearly with dollar per kilowatt hour. And so we're like, hey, we might as well just put put as much battery on there as we reasonably can that can reasonably fit. And so the bigger the battery, generally the better. Obviously, there's like space and electrical panel limitations we can talk about and sort of like where the real world meets

like what is optimal. But the bigger the battery, generally the better. The other thing that we sized for is a pretty large inverter. And so the larger inverter allows us to discharge that battery, if we want to, all onto the grid or

onto the grid in the home. relatively quickly. What tends to happen, especially for pricing here in Texas, even in the summer and the winter, is you get these really kind of peaky prices where it's not like a slow ramp up, it's like really high for maybe an hour and then it's like low because now people

are going to bed. It's like people came home from work, and the sun set and gas plants have been turned back on or there's not enough batteries in the system, whatever. So price is really high because supply was tight and now price fell down because everybody's going to bed. And so you want to be able to discharge a lot of energy very quickly out onto the grid. And so the whole system we're developing is sized for how do we maximize the value of the interconnection at

the home. The homeowner didn't know that their interconnection had value. Now they do, and the value that they get is having backup. Can you talk about what that means physically? This is one of those things that I've only ever read and I've never actually said aloud before, so here we go. The C-rate or whatever, basically the

way that a battery is discharged, is it called C-rate? I don't even know. Totally. Yeah, C-rate is You can think about it basically as one over the number of hours that it takes to discharge a given like sort of unit of battery. So a 1C battery is like from full to empty in an hour, is the way I think about it. People make it seem more complicated. It's not that complicated. So a 0.5C

battery is a two-hour discharge battery essentially. We are using lithium iron phosphate cell chemistry, which is far more stable than the traditional nickel manganese cobalt or NMC, NCM chemistry that you'll find in a lot of EVs. Some EVs are switching over to LFP, which you'll find there. And so it's much safer, it's much more stable. It's a little less energy dense than NMC, but the thing isn't needing to accelerate zero to 60 like my Tesla does. It's

just sort of sitting there, and so the energy density isn't quite as important. And it's also lower cost. And importantly, it has way less sort of rarer minerals than NMC does. You don't have the cobalt and the nickel and the manganese, as the name would imply. And so, our batteries are just about 1C, which allows us to discharge them roughly at an hour. So, we have a 24-kilowatt inverter, 30-kilowatt hour battery. And

you kind of asked sort of how you think about this physically. What folks will see and we're bringing to market later this year, the battery is like, you can kind of imagine it's like an old or like an outdoor AC unit, kind of like on the order of two-ish foot square by on the order of three, four foot tall. And it's ground mounted and so much easier and simpler to install. In a wall-mounted system, you don't have to worry about a lot of weight on the wall and

doing structural calculations and all this other stuff. You need four square feet of available space, and you need some panel space to electrically wire it in, and there it is on the home. Would love to spend more time on kind of the whole deployment motion and operations, because

that gets interesting as well. Totally. I was actually let's let's just head there right now. I mean, I think it's really interesting to ask or like to think about how you reduce the time and also the cost of deployment because both of those probably matter a lot. I mean, the things that are probably in the time category are like even permitting. Like I imagine you do have to get this like permitted, right? Yeah,

yeah. So this whole... Let me take a quick step back out from permitting for a second because that's a rabbit hole we could spend an entire video on. I could write a dissertation on permits at this point. We think about this entire thing, and this kind of ties into my background here. We think about this whole thing from customer says they're interested in getting battery on their home and

only paying for the cost of install and all the sort of benefits we discussed. From that, all the way through to operating battery on their home and everybody's happy and we're just charging out on the grid. That whole thing we call the deployment factory. It's not necessarily like physically building a thing like, you know, like in my past in kind of one location, but instead it is a series of process steps, each that have a cycle time associated with them, a

number of humans that are required or automation that is required. They have tooling required for each one. And so this is a really, I think like, Honestly decently differentiated thing from what many kind of in the like home services type business where it's or this vertical or business lives does or in solar install business. They typically think about each installation is like its own construction project, but the project manager. and it has like a unique set of

permit plans and all of that stuff. We take a much different approach, which is, hey, we're installing what is relatively simple in comparison to solar or any other thing that you would, you know, a hot tub or something or whatever, you know, a new kitchen you would install. This is like quite, quite, quite simple, both physically and electrically. And we want to do it the exact same every time if we can. We want to offer the same product every

