00:35:07 · Zach Dell
[00:35:07] S0: Yeah. I take you back to to my time at Blackstone and really like sitting in a more institutional investing seat where you're looking at asset classes. Right? And the battery asset classes existed for, you know, a decade. And this has largely been dominated by utility scale batteries. So think shipping containers in a farm field somewhere, plugged into the power grid. Right? Megapacks. Right? Think about that. And that's been a really good asset class over the last ten, twenty years, but it's fundamentally constrained by two things. One is interconnection capacity. So there are... There's this concept of the interconnection queue and the interconnection queue is very different in nature in Texas than it is in California than it is in, you know, Illinois and New York, and we can talk about those discrepancies, but it basically is a line that you have to wait in to plug in your utility scale battery. The second constraint is transmission congestion. So the place that you need these batteries is not the place where you can go put these big shipping containers. Right? Downtown Austin, Downtown Houston, Downtown Dallas, these densely populated city centers, that's where the load pockets are, but that's not where you can put the supply. That's where the demand is, it's not where you can put the supply. So you have transmission problems, right? And you have congestion on the lines and you have price spikes as a result And so the decentralized thesis came from a solution to these constraints. Right? How do you get around the interconnection queue and the transmission congestion? You deploy the batteries where the interconnection already exists, co located with the load, and that requires this decentralized architecture.
00:36:35 · Sachin, Zach Dell, Adam Miller
[00:36:35] S1: So is Base actually cheaper than other energy providers and how will this affect the life of an everyday consumer? [00:36:42] S0: Yeah. It's really straightforward. So you come to base, you sign up, we install a battery on your home. When the grid's up and running, we use that battery to serve the grid. We share the income we generate off that battery with you in the form of lower prices. When the grid goes down, you get that battery on your home to keep your home up and running. So you get all the benefits of home backup without the high upfront cost of a home battery or a home generator, and you save on your monthly electricity bill, which is driven by the battery on your home. So it's one integrated system that keeps your lights on and your bills low. [00:37:15] S2: Let's talk again about the customer because I think in Texas, it feels like a very logical place to start. There's been a history of people losing power. But as you move into other markets, what is the incentive for the consumer to, you know, sign up for for ten years on the battery, that don't actually own the battery, and to, you know, all the other provisions that come with Yeah. Signing up with Base Power? [00:37:35] S0: Think... And not to be a broken record, I think it's really simple. It just comes back to affordability and reliability. Yeah. It's like if we cannot lower your power bill and make your your electricity more reliable, why would you sign up? You shouldn't. [00:37:45] S2: How do you guarantee that affordability? Well,
00:37:49 · Zach Dell
[00:37:49] S0: it's inherent in the business model. Yeah. Right? So let's say, you know, this is your home. Right? And I'm just gonna, like, make this stupid simple for sake of argument. Like, this is a money machine that we put on your home. Right? And the money machine generates money. And we can take some of the money out of the money machine and we can like give it to you. Right? That's how we do it. Right? So the the battery is is is a money machine. It's it's a it's an infrastructure asset. It is a It is a technology. It's an efficiency box, right? And that efficiency box is creating efficiency by time shifting electricity, charging when price of power is low, discharging when price of power is high. Said differently in other words, charging when demand is low, discharging when demand is high, right? Load balancing the power grid. And because you are sharing your space with us, you're giving access to your meter. We are going to cut you in on the deal. We're going to help you save money by sharing this money machine, sharing this money box with you in the form of lower prices. Right? And that is that is the business model and the lower cost we can get this money machine in the ground all the way to the factory and how we manufacture it, to how we install it, to how we acquire you the customer, to how we support you in your customer journey. The more profitable the money machine is, the more money we can share with you, the more effective we can make the customer, the the the customer offering. Right? So we are eyes wide open about the fact that we're in a commodity business. I think that people try to, obfuscate that sometimes. Right? It's like electricity is a commodity. Again, no sexy electrons. I say this all the time. Right? Like we're in a cost structure game. It's like, why are we building factory one? Why are we building factory two? Like, because we have to drive costs down. We have to have a cost advantage. Why'd you raise a billion dollars? Because we have to get big fast. We have to drive our costs down. Like we are going to compete on cost. Right? And if we can't be the most affordable and reliable electricity provider in the world, like we are going to lose, but we're not going to lose because we are going to be that provider and we're going to do it through vertical integration and technology because that's the only way to do it.
00:39:54 · Adam Miller
[00:39:54] S2: This may be a stupid question but when you're moving from a centralized grid to a decentralized grid, if let's say theoretically every home in America had base power right now, would there still be this arbitrage in the margin you own in in selling the energy?
00:40:10 · Zach Dell
[00:40:10] S0: Well, if every home in America had base, which that sounds like an amazing future and I hope we get there, you would increase our capacity for power consumption. And so the amount of load that would come online would be massive. Yeah. Right? Because you would basically increase the the utilization, the capacity factor of those lines and you would create availability or headroom on the substations, on the circuits, on the transmission infrastructure to add more load. Yeah. Right? So what people kind of forget is these are markets, right? Supply and demand. And when you add more capacity to a system, your capacity to consume on that system goes up and you can you can generate more or you can you can consume more. Right? And so we can do, you know, said differently, we deploy a bunch of capacity, capacity prices go down, a bunch of demand shows up, we start using more power, that's super awesome for humanity, like all the data points to that leads to amazing outcomes for humanity. More demand comes, we need more supply. Yeah. Right? So I think there's a world where we deploy batteries to a massive amount of the households in America And, for some amount of time, capacity prices go down because a bunch of capacity comes online and then it's... Like I said, it's a market, it's supply demand. Right? So once the the supply comes, the demand catches back up and and vice versa. And I think, you know, it'll be very hard for us at the limit to catch up with the demand. As we drive price, it's kind of this Jevons paradox, that people like to talk about in AI where it's like, we add a shit ton of supply, prices go down, like demand's coming. Right? Demand comes like crazy, prices go back up, supply comes back online, prices go back down.
00:41:47 · Adam Miller, Sachin
[00:41:47] S2: And if you look at the businesses of any of these market makers with, you know, basically perfectly priced things, there's a lot of... They're they're amazing cash printing businesses. So there's, an analogy there in, like, traditional business. [00:41:59] S1: Exactly. Mhmm. Said before that you can make money through demand and supply imbalances. So what risks are you actually exposed to? Is there something else here about energy prices where if they spike dramatically that you could be losing money? From the way it sounded, it sounds like you just print cash either way.