#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

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So I've heard people sort of like honestly mock ERCOT, just

like the reliability piece in the word

in particular, because there's the very famous example of that winter storm in

like 2021 or whatever it was, when basically Texas

being disconnected from the other grids couldn't get any energy into

the state. And so people were just without power for a really long time. Yeah.

I mean, that sort of example is a great reason why you would want batteries,

why you would want storage. But maybe that's a good example. Maybe

that's like a good enough tie to like talk a little bit about those energy markets and

tell us how the buying and selling works and, you know, basically

just like what that looks like tangibly for like a consumer or

a business in Texas. Yeah, so let's start with how the Texas

energy market works. So the sort of simplified view

of this is there's essentially three main players. You've got The

people who make the power, called the generators. You got

the people who own the poles and the wires. This is like the

grid itself. When you see poles and wires, you think the grid. Those are

called the utilities. And then there are energy retailers.

And those are the people that buy the energy from the generators, pay

the poles and wires guys to deliver it, and they sell it to the

end consumer. So if you're a homeowner in Houston or

Dallas or Waco or Round Rock or whatever, you

can choose who your power provider is. So this is very different than if you live

in SoCal, where I used to live, and if you want electricity at

your house, SoCal Edison is the only option. In Houston, you have like

a hundred plus different options of who you buy your power from.

And those are called reps, retail electric providers. We

are a retail electric provider that buys energy from

the grid on the wholesale markets and sells it at a

retail rate to our customers. And

so that is sort of one piece of the business and that is tied into

the batteries and I'll get to that in a second. But the way to think about the Texas energy

market is that it is, you have a freedom to choose who your power

provider is. As a consumer, utilities themselves

are regulated monopolies in their jurisdictions. So

there's a handful of big utilities in the state. There's one, as

an example, in Houston called CenterPoint. CenterPoint owns the poles and wires and

the infrastructure, but they don't sell the energy to the customers, and

they They don't and they can't legally generate the energy. So

that's kind of like the three main buckets of how the Texas energy

market works. The Texas energy market is also

a relatively free trading market, meaning the price

of energy changes every 15 minutes, 24-7,

365. If you go to ERCOT.com, you can see it's actually safe. There's some really good

data on this. And the prices change based on supply and

demand, just like any other market, but they also change geographically.

So we can go into a lot of detail here, so I could kind

of like pull out of the rabbit hole for a second, but there is a handful

of different ways in which it is broken up geographically. The important point

here is that the prices

at specific areas of the grid are different, and

those prices are basically reflecting what I was saying earlier,

which is congestion. So if there's a bunch of congestion on a

line going from outside of the city of Houston into

Houston, it is likely that the node on the

city side of that is paying a high price, right, for

that electricity. Over in Midland, as an

example, where I spent a summer as an intern many, many, many years ago in the

oil fields out there, they might have negative pricing

because there's more energy there than can be delivered across

the transmission line all the way to Houston. What you'll find is that there's a large disparity

in prices geographically based on where the

energy is produced versus consumed and where there is congestion on

the grid. And so that price signal tells us

where we should go put a battery because that is where the most volatility

is. And as you put a battery in a specific node, you

drive down the volatility by decreasing the peak demand and

increasing the trough demand and sort of relieve that congestion. So,

kind of long-winded way of explaining how the Texas energy market works, but

it's a fascinating, extremely, you

know, extremely niche and nuanced thing that like not everyone,

especially those who don't live in Texas, but even those who do, aren't necessarily exposed

to in their day-to-day. And that's

a really fascinating thing to learn about, which is why I'm so excited to learn about it.

Totally. I mean, I think the, um, so when you are a seller,

You can also be a seller, which is kind of part of the point. Um, you

can buy it when it's low and sell it when it's high. Um, so

do you sell it back to the utilities or do you sell it to other reps? So,

um, here's the analogy that I use that I think is helpful. So imagine that you and

I are standing, uh, on either end of like a lake and we each have cups.

and I have a cup of water, yours is empty. I pour

my water into the lake and then you pick your cup up into

the lake. It's like you didn't get my water, you just got water,

but it was sort of contributed by me. That's

sort of the way to think about it from a physical perspective there's

a bunch of different sort of sub markets but but let's just say you're you're

in what's called the real time market exactly what it sounds like I buy

energy right now I pay the price like this 15 minute

interval price for the energy to charge my battery or Run

my blender, like you said. That's on the buying side. On the selling

side, when you're selling back to the grid, you're essentially offering it

almost like you're offering a stock to the New York Stock Exchange,

or you're pouring a cup of water into the lake. It's like a sort

of bid-ask spread, so to speak. Check. That's

how you're paid back. The utilities are very impartial to the market.