time if we can, and we want to do it really fast. And so each step of that process, one or a handful of which are permitting related, has an owner, it has a sort of a defined entry to that process, a defined exit. These are all sort of first principles of manufacturing that we're applying to this motion. And so on the physical install time side, which is kind of what you're getting at, our system is far easier to install than what you'll traditionally see in the market. The ground

mounting is a good bit of that. And then it also is like, things that maybe sound simple, but are very important. So like, instead of having multiple boxes, either on the ground or on the wall, sort of wired to each other, which requires conduit and conductors, and you have to strip and crimp and put fittings on the end of conductors, all of that is simplified by, we sort

of Lego brick stack our entire system. So we have a little sheet metal base, we have six battery modules, we put a battery management system on top of that, an inverter on top of that, and a hub on top of that. No tools are required for anything I just said. It's all board-to-board connections, it is latches, and

it's all put together. And so the physical install, we think about like a NASCAR pit stop or like a factory line as opposed to something that you have to have a ton of experience and knowledge and skill set and sort of fine crafting and bending conduit exactly the right way and all this other stuff to

connect a bunch of boxes together. So all of that comes in together when we go do the physical install, but there is a ton of work ahead of that, which You mentioned the inverter, but is there other like ways that you have to plug into either the grid side or the house side that require more work Yeah, I mean, in the last segment there, I made it sound like it's literally just like plug in. So the mechanical side

is quite easy to install. The electrical side is we basically, so we build the whole system and then we have one in and one out is the way to think about it. So because our system is quite large from a energy and power standpoint, we can use it to go right in between basically the meter and the main panel. Looking around the side of homes, you'll find there's typically a meter box, and at least here in Texas, that's almost always separate from the main breaker box.

And so we basically intercept the line in between those two, we run out from the meter into our system, out from our system into the main panel,

and that allows you to back up the whole home as well as be able to back feed onto the grid or discharge into the home. And so that does require a little bit of conduit, but it is not wiring our system to itself, so to speak. It is wiring our system into the home. And we're doing a number of things on the install side as it relates to connectors and fittings and that sort of

thing to make that process even as simple as possible. And there's some Skunk Works projects to make that even more easy, as a production guy, like a guy who has built factories and like built high throughput processes, basically, I'm Like, what are my, what are the things that can slow us down? What are the things that have the highest variability? Where are the places in the supply chain that, you know, I have to really like care

about getting those parts in on time. So like maybe we'll buy more of them. Like, can you just tell us like how your production brain is approaching this, like kind of different problem than building a bunch of rockets or a bunch of, you know, like weapon systems or whatever? You know, I think it's like, I think that you can apply sort of this like production mindset to a lot of, you know, call it business processes. And

so I think you're totally right. Like, one of the things we talk about a lot here is sort of the theory of constraints, like where's the blocker, and making sure that the constraint is obvious, easy to spot, well understood and there are metrics around exactly what the right constraint is so that you can go put the right resources into that constraint

and sort of squash that constraint very quickly to go on to the next one. So I think it's a really important principle of kind of how we're building out the operations here. Some of those steps are in our control. So as it relates to making sure that we have the right size system on the home and that we have the labor scheduled, as an example, and that we have the right tools and

that we've communicated correctly with the customer, all those things are like in our control. Some of the items that are less in our control are on permitting or

sort of interconnection with the utility, that sort of thing. And even then, like, you can apply a sort of production mindset to use your terminology to that, which is, okay, what are the steps that we need to take in order to provide the most accurate, clean submission we possibly can to the authority, whoever it is, they call AHJ, another three-letter acronym, Authority Having Jurisdiction, which is like the municipality. Authority Having, that's funny. Yeah,

AHJ is like a city of Austin or whatever, right? Like it's the, that's the AHJ. And so we've spent quite a bit of time, we continue to spend time on each sort of new area we move into as a business, putting a lot of thought and effort and time into producing the exact right detailed documentation and submissions such that the throughput or the fallout rate, if you're using a manufacturing terminology, through that permit process is as throughput is as high

as possible or fallouts as low as possible, right? So even things that are out of our control necessarily, we can still apply a production mindset to and I think get good results. This might not be a thing that is

kind of continuous. I guess it is to some extent, whatever. In the beginning of starting this company, you had to make a bunch of decisions about what are we actually going to build? What are we going to rely on partners for? What are we going to do? What are we going to do in-house? What are we going to source? Whatever, like build versus buy. You had to make a million of those decisions. How did you end up making the ones you did? And actually, what are you building within the

battery module itself? Yeah, no, it's a great question. So, yeah, I think there's a... What we're building here is what we call a complex coordination machine. We have to be good at a lot of different things. All of the stuff that we just mentioned on the deployment factory, that's only one piece of it though. We need to be good at financing and trading energy with ERCOT and all the regulatory sort of like hoop jumping you have to do there. We have

to be good at acquiring customers and building a brand. We need to be good at software and hardware. And so what we've tried to do is be really thoughtful around build versus buy and sort of each one of those verticals. And so, like, as an example, on the installation side, we own, internally, we own basically all of the pre-install, and then we

subcontract out our electrician work today. This is something that we're kind of, you know, going, we will edit over time, for sure, and likely have a mixture of

in-house versus out-of-house. We've said, hey, look, I think it's actually most, beneficial for us to not sort of manage the physical electrician labor today. So that was a build versus buy decision. So we need to be good at a lot of different things that are honestly quite different from each other. This is, by the way, total aside, but one of the interesting things about being a founder is that You do a lot of like context switching, especially

in this business. We're going from hardware development to software development. That's like sort of engineering or technology. Then we've got customer acquisition and building a brand. This is more of a consumer products thing. We then go to energy trading and interfacing with the electricity markets. This is like more of a finance-ish thing, right? And so each one of those verticals, we have tried to be thoughtful on what we build versus what we buy. And so a good example of this is in

the deployment factory that we talked about earlier. Again, deployment factory being customer says, I want it to, it is installed on their home. And in that, we are basically building, we're owning ourselves basically the entire pre-install process, and then we're working with a subcontracted electrician to basically

do the physical install. And that was a conscious decision around build versus buy that we thought made the most sense at the time and continue to feel like it makes the most sense, but we'll likely change that over time. I think it's important. A lot of businesses, especially those in sort of the Elon company circles perhaps, have a

tendency to kind of really, really vertically integrate. And while I think like that's the ultimate end game that you should really be striving for, because if you're able to own pieces of the supply chain and the labor and the deployment factory and all that other stuff, it is very beneficial. It's

not necessarily the place to start. And so we're trying to be very thoughtful about build versus buy and really build the things where we think we have some differentiated motion or process or technology and buy the things where we don't have a differentiated thing today and we'll add some differentiation over time. I'm curious to hear also about, like, there's obviously a ton of decisions that you have to make when building, basically, battery packs about what to build versus

buy. Can you talk us through a little bit more of those decisions about, you know, okay, you're not out there, like, mining the raw materials, but at the end of the day, you are building, like, presumably, like, the pack design or something that, you know, like, how you integrate all the cells together, that kind of thing. Like, where in that spectrum did you decide to draw the line and why? At the cell level, it

is made the most sense to buy. And I think what you'll find if you look at the battery market in general is that the automakers and stationary energy storage manufacturers are producing an enormous amount of cells at really low costs and really high quality. And so that's like a, okay, we do not build a sort of, and there are many companies out there that are working on this, we're not building a cell chemistry company, right? That's not kind

of what we set out to go do. There are a handful of really fascinating companies that are working on that problem, but it's not something that we set out to go do. On the other end of sort of the hierarchy or the bill of materials, as

it were, is this sort of enclosure and how we mount it to the other boxes around it and how we wire it and that sort of thing. That's like core to our custom hardware. And so that's really important for us to us to develop ourselves. So then there's like a spectrum in between, right? So connectors and individual electronic components doesn't make sense for us to do, but the integration of

all of those, this piece is really important. And I think what you'll find in a lot of kind of very successful integrator type businesses, and Enrol is certainly one of them, as we discussed, like they're able to take existing technology that is maybe applied a little bit of a different way or has a little bit of a different sort of look and feel or integration and apply it

to this new problem. And that's what we're doing kind of throughout the Bill of Materials. And so there's things in there that are While the component part is sourced by us, the integration and

the overall construction of it is developed by us. Totally. I mean, I think one of the other interesting things about y'all is that you are deciding to do a thing that other reps are not, that you're actually going to do this unique, this like modern software stack, basically that, you know, looks good and is transparent to the customer and whatever, just like is a modern, nice software product.