They just transmit the energy from

where it is generated to where it is consumed. How much of a

spread are we talking about though? Like, I guess, I mean, if it can

be literally negative in wherever Midland and then positive,

presumably still in Austin, like that's, that's obviously a huge spread, but like a

normal day or whatever, it's not, I imagine it's not huge

Like is the market like relatively efficient across geographies

Uh, so there's, there's spreads across geography and then there's also spreads across

time. And so, um, the market is,

is efficient, but the pricing volatility is,

is very high. So I would encourage you or maybe viewers to,

to, to actually spend some time on the ERCOT website. It's, it's really just

like if you're a nerd on this stuff, like I am, uh, you think

you'll find it quite fascinating. But basically if you look at kind of just, let's

just say, let's. abstract away the geographic volatility

for a second and just look at sort of average prices in the whole state. As the

sun is setting, you have this pretty common problem, especially in the summertime. The

sun is setting, so supply is falling, available supply

is falling, but demand is just peaking, because this is like as

people come home from work. The demand peaking at like 5, 6 p.m.

is not a Texas phenomenon. This happens kind of everywhere. But

you have demand peaking just as supply is falling. And

so you have this like approaching curves that happen and

unfortunately get quite close to each other. In the summer, this is

what batteries help support. And you'll have prices that can go

from zero or negative in the middle of the day

when you have overproduction, you know, from solar and wind,

up to, and I just put a number in your head here, is up to $5,000 per megawatt

hour. That's $5 per kilowatt hour. Just

to give you a sense, like in the very, very expensive utilities,

like in California, you're paying on the order of like 30 or 40 or 50 cents

a kilowatt hour. You're not paying nearly

this sort of $5. So there's this very, very volatile prices that

especially happen in the summer when you have declining supply

from solar and wind, and you have peaking demand,

especially from HVAC loads. So, the spreads are

quite high, and they are highest in the areas in which

they sort of need batteries the most. And so, the way to think about

it is what we're doing with a battery on a customer's

home is when energy is very expensive,

we're discharging it. Yes, we are selling it back to the

grid, but we're also negating the load of the home. So,

if you come home at 5 p.m. and energy prices are $5 a kilowatt hour, $5,000 a megawatt hour,

we are likely discharging the battery into the home and

the rest is going to the grid in

order to basically say, okay, we don't need to go

buy that very expensive energy from the grid to sell to you at what would

normally be a loss for any other rep that doesn't have a battery. And

so it certainly

makes our economics as a business better, but very importantly,

it allows us to offer very competitive rates to

customers. And by the way, they get the benefit of the backup. We haven't talked

about that. We totally need to spend some time on that. Totally. The

fact that we were able to basically turn off the customer from

the grid at certain expensive times means that our average

cost to serve that customer is decently less than

on the price spread between the wholesale electricity price

Presumably this is a commodity market and people are just racing to the

There's not a huge amount of margin between what you're buying and what you're

I don't know if that's actually true. Do you have enough of a

margin to play with there, basically, between how you're buying it from

the transmission dudes, or the utilities, and then

what you're selling it to consumers at? Yeah, so you're basically asking,

what are the economics for just a standard rep? Yeah,

I should be clear. We are a rep as a way to distribute our

batteries. We think this is the most effective way to get

the most batteries on the grid as possible. It allows us

to offer a service to customers, and in particular, allows us

to monetize the value of a battery behind the meter that we

own, right? It's very important for folks to understand. We're

not, like, selling a battery to a customer. We

are giving a battery to a customer. They're paying for install. We're giving them the battery. We

retain ownership of it. It's a much lower upfront cost to

them. And the rep allows us

to monetize that. Like if I gave you a battery and you live in PG&E territory

or something, it would benefit you, but we wouldn't see any of that. And

so we need to sort of split the

benefit in order to sort of give you the battery at no cost. at

no cost other than the cost of install to you. So

the rep is like not meant, it's not necessarily our

core business, it is the way in which we go to market. But we

are not here to be a

rep that is like, just for a rep's sake, we're using the rep as

a way, as a wedge into the market in order to distribute batteries

in a way that does not require us to kind

of like have a huge deal with a big

monolith utility. So to answer the question, being

a rep on its own without the battery is a pretty tough business. You're

right, it's a commodity business and so you're looking for ways

in which you can lower your average buy price because you have a flat fixed sell

price typically is how most reps price their energy. Um,

and, uh, there's, there's a lot of like really interesting, probably not

for, for the subject of this conversation, but really interesting data analysis and

trading and risk pieces that, that come with being a rep. Um,

but our, uh, again, our, our core, our core business is really building

a battery farm and bringing customers along for the journey

and the energy transition. And by the way, we use a rep to, to

I think the interesting thing about how most home batteries are deployed today

Like if I think of, if I think of like, well, what does everybody think when they think of a

home battery? They think of a Tesla power wall. Like what do people have their Tesla power wall

attached to the solar panels that are on the roof? Like most people think

of it as a thing I am buying. I am buying a battery to

go along with my solar panels. That's like the normal way. And that's why

I think that your rep thing is so interesting because you're basically giving people

batteries. All they have to do is pay for the cost of installing the original service.

And then they just like have the benefit of a battery, but they didn't have to buy

And they don't even have to have solar on the roof. Like that's a pretty unique model. And I

would love for you to dive into like why you chose that and the benefits of that and

that sort of thing. Yeah, yeah, totally. I think you're hit on the exact right

core kind of question here and core sort of differentiator question

is that it's a completely

different business model than your sort of traditional battery developer

manufacturer. Our thesis

and philosophy and what we're seeing so far, and

if you look kind of out in the market today, is that the

battery does not really provide a lot of benefit to the home. It provides

the benefit of backup, which is, by the way, very important,

especially to folks here in Texas where, unfortunately, there's a lot of outages. But

that benefit only happens like a handful of times a year. Even in

Texas where it happens a lot, it's like once a month, once every other

month kind of thing. But the rest of the time, that thing is just sort of sitting there

not providing value to the home. It should be providing value

to the grid. Also, the battery is

much more valuable to the power company, or I

should say, the battery is much more valuable to whoever is

exposed to the wholesale markets where the real volatility is, as

opposed to just a flat rate. Like if you bought a battery from, you

know, whoever, and you put it in your home and you paid 15 cents a

kilowatt hour all the time, like, why do you care about time

shift energy, right? The value of the

battery is really best for the grid and best exposed to the wholesale

markets. And so that's what the REP allows us to do. And so, yeah,

this is like a core fundamental fundamental piece

of the puzzle is you get the benefits of home backup without

the high upfront cost, and all the rest of the time, the benefits

accrue to the grid, which then lower system costs and ultimately lowers cost

of energy, more available energy, more human prosperity, like

I mean, I think that there's so many interesting choices that you guys made with the

battery deployment too. So there's like, uh, we can talk about all of them, but there's

like load side versus generation side. There's like the

There's, um, I don't know. It's like, like the business model,

which we already sort of talked about the inverter that goes along with the battery. Like all these things are

I think maybe the simplest place to start is the size

Do you want to just tell us why you chose the size you did and what

it is? The battery that we're developing now is

a 30 kilowatt hour system. And so that

is far larger than your traditional home battery systems, which are on the order

of 10, 10 plus, plus or minus kind of five. kilowatt

hours. The reason for that is a fewfold. One,

I would say the reason that the existing home batteries in the market today are

relatively small is because they're sized to be paired with solar, right? So like

one battery is roughly on average one solar

system on a house worth over a day. So you basically, you

know, produce over the day, you store in the battery, and then you discharge, you

know, for a handful of hours at night. And again, that battery is just sort of

like focused on the home. When you go, okay,

that home is really a way for us to get interconnection onto

the grid. And by the way, we're already there. The

truck's there, the guy with the tool, the electrician's already there with the tools.

Let's put as much energy as we can because the customer is not directly

paying for it, right? The cost basically scales

roughly linearly with dollar per kilowatt hour. And so we're

like, hey, we might as well just put put as much battery on there as we reasonably can

that can reasonably fit. And so the bigger the battery, generally

the better. Obviously, there's like space and electrical panel

limitations we can talk about and sort of like where the real world meets

like what is optimal. But the bigger the battery, generally the better. The

other thing that we sized for is

a pretty large inverter. And so the larger inverter allows us

to discharge that battery, if we want to, all onto the grid or

onto the grid in the home. relatively quickly. What tends

to happen, especially for pricing here in Texas, even in the

summer and the winter, is you get these really kind of peaky prices where

it's not like a slow ramp up, it's like really high for

maybe an hour and then it's like low because now people

are going to bed. It's like people came home from work, and

the sun set and gas plants have been turned back on or there's not enough batteries

in the system, whatever. So price is really high because supply was tight and

now price fell down because everybody's going to bed. And so you want to

be able to discharge a lot of energy very quickly out onto the grid. And

so the whole system we're developing is sized for how do

we maximize the value of the interconnection at

the home. The homeowner didn't know that their interconnection had value. Now

they do, and the value that they get is having backup.