So do you want, do you want to tell us more about like both the consumer facing part of the software, but then also the other stuff like the, you know, trading and all that, all that sort of thing. Yes, so you kind of think about kind of the software and maybe three areas kind of helpful to break it out. So there's the stuff that runs on the device, there's the stuff that runs in the cloud to manage the devices, and

then there's the sort of consumer-facing end of it. And you're right that the kind of standard in the market today for retail electric providers is typically that they're not technology-focused companies, right? And so our view is that we should apply what is, you know, to some degree maybe table stakes for modern SAS, you know, if you're using a some sort of B2B software in your day-to-day, the sort of slacks or ramps of the world. It's like good design, good UI, high functionality,

good integration. These things don't really exist today in the energy markets. If you've paid your bill for the electricity from a rep in Texas or anyone else, I think you'll probably agree, or any other sort of utility service. We're developing a modern, good UI so you can track your usage. There's a bunch of interesting features that we're going to be rolling out here over the next few months for consumers on the consumer

end. Now, the other two pieces, which is the software that runs on the devices and the software that runs on network, is a really interesting problem, actually. So it's a, we like to think about it as sort of a distributed systems problem, where you have a bunch of different things that you can't talk to. It's kind of like satellites in some way. It's like, once you've deployed a battery and you have, you know, a lot of them out there, you definitely don't want to go back

to them. It's sort of like a satellite in that way. It's sort of like, you know, it's gone, it's out there, so you better be able to Talk to it reliably. You better be able to get telemetry off of it reliably. You better know what it's doing and be able to diagnose and repair things all remotely without

touching it. And so that's the sort of software stack that we're building, is the ability to manage the network very effectively and have the device do self-diagnostics and safety health checks and all that other stuff sort of on the device itself. And so that's the on-device software. And then the, call it like, higher-end sort of cloud-side software is both interfacing with the market. So it's, hey, prices are high now here,

and so I'm going to tell this battery or these few batteries to discharge. But actually, they're low over there, so I'm actually going to tell those guys to charge. And so that management layer is a very complex sort of software problem. And also, interfacing directly with the markets is also its own sort of has some regulatory oversight around kind of how you do it and what trades you can place. And there's a handful of different markets. There's the real time market. There's

the day ahead market. There's a thing called ancillary services. And so basically managing all of that is what we're developing the sort of top level software to do. Cool. Are you guys going to eventually have basically like a trading desk of finance dudes

at the office? It's like the, you got the engineering, you got like the, like the electrical, the installer guys. And then you got like these, these like quant finance bros who are like just the masters of the trading market. Yeah, I would say this is something that we need to and are starting to get good at. I think there's like a sort of maybe movie theaters version of this, which we don't

want to have. And then there's the more real version, which is we're taking a data science based approach as opposed to a sort of When you think of a person doing trades, it's like sort of what you see in the movies. It's not bad. It's a very scientific approach to how you're able to best monetize

the value of the batteries. But also extremely importantly, how you're able to make sure that you have sufficient, you know, margin in the system for errors or issues, for backups, for outages, and how you're safely operating the system. We don't want to, you know, build a sort of trading desk and just set them loose to sort of like trade energy in the batteries. It's very much a co-optimization problem with

Totally. I mean, I imagine some of those constraints are really interesting. Like my, my, my gut instinct, like, as soon as I heard about this idea, I was like, well, if I was a consumer, I would want to make sure that there was some sort of protection I had that like, you are just going to like sell all my battery electricity array right before Prices are really high. So like, we're just getting rid of all of the electricity that

I want to use. It's because it's at my house. Like I I'm curious, like, do you have, like, I'm sure there are a lot of safeguards that are like that to, protect the customer, they're like for regulatory reasons or whatever, like, do you mind talking about some more of them? So I think it's like, it's, it's, it's somewhat of a misnomer that the, that high prices translate to high likelihood of outages. So, so what you'll typically find actually is that the, um, And when prices are high, it

is because of a supply and demand problem. And when there are outages, it's typically because of a infrastructure failure problem. Somebody drove into a pole next to your house or a hurricane came through Houston and tore down some wires and stuff. And those two things aren't really that correlated. And so I would say that, like, the likelihood that those two things happen together is to start with low. Okay, so