Can you talk about what that means physically? This is

one of those things that I've only ever read and I've never actually said aloud before, so here we go. The

C-rate or whatever, basically the

way that a battery is discharged, is it called C-rate? I don't even know. Totally. Yeah,

C-rate is You can think about it basically as one over

the number of hours that it takes to discharge a given like sort of unit of

battery. So a 1C battery is like from full to empty

in an hour, is the way I think about it. People make it seem

more complicated. It's not that complicated. So a 0.5C

battery is a two-hour discharge battery essentially. We are using lithium

iron phosphate cell chemistry, which is

far more stable than the traditional nickel manganese cobalt

or NMC, NCM chemistry that you'll find in

a lot of EVs. Some EVs are switching over to LFP, which

you'll find there. And so it's much safer, it's much more stable. It's a little less

energy dense than NMC, but the thing isn't

needing to accelerate zero to 60 like my Tesla does. It's

just sort of sitting there, and so the energy density isn't quite as important. And

it's also lower cost. And importantly, it has

way less sort of rarer minerals than

NMC does. You don't have the cobalt and the nickel and the manganese, as

the name would imply. And so, our batteries are just about 1C,

which allows us to discharge them roughly at an hour. So, we have a 24-kilowatt inverter,

30-kilowatt hour battery. And

you kind of asked sort of how you think about this physically. What

folks will see and we're bringing to

market later this year, the battery is like, you can kind of imagine it's like an

old or like an outdoor AC unit, kind of like on

the order of two-ish foot square by on the order of three,

four foot tall. And it's ground mounted and

so much easier and simpler to install. In

a wall-mounted system, you don't have to worry about a lot of weight on the wall and

doing structural calculations and all this other stuff. You need four

square feet of available space, and you

need some panel space to electrically wire it in, and there it is

on the home. Would love to spend more time on kind of the whole deployment motion and operations, because

that gets interesting as well. Totally. I was actually let's let's just head there right now. I mean,

I think it's really interesting to ask or like to think about how

you reduce the time and also the cost of deployment because

both of those probably matter a lot. I mean, the things that are probably in the time category are like

even permitting. Like I imagine you do have to get this like permitted, right? Yeah,

yeah. So this whole... Let me take a quick step back

out from permitting for a second because that's a rabbit hole we could spend an entire

video on. I could write a dissertation on

permits at this point. We think about this entire thing, and this kind

of ties into my background here. We think about this whole thing from

customer says they're interested in getting battery on their home and

only paying for the cost of install and all the sort of benefits we discussed. From

that, all the way through to operating battery on their home and

everybody's happy and we're just charging out on the grid. That whole thing

we call the deployment factory. It's not necessarily like

physically building a thing like, you know, like in my past in

kind of one location, but instead it is a series of

process steps, each that have a cycle time associated with them, a

number of humans that are required or automation that is required. They

have tooling required for each one. And so this is a really, I

think like, Honestly decently differentiated thing from what

many kind of in the like home services type business where

it's or this vertical or business lives does or in solar install business.

They typically think about each installation is like its own construction

project, but the project manager. and it has like a unique set of

permit plans and all of that stuff. We take a much different approach,

which is, hey, we're installing what is relatively simple in comparison to

solar or any other thing that you would, you know, a hot tub or

something or whatever, you know, a new kitchen you would install. This is like quite,

quite, quite simple, both physically and electrically. And

we want to do it the exact same every time if we can. We want to offer the same product every

time if we can, and we want to do it really fast. And so each step of that process,

one or a handful of which are permitting related, has

an owner, it has a sort of a defined entry

to that process, a defined exit. These are all sort of first principles

of manufacturing that we're applying to this motion. And so on

the physical install time side, which is kind of what you're getting

at, our system is far easier to

install than what you'll traditionally see in the market. The ground

mounting is a good bit of that. And then it also is

like, things that maybe sound simple, but are very

important. So like, instead of having multiple boxes, either on

the ground or on the wall, sort of wired to each other, which requires

conduit and conductors, and you have to strip and crimp and

put fittings on the end of conductors, all of that is simplified by, we sort

of Lego brick stack our entire system. So

we have a little sheet metal base, we have six battery modules, we

put a battery management system on top of that, an inverter on top of that, and

a hub on top of that. No tools are required for anything I just said. It's

all board-to-board connections, it is latches, and

it's all put together. And so the physical install, we think about

like a NASCAR pit stop or like a factory line as

opposed to something that you have to

have a ton of experience and knowledge and skill set and sort of fine crafting

and bending conduit exactly the right way and all this other stuff to

connect a bunch of boxes together. So all of that comes in together

when we go do the physical install, but there is a ton of work ahead of that, which

You mentioned the inverter, but is there other like ways that you have to plug into

either the grid side or the house side that require more work

Yeah, I mean, in the last segment there, I

made it sound like it's literally just like plug in. So the mechanical side

is quite easy to install. The electrical side is we

basically, so we build the whole system and then we have one

in and one out is the way to think about it. So because our system is

quite large from a energy and power standpoint, we

can use it to go right in between

basically the meter and the main panel. Looking around the side of homes, you'll

find there's typically a meter box, and at least here

in Texas, that's almost always separate from the main breaker box.

And so we basically intercept the line in between those two, we run out from

the meter into our system, out from our system into the main panel,

and that allows you to back up the whole home as well as be

able to back feed onto the grid or discharge into the home. And

so that does require a little bit of conduit, but it

is not wiring our system to itself, so to speak. It

is wiring our system into the home. And we're doing a number of things

on the install side as it relates to connectors and fittings and that sort of

thing to make that process even as simple as possible. And there's some Skunk Works

projects to make that even more easy,

as a production guy, like a guy who has built factories and

like built high throughput processes, basically, I'm

Like, what are my, what are the things that can slow us down? What are the things that have the highest variability?

Where are the places in the supply chain that, you know, I have to really like care

about getting those parts in on time. So like maybe we'll buy more of them. Like, can you

just tell us like how your production brain is approaching this, like kind

of different problem than building a bunch of rockets or a bunch of, you

know, like weapon systems or whatever? You know, I think it's like, I

think that you can apply sort of this like production mindset to

a lot of, you know, call it business processes. And

so I think you're totally right. Like, one of the things we talk about a

lot here is sort of the theory of constraints, like where's the blocker, and

making sure that the constraint is

obvious, easy to spot, well understood and

there are metrics around exactly what the right constraint is so that you can go put

the right resources into that constraint

and sort of squash that constraint very quickly to go on to the next one. So

I think it's a really important principle of kind of how we're building out the operations

here. Some of those steps are

in our control. So as it relates to making

sure that we have the right size system on the home and

that we have the labor scheduled, as an

example, and that we have the right tools and

that we've communicated correctly with the customer, all those things are like in our control. Some

of the items that are less in our control are on permitting or

sort of interconnection with the utility, that sort of thing. And even then,

like, you can apply a sort of production mindset to use your

terminology to that, which is, okay, what are the steps that we

need to take in order to provide the most accurate, clean

submission we possibly can to the authority,

whoever it is, they call AHJ, another three-letter acronym, Authority

Having Jurisdiction, which is like the municipality. Authority Having, that's funny. Yeah,

AHJ is like a city of Austin or whatever, right? Like

it's the, that's the AHJ. And so we've

spent quite a bit of time, we continue to spend time on each sort of new area

we move into as a business, putting a

lot of thought and effort and time into producing the

exact right detailed documentation and submissions such that the

throughput or the fallout rate, if you're using a manufacturing terminology,

through that permit process is as throughput is as high

as possible or fallouts as low as possible, right? So even

things that are out of our control necessarily, we can still apply a production mindset

to and I think get good results. This might not be a thing that is

kind of continuous. I guess it is to some extent, whatever. In

the beginning of starting this company, you had to make a bunch of decisions about

what are we actually going to build? What are we going to rely on partners for? What

are we going to do? What are we going to do in-house? What are we going to source? Whatever, like

build versus buy. You had to make a million of those decisions. How did

you end up making the ones you did? And actually, what are you building within the

battery module itself? Yeah, no, it's a great question. So,

yeah, I think there's a... What

we're building here is what we call a complex coordination machine.