that's like point one. Point two is we have a reserve capacity in the battery that we set dynamically based on the likelihood of an outage during sort of the upcoming window. And so that's like another sort of safeguard item. And the third thing I would say is when you do have a correlated high price before outage scenario. The way those typically work is that the grid operator needs to sort of shed load. This is, by the way, a really bad day for ERCOT

or for Texas Grid. This does not happen very often, but it has happened. They'll like rotate outages, basically. And so your individual outage is quite short. So the energy you need in the battery to sort of sustain through that outage is relatively low. And we have a really big battery, and so it's much larger than you would otherwise normally have with a smaller one. The last point, kind of the fourth point, is if you look sort of just throughout a given day or week or month, we

on average have a high state of charge in the battery. So the chance that somebody randomly drives into a pole near your house or something, that that happens right at the end of a discharge is quite low. And even then, we still have energy reserve left in the battery. If it happens any other time, it's likely either fully charged or almost fully charged. And so it's like less of a sort of, it's

something we spend a lot of time thinking about, but it's maybe less I imagine there's part of it too, where these pieces of software, like the different layers or whatever you would call them are interacting in interesting ways. Like I could imagine that having telemetry from tons of homes all over the place would give you pretty good data that you could use

Like, uh, I don't know. Are there like temperature things that like, I don't know, maybe you have some cool sensors or something that we can like pick up temperature or usage or whatever. Like what are the sorts of telemetry that might help you with that kind of thing? Yeah, it's a really interesting point. The data that we're able to capture off of the system is very important. And

it's not even just important for us to operate our system. It's actually very, very beneficial to and important to the grid operators as they think about how to build new infrastructure or maintain existing infrastructure. The standard in the market today is that utilities, at best, have 15-minute interval data, right? So every 15 minutes, they knew how much energy you used in the last 15 minutes, and

that, like, lags a few hours or whatever. But they don't have sort of sub-15-minute data oftentimes, and they oftentimes have a challenge sort of aggregating and presenting that data in a sort of, you know, useful or unique way. There's a handful of companies actually that are working on this sort of using meter data challenge. But we have much, much tighter telemetry on our system. And our system both measures what the battery is doing from a charge and discharge perspective, as well

as what the home is doing from a consumption perspective. And so that data is very valuable to allow us to size our system, to operate our system, but we're also able to share that with the utilities, which in sort of some early discussions has been very beneficial to us. Sorry, I should say very beneficial to them to really fine tune what what energy usage means in a given very short period of time, and

how that affects stress on the system. At the end of the day, kind of taking a big step back here, what we're trying to do is fortify the grid with energy storage. And to do that, we're able to time shift energy, we want to have sort of very fine grain data around the time with which we're shifting energy and kind of how that plays throughout

the system. And so that data is super, super valuable to Um, this might be, this is, this is totally far afield from the software piece we were just talking about, but I'm curious about it because it reminded me of like, um, so there are lots of reasons why your battery might just be better There's the outage thing, obviously there's like the software piece of it, which is just a better sort of like user experience, more transparency about

pricing, that sort of thing. But the third one, which we haven't talked about, I don't actually know if this is true, so you'll have to correct me if it's not, but is there a way that the battery being DC actually helps in some ways? Like the fact that you would have basically like a DC rail into your house as opposed to like AC? Can people actually use that? Is that a thing? It

is not a thing today, or at least not more of a thing today. It's funny actually, a lot of appliances inclusive of your EV, are consume energy in DC form. So anything with a, or most things with a DC-based motor, convert or rectify specifically the AC that is on the grid back down to DC. But what if you had a big DC source in your home? That's a pretty interesting item. There's not an infrastructure built for this today, and it's not necessarily something that we're

spending a lot of our current time on. But it is a very pretty interesting thing. You can dig it all the way back to the Edison days and the fight between DC and AC. AC ultimately won from the grid perspective, but there's a lot of things that consume energy at the end, and motor or whatever in the form of DC. And so having a DC system in a home

Well, awesome. Perfect, man. Is there anywhere you want to send people? Places like, I don't know, your website? Can they sign up for electricity if they're in Texas? Yeah, totally. So you can sign up right on our website. You kind of like put in your address there and it tells you if we're servicing your area now. If not, we put you on the wait list. So yeah, website is basepowercompany.com, B-A-S-E powercompany.com.

And yeah, we're based out here in Austin. So for anybody who's either in Austin or is looking to move to the great city of Austin, we're also recruiting top talent. Yeah. Thanks a bunch, Christian. Super great to