We have to be good at a lot of different things. All

of the stuff that we just mentioned on the deployment factory, that's only one piece of it though. We

need to be good at financing and trading

energy with ERCOT and all the regulatory sort of

like hoop jumping you have to do there. We have

to be good at acquiring customers and building a brand. We need to be good at software

and hardware. And so what we've tried to do is

be really thoughtful around build versus buy and sort of each one of those verticals.

And so, like, as an example, on

the installation side, we own, internally,

we own basically all of the pre-install, and then we

subcontract out our electrician work today. This

is something that we're kind of, you know, going, we

will edit over time, for sure, and likely have a mixture of

in-house versus out-of-house. We've said, hey, look, I think it's actually most, beneficial

for us to not sort of manage the physical

electrician labor today. So that was a build versus buy decision. So

we need to be good at a lot of different things that are honestly quite

different from each other. This is, by the way, total aside, but one of the interesting things

about being a founder is that You do a lot of like context switching, especially

in this business. We're going from hardware development to

software development. That's like sort of engineering or technology. Then

we've got customer acquisition and building a brand. This is

more of a consumer products thing. We then

go to energy trading and interfacing with

the electricity markets. This is like more of a finance-ish thing,

right? And so each one of those verticals, we

have tried to be thoughtful on what we build versus what we buy. And

so a good example of this is in

the deployment factory that we talked about earlier. Again,

deployment factory being customer says, I want it to, it

is installed on their home. And

in that, we are basically building,

we're owning ourselves basically the entire pre-install process,

and then we're working with a subcontracted electrician to basically

do the physical install. And that was a conscious decision around build

versus buy that we thought made the most sense

at the time and continue to feel like it makes the most sense, but we'll likely change

that over time. I think it's important. A

lot of businesses, especially those in sort of the

Elon company circles perhaps, have a

tendency to kind of really, really vertically integrate. And

while I think like that's the ultimate end game that you should really be

striving for, because if you're able to own pieces of

the supply chain and the labor and the deployment

factory and all that other stuff, it is very beneficial. It's

not necessarily the place to start. And so we're trying to be very thoughtful

about build versus buy and really build the things where we think we have

some differentiated motion or process or technology

and buy the things where we don't have a differentiated thing

today and we'll add some differentiation over time. I'm curious to

hear also about, like, there's obviously a ton of decisions that you have

to make when building, basically, battery packs about what to build versus

buy. Can you talk us through a little bit more of those decisions about, you know, okay,

you're not out there, like, mining the raw materials, but at

the end of the day, you are building, like, presumably, like, the pack design or

something that, you know, like, how you integrate all the cells together, that

kind of thing. Like, where in that spectrum did you

decide to draw the line and why? At the cell level, it

is made the most sense to buy. And I think what you'll find if

you look at the battery market in general is that the automakers and

stationary energy storage manufacturers are producing

an enormous amount of cells at really low costs and really high quality.

And so that's like a, okay, we do not

build a sort of, and there are many companies out there that are working on this, we're not

building a cell chemistry company, right? That's not kind

of what we set out to go do. There are a

handful of really fascinating companies that are working on that problem, but

it's not something that we set out to go do. On the other

end of sort of the hierarchy or the bill of materials, as

it were, is this sort of enclosure and how we

mount it to the other boxes around it and how we wire it

and that sort of thing. That's like core to our custom hardware.

And so that's really important for us to us to develop ourselves. So

then there's like a spectrum in between, right? So connectors and

individual electronic components doesn't make sense for us to do, but the integration of

all of those, this piece is really important. And I

think what you'll find in a lot of kind of very successful integrator

type businesses, and Enrol is certainly one of them, as we discussed,

like they're able to take existing technology

that is maybe applied a little bit of a different way or has a little bit of a different

sort of look and feel or integration and apply it

to this new problem. And that's what we're doing kind of throughout the Bill of Materials. And

so there's things in there that are While

the component part is sourced by us, the integration and

the overall construction of it is developed by us. Totally. I

mean, I think one of the other interesting things about y'all is that you are deciding to

do a thing that other reps are not, that you're actually going to do this

unique, this like modern software stack, basically that,

you know, looks good and is transparent to the customer and

whatever, just like is a modern, nice software product.

So do you want, do you want to tell us more about like both the consumer facing part

of the software, but then also the other stuff like the, you know, trading and all that, all

that sort of thing. Yes, so you kind of think about kind of the software and maybe

three areas kind of helpful to break it out. So there's the stuff that runs

on the device, there's the stuff that runs in the cloud to manage the devices, and

then there's the sort of consumer-facing end of it. And you're right

that the kind of standard in the market today for retail

electric providers is typically that they're not technology-focused companies,

right? And so our

view is that we should apply what is, you know, to

some degree maybe table stakes for modern SAS, you

know, if you're using a some

sort of B2B software in your day-to-day, the sort of slacks or ramps

of the world. It's like good design, good UI, high functionality,

good integration. These things don't really exist today

in the energy markets. If you've paid your bill for

the electricity from a rep in Texas or

anyone else, I think you'll probably agree, or any

other sort of utility service. We're

developing a modern, good UI so you can track your

usage. There's a bunch of interesting features that we're going

to be rolling out here over the next few months for consumers on the consumer

end. Now, the other two pieces, which is the software

that runs on the devices and the software that runs on network, is

a really interesting problem, actually. So it's a, we like to

think about it as sort of a distributed systems problem, where you have a

bunch of different things that you can't talk to. It's kind of like satellites in

some way. It's like, once you've deployed a battery and

you have, you know, a lot of them out there, you definitely don't want to go back

to them. It's sort of like a satellite in that way. It's sort of like, you

know, it's gone, it's out there, so you better be able to Talk to it reliably. You

better be able to get telemetry off of it reliably. You better know

what it's doing and be able to diagnose and repair things all remotely without

touching it. And so that's the sort of software stack that we're building,

is the ability to manage the network very effectively and have

the device do self-diagnostics and safety health checks and

all that other stuff sort of on the device itself. And so that's the on-device software.

And then the, call it like, higher-end sort of

cloud-side software is both

interfacing with the market. So it's, hey, prices are high now here,

and so I'm going to tell this battery or these few batteries to discharge. But

actually, they're low over there, so I'm actually going to tell those guys to charge. And

so that management layer is a very complex

sort of software problem. And

also, interfacing directly with the markets is also its own sort

of has some regulatory oversight

around kind of how you do it and what trades you can place. And

there's a handful of different markets. There's the real time market. There's

the day ahead market. There's a thing called ancillary services. And

so basically managing all of that is what

we're developing the sort of top level software to do. Cool.

Are you guys going to eventually have basically like a trading desk of finance dudes

at the office? It's like the, you got the engineering, you got like the,

like the electrical, the installer guys. And then you got like these, these

like quant finance bros who are like just the masters

of the trading market. Yeah, I

would say this is something that we need

to and are starting to get good at. I think there's like a sort

of maybe movie theaters version of this, which we don't

want to have. And then there's the more real version, which is we're

taking a data science based approach as opposed to a sort of When

you think of a person doing trades, it's like

sort of what you see in the movies. It's not bad. It's a very

scientific approach to how you're able to best monetize

the value of the batteries. But also extremely importantly,

how you're able to make sure that you have sufficient,

you know, margin in the system for errors or issues, for

backups, for outages, and how you're safely operating

the system. We don't want to, you know, build

a sort of trading desk and just set them loose to sort of like trade energy in

the batteries. It's very much a co-optimization problem with

Totally. I mean, I imagine some of those constraints are really interesting. Like my, my, my

gut instinct, like, as soon as I heard about this idea, I was like, well, if I was a consumer,

I would want to make sure that there was some sort of protection I had that like,

you are just going to like sell all my battery electricity array right before

Prices are really high. So like, we're just getting rid of all of the electricity that

I want to use. It's because it's at my house. Like I I'm curious, like, do you

have, like, I'm sure there are a lot of safeguards that are like that to,

protect the customer, they're like for regulatory reasons or whatever, like, do you

mind talking about some more of them? So I think it's like, it's, it's, it's somewhat of

a misnomer that the, that high prices translate to

high likelihood of outages. So, so what you'll typically find actually is that

the, um, And when prices are high, it

is because of a supply and demand problem. And when there are outages, it's

typically because of a infrastructure failure

problem. Somebody drove into a pole next to your house or a hurricane came through Houston and

tore down some wires and stuff. And those two things aren't really that correlated. And

so I would say that, like, the likelihood that

those two things happen together is to start with low. Okay, so

that's like point one. Point two is

we have a reserve capacity in the battery that we set

dynamically based on the likelihood of an outage during sort

of the upcoming window. And

so that's like another sort of safeguard item. And

the third thing I would say is when you do have a

correlated high price before outage scenario.

The way those typically work is that the grid

operator needs to sort of shed load. This is, by the way, a really bad day for ERCOT

or for Texas Grid. This does not happen very often, but it has happened. They'll

like rotate outages, basically. And so your individual outage is

quite short. So the energy you need in the battery to sort of sustain through that

outage is relatively low. And we have a really big battery,

and so it's much larger than you would otherwise normally have

with a smaller one. The last point, kind of the fourth point, is

if you look sort of just throughout a given day or week or month, we

on average have a high state of charge in the battery. So

the chance that somebody randomly drives

into a pole near your house or something, that that happens right at

the end of a discharge is quite low. And even then, we still have energy

reserve left in the battery. If it happens any other time, it's

likely either fully charged or almost fully charged. And

so it's like less of a sort of, it's

something we spend a lot of time thinking about, but it's maybe less

I imagine there's part of it too, where these pieces of software, like the different layers

or whatever you would call them are interacting in interesting ways. Like I could imagine

that having telemetry from tons of

homes all over the place would give you pretty good data that you could use

Like, uh, I don't know. Are there like temperature things that

like, I don't know, maybe you have some cool sensors or something that we can like pick up

temperature or usage or whatever. Like what are the

sorts of telemetry that might help you with that kind of thing? Yeah,

it's a really interesting point. The data that we're able to capture off

of the system is very important. And

it's not even just important for us to operate our system. It's

actually very, very beneficial to and important to the

grid operators as they think about how to build new infrastructure or

maintain existing infrastructure. The

standard in the market today is that utilities, at

best, have 15-minute interval data, right? So every 15 minutes,

they knew how much energy you used in the last 15 minutes, and

that, like, lags a few hours or whatever. But

they don't have sort of sub-15-minute data oftentimes,

and they oftentimes have a challenge sort of aggregating

and presenting that data in a sort of, you know, useful

or unique way. There's a handful of companies actually that are working on

this sort of using meter data challenge. But we have

much, much tighter telemetry on our system. And our system both

measures what the battery is doing from a charge and discharge perspective, as well

as what the home is doing from a consumption perspective. And so that data

is very valuable to allow us to size our system, to operate our

system, but we're also able to share that with the utilities, which in

sort of some early discussions has been very beneficial to us. Sorry,

I should say very beneficial to them to

really fine tune what what

energy usage means in a given very short period of time, and

how that affects stress on the system. At the end

of the day, kind of taking a big step back here, what we're trying to do is

fortify the grid with energy storage. And to

do that, we're able to time shift energy, we want

to have sort of very fine grain data around

the time with which we're shifting energy and kind of how that plays throughout

the system. And so that data is super, super valuable to

Um, this might be, this is, this is totally far afield from the software piece

we were just talking about, but I'm curious about it because it reminded me of like, um,

so there are lots of reasons why your battery might just be better

There's the outage thing, obviously there's like the software piece

of it, which is just a better sort of like user experience, more transparency about

pricing, that sort of thing. But the third one, which we haven't talked about, I don't actually know

if this is true, so you'll have to correct me if it's not, but is there a way

that the battery being DC actually helps in

some ways? Like the fact that you would have basically like a DC rail

into your house as opposed to like AC? Can people

actually use that? Is that a thing? It

is not a thing today, or at least not more of a thing today. It's

funny actually, a lot of appliances inclusive of

your EV, are consume energy in

DC form. So anything with a, or most things with

a DC-based motor, convert or

rectify specifically the AC that is on the

grid back down to DC. But what

if you had a big DC source in your home? That's

a pretty interesting item. There's not an infrastructure built for

this today, and it's not necessarily something that we're

spending a lot of our current time on. But

it is a very pretty interesting thing. You can dig it all the way back to

the Edison days and the fight between DC and AC. AC

ultimately won from the grid perspective, but there's a lot of things that consume energy

at the end, and motor or whatever in

the form of DC. And so having a DC system in a home

Well, awesome. Perfect, man. Is there anywhere you

want to send people? Places like, I don't know, your website?

Can they sign up for electricity if they're in Texas? Yeah, totally.

So you can sign up right on our website. You

kind of like put in your address there and it tells you if we're servicing your area now.

If not, we put you on the wait list. So

yeah, website is basepowercompany.com, B-A-S-E powercompany.com.

And yeah, we're based out here in Austin. So for

anybody who's either in Austin or is looking to move

to the great city of Austin, we're also recruiting top

talent. Yeah. Thanks a bunch, Christian. Super great